A home improvement loan or renovation loan provides funding specifically for home improvements. These funds can be used to cover the cost of projects like a bathroom remodel. The loan amount is usually based on the estimated project costs and the value upon completion. The loan can be repaid over a preset term with interest.
Let’s clarify the terms – home improvement loan or renovation loan. Some loans offered for home improvement or renovation are just unsecured personal loans or credit cards with high interest rates, short terms, and limited loan sizes. A Par 4 Mortgage renovation loan gives homeowners credit for your home’s future value and uses that future value get the lowest rates available.
Fannie Mae’s HomeStyle renovation mortgage is a single purchase and home improvement loan. It’s a good option for that property that needs work, for a primary residence or investment property.
The HomeStyle Renovation loan is flexible when it comes to financed repairs and upgrades. Gut your home and remodel the interior, including bathrooms and kitchens, floors, or paint. Build an accessory dwelling unit – ADU, a smaller separate residence on the property for mother-in-law. Add landscaping features like a retaining wall. Add luxury features, like an in-ground swimming pool or outdoor kitchen. All renovations must be permanently affixed to the property.
Borrowers can include up to six months’ worth of principal, interest, taxes and insurance in the renovation financing allowing you to live elsewhere during major construction phases. Not allowed: tearing down and reconstructing your home. For that, the FHA’s 203(k) loan might be a better option.
HomeStyle renovation loans will cover repairs, renovations, remodels or energy-efficient improvements on a primary residence, a second home or an investment property. A licensed contractor must complete work and it must add value to the property.
A Limited 203(k) home improvement loan (sometimes called a Rehab Loan or FHA Construction Loan) allows you to finance not only repairs and renovations but also enables you to finance the home as well. This loan is considered ‘limited’ because it provides up to 35,000, including a contingency reserve. In addition, the home must meet particular safety and livability conditions for a borrower to qualify. This loan is a great option for those with a tighter budget who choose to purchase a fixer-upper vs. a more expensive home.
Standard 203(k) Rehabilitation Mortgage
The 203(k) rehabilitation loans are designed specifically for properties in need of updates. If you plan to purchase a home and need more than $35,000 in structural repairs and renovations, the Standard FHA 203(k) can be the best home improvement loan. With a standard 203(k), the maximum allowable amount of $35,000 is lifted. As a result, you can borrow monies above this amount. For both the Limited and Standard FHA 203(k) mortgages, the final disbursement of funds is subject to final inspection by the lender.
Home Improvement Loan
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