Are you interested in a renovation loan? In today’s housing market, it can sometimes seem like there’s a shortage of affordable, move-in-ready homes, leaving you wondering if you might be better off considering fixer-uppers instead. With a renovation mortgage, you can expand your home-buying options through a loan that covers the purchase price along with the cost of home improvements.
Midland Mortgage Corporation is here to help you understand the details of a renovation loan and determine if it’s right for your situation.
What Is A Renovation Loan?
A home renovation loan provides individuals with funding to purchase a home that requires a lot of work and includes a reserve placed in escrow to pay for those renovations. Two types of renovation loans are the HomeStyle Renovation Mortgage from Fannie Mae and the Federal Housing Administration’s (FHA) 203-k rehabilitation loan. Both loans are ideal for potential homebuyers who may be able to afford a mortgage payment but don’t have excess cash on-hand to pay outright for renovations.
A renovation loan is also a wise choice for a first-time homebuyer who wants to live in a specific area, has a limited budget, and is interested in purchasing a fixer-upper instead of a move-in-ready home. Rather than having to worry about two loans—one to cover the home purchase and one to include the upgrades—the renovation loan makes it possible to get all of the funding through one mortgage.
How Does A Renovation Loan Work?
The process for getting a renovation loan requires five simple steps:
- Find a property with your real estate agent and determine the improvements to make.
- Contact Licensed Contractors to get multiple quotes.
- Submit all information to your trusted Renovation Mortgage Consultant at Midland Mortgage.
- Bring in a property appraiser to determine the property’s after-improved value.
- Proceed to the loan closing.
When the loan closes, one portion of the funding pays for the home purchase, while the other part goes into an escrow account. Once the renovations are complete, your mortgage lender will send out an inspector to review the project. The lender will release the funds to pay the contractor, once the company determines the renovations are acceptable, meeting any local and state codes.
Dissatisfied With The Real Estate Market? Expand Your Options With Midland Mortgage
If you are interested in learning more about renovation loans or would like to find out if you or your desired property qualify, reach out to our experienced mortgage counselors at Midland Mortgage today. We would love to work with you to help make your fixer-upper dreams a reality.