If you’re starting to feel like Goldilocks, trying one house after another and having
trouble finding the one that fits you “just right,” you may want to consider an
alternative method to get the home of your dreams. Prospective buyers who love
the charm of older homes or want to live in an established neighborhood, but
who are not so crazy about aging appliances or outdated designs, have another
option to buying as-is. With a renovation loan like those o;ered by Prosperity
Home Mortgage, LLC (NMLS#75164), you can buy an existing home and get it
renovated—all before move-in day.
How a renovation loan can turn
an existing house into your dream home
From the Federal Housing Administration’s (FHA) 203(k) program to Fannie Mae’s
HomeStyle Renovation loans, there are numerous lending options that allow
buyers to wrap the costs of renovation into their home purchase loan. You simply
apply for a renovation loan based on the price of a home plus the estimated cost
of renovations based on contractor bids. You can also work with a full-service
mortgage banker like Prosperity, which o;ers both the FHA and Fannie Mae
renovation loans through its “House-To-Home” Renovation program.
The advantage to a renovation loan is that you pay for your renovation over
the entire term of the loan rather than out-of-pocket or with other more costly
financing. The work can be done before you move into the property and your
home will be the way you want it as soon as you get settled.
What updates are allowed with renovation loans
The financing program chosen will determine what types of renovations are
allowed and how much can be spent. With the FHA 203(k) program, for example,
you cannot use the loan for luxury items like a pool or hot tub, but you can
replace kitchen counters and cabinets, install new flooring or upgrade your
heating and air conditioning system. The standard FHA 203(k) program requires
a minimum renovation cost of $5,000 and can go above $35,000 to cover more
expensive structural repairs and additions.
The FHA 203(k) program requires you work only with licensed contractors and
you also have to coordinate with a U.S. Housing and Urban Development (
HUD)-approved consultant to review contractor bids. Additionally, the maximum loan
amount, including the renovations and the purchase price, must fit the FHA loan
limits for your area, and you must qualify for the loan based on the total amount
you’re borrowing, not just the purchase price.
Can Get the