After already closing the deal in getting your new home, you come across a leaky roof, tampered drainage, and you may just want to fix or customize several things in the house to your fit your own preference. Oftentimes, when homebuyers check their savings account after closing the deal, they find that they don’t have enough money for renovations. Renovation loans are here to rescue you.
How do you find the right home renovation loan for you? Below are examples of different types of home renovation loans to help you in your selection.
Fannie Mae’s HomeStyle Loan
Apart from Fannie Mae’s HomeStyle Loan being a government-backed type of home renovation loan, it is also among the most popular home improvement loans with good deals. It gives the client a platform to either choose to buy the place that requires repair or just refinance the home with a brand new mortgage that will fund the improvements.
Fannie Mae’s HomeStyle Loans are readily available from all Fannie Mae-approved lenders and have minimum requirements for you to qualify. The minimum required credit score is 620. You are also expected to have no less than five years of the home’s purchase price put down.
The Federal Housing Administration is also a government-backed type of renovation loan. It is also known as a 203 (k). Compared to HomeStyle renovation loans, the FHA loans come with not only a lower minimum credit score requirement, but also a smaller minimum loan down payment of 3.6%.
They are further subdivided into two categories; Standard and Limited loans. The limited loans were formerly referred to as streamline loans.
The difference between the two subdivisions is that a limited/streamlined FHA 203 (k) loans are created for purposes of cosmetic upgrades or improvements while the standard FHA 203(k) is mainly used in more expensive and intensive remodeling. A standard FHA will require you to have a qualified consultant for purposes of overseeing the work, step by step until the results of the project. Most people hire a contractor on their own for significant home improvement projects.
Private home renovation loans
A second mortgage or a home equity loan is also a great way to renovate your home. This type of loan come as a full package and there are no chances of fluctuating interest rates or monthly payments. They are recommended for a person with significant home improvement projects.
You should note that when applying for this kind of home renovation loan, you are pledging the home as collateral. In case of the loan payment failure, the house could end up being owned by the lender.
Cash-out mortgage refinancing
This is a private remodeling loan that gives allowance to the homeowner to have another mortgage. In most cases, the first mortgage is lower than the second one, and the difference is given in cash to the homeowner.
Do you have a question about renovation loans? Click here to contact Kolesar Team today!