Renovation loans are for properties that might need a little attention and improvements before becoming homes of the home buyers’ or homeowners’ dreams. Offering both purchasing and refinancing options, Renovation loans are one loan that includes the costs of renovation with the mortgage amount. The total loan can be financed at a fixed rate. Depending on the situations and plans, there are several options available for borrowers to consider.
Insured by the Federal Housing Administration, the FHA 203K Full Mortgage allows for the purchase or refinance of a home which needs major structural and/or cosmetic repairs and renovations. With this loan, the home must be your primary residence. Approved lenders, like First Choice Loan Services, provide the funds for the purchase or refinance of the home and the full cost of repairs in one loan. When purchasing your home, the FHA 203K Full Mortgage offers a fixed rate with a required down payment.
Similar to the FHA 203K Full Mortgage, the FHA 203K Limited (203K(s)) is also insured by the Federal Housing Administration but has a bit more limitation since it allows for cosmetic repairs. Repairs are also limited to a maximum of $35,000 which must include a contingency reserve and all fees. The loan includes ‘streamline’ in its name because the lower maximum allowable repairs means the process is a bit simpler and more ‘streamlined’ than other Renovation Loans. The 203K(s) also are available for purchase transactions and refinances.
The HomeStyle® Renovation Loan program are used on conventional loans for repairs that are both required by the appraiser or desired by the borrower. Whether structural or cosmetic, the repairs must be attached to the property and be determined to add value to the home. Appliances can only be included within the Renovation Loan amount when they are a part of a full kitchen remodel. For example, a dishwasher and stove could be included as long as kitchen countertops and cabinets are also being remodeled. The HomeStyle® Renovation Loan program can also be used on second home and investment properties.
*HomeStyle® is a registered trademark of Fannie Mae.
The homes eligible for this program are those which were foreclosed upon by the lender and have been conveyed or deeded back to HUD. The eligible repairs for this program are exactly the same as those eligible for Underwriter or Appraiser required repair program. The only difference between the 2 is that the HUD REOs are government owned properties! Repairs up to $5,000 plus a 10% contingency reserve that effect health, safety or habitability can be financed into the loan. One important thing to remember with these is that the cost of repairs will be added to the bid price submitted for the property. Your down payment will be based on your bid price plus the cost of the repairs.
With this escrow holdback program, you are able to finance repairs on an FHA loan up to $10,000 plus a 10% contingency reserve. These repairs will be for items the appraiser and/or underwriter have deemed to be a health, safety or habitability requirements. The appraiser will be the one that determines the cost to cure, or repair.
There may be times when you don’t want to finance repairs into your loan because of several reasons. You and the seller may have negotiated repairs to be done once the loan closes, and the seller leaves some of their proceeds to you after closing to pay for those repairs. There may be a situation where you have enough funds in your reserves where you don’t want to increase your loan amount and you are able to fund them yourself. You are able to facilitate each of these scenarios utilizing this program.
You guys rock! I am so blessed to have had such wonderful and dedicated professionals working on my family’s behalf during this process. I couldn’t ask for a better experience because this was top notch service from start to finish. -Ayana A. | Browns Mills, NJ | 12.6.2017
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