Things You Should Know About Renovation Loans

Are you considering renovations loans to purchase a fixer-upper? Here are three things you should know before you move forward.

If you are struggling to find an affordable, move-in-ready home in your area, you may be considering a renovation loan to purchase a fixer-upper instead. What should you know about renovation loans before you move forward? We have three facts to help you make the most informed decision.

#1: There Are Two Types of Renovation Loans

The two kinds of renovation loans are the 203-k Rehabilitation Loan from the Federal Housing Administration (FHA) and Fannie Mae’s HomeStyle Renovation Mortgage.  The FHA renovation loan tends to be the best option for home buyers with lower credit scores or a smaller down payment. The benefit of choosing either of these loans is that you don’t need to have a lot of cash upfront to pay for your renovations. As long as you can afford the monthly payment, you’ll have the freedom to renovate your home.

#2: The Renovation Loan Process Is Simple

If you decide you are ready to apply for a renovation loan, the process is straightforward. Here’s how it works:

• Choose a property and identify the specific improvements you want to make.
• Get several quotes from licensed contractors.
• Submit all the information and quotes to your mortgage consultant.
• Schedule an appraisal to determine the home’s projected value following the improvements.
• Move forward to close the loan.

#3: A Renovation Loan Is a Good Choice for First-Time Homebuyers

While any homebuyer can benefit from a renovation loan, it’s ideal for first-time homebuyers who may have a limited budget and want to purchase a fixer-upper. Instead of worrying about two separate loans—one for the property purchase and one for the remodeling—a renovation loan enables you to get all the funding you need with one mortgage.

Do you have questions about renovation loans, or would you like to speak to one of our helpful consultants at Midland Mortgage Corporation to determine if this loan type is a good fit for your needs? Contact us online now.

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