A lot of people are looking into home renovation loans right now. The market has been crazy over the last few years. Home buyers are hence looking for ways to get into a great home at a price they can easily afford. You have several options of paying for renovations once you’re in a home. One of those options is a Home Renovation Loan.
What is a Home Renovation Loan?
The short answer is this is a mortgage/loan where you borrow extra funds to be used for home renovation. This type of loan was created so you can buy a fixer-upper and update the home to get it up to par. It’s great for someone who has just enough cash for a down payment but wouldn’t have a lot left over for renovations after they are actually in the home.
Why take a Home Renovation Mortgage Loan?
There are really three reasons why someone may want to go this route. The first is one we already mentioned. Let’s say you want a home in a certain area with certain features, but they are priced a bit out of your price range. That wouldn’t be a surprise these days, considering how much home prices have increased. It’s too bad – until you find a fixer-upper that is essentially falling apart that is in your price range and in your ideal neighborhood! You can take out this kind of mortgage, do the home repair, and be all set. The second reason is let’s say you want to buy a great home but it’s a little outdated. You’d be okay with it as-is, but you would prefer if you could modernize a few things. A Home Renovation Loan lets the home buyer borrow some extra cash to make the upgrades they want. The third reason is if you just like doing this kind of stuff! Maybe you’re a DIY kind of person and you love fixing things around the home. You can get a Home Renovation Loan to help with the materials purchases to get the job done. The good thing is you wouldn’t be adding much to your mortgage. However, it does give you the cash necessary so you aren’t dipping into savings.
How do you get a Home Renovation Loan/Mortgage?
The first step is to contact a good mortgage broker. They will answer any questions you may have such as how the process works, what kinds of loans you may qualify for, etc. Next, you’ll get pre-approved for the loan. This step is generally pretty straightforward but is an important step nonetheless for all homebuyers. You need to get pre-qualified for a loan before you can submit an offer to buy a home. Especially in today’s market, a seller will typically only accept an offer with a prequalification letter. Once you get on contract with a house, you will partner with the broker to get them all of the information they need. Meanwhile, the lender is underwriting to make sure you’re a good risk. They also need to figure out what terms to give you on the mortgage. You will also need to get an inspection and appraisal on the home. But before those things are done, you need a feasibility study. This study is done by a 203K consultant. This consultant determines how much the home will be worth once renovated and how much the renovations should cost. The lender is only willing to take so much risk – if the home is expected to be worth $200,000 after the renovation but it will take you $100,000 to fix it up, they probably won’t bite!
A Home Renovation Loan is a great way for a home buyer such as yourself to compete in today’s housing market and be able to fix up a home to the standard you are looking for. More importantly, a great broker can make the difference between you getting a good deal and a great deal. For more personalized guidance, give us a call at (775) 688-9100, and we will help you any way we can.