RENOVATIONS
WHY RENOVATE with a REFINANCE?
Renovating, remodeling, and repairing your home.
Why now?
In today’s purchase market, there are a lot of people looking for homes but, there is not a lot of inventory available. So, instead of leaving your home you own with or without a current mortgage, stay a while longer. If you do not have the cash on hand, there are a few options available to renovate your current home to be the home of your dreams.
What is a renovation loan?
Renovation loans can be utilized to update and repair your home by utilizing the current or future equity of the home to fund the work.
Option 1 – FHA Renovation Loans
Being a government program there are additional fees that are associated with these twp (2) options.
Standard 203k:
- Repairs from $5,000 to 110% of the appraised value of the home after improvements
- HUD consultant and general contractor required
- Cannot be general contractor on your own loan
- Borrower’s with not so great credit and higher debt-to-income ratio
- Renovations on primary homes only
Limited 203k:
- No HUD consultant required
- Cannot be general contractor on your own loan
- Less extensive, non-structural repairs totaling under $35,000
- Value of home is the “as completed” appraisal with projected work
Option 2 – Homestyle Renovation Loans (conventional)
Similar to the 203k’s, costs of this option are a little less.
- For borrower’s with stronger credit and lower debt-to-income ratios
- Lenient with the kinds of repairs
- If Single Family Residence, it can be a 2nd home or investment property
- If multi-family, must be a primary residence
- Repairs of $5,000 up to 50%-70% of the projected value after improvements (depending on the lender)
Option 3 – Cash-out Refinance (conventional and non-qm options)
- Based on the current equity of the “as is” home value and borrower against the equity
- Can borrow up to 80% loan to value (up to 90% with non-qm)
- Home is used as the collateral to keep 1 monthly mortgage payment
- Closing costs can be rolled into the loan but, will deduct from total cash out
- No restrictions on the money
- Appraisal Drive – Home has to appraise for this option to be viable
How to choose the best option:
If you are considering the renovation route, be sure to give me a call. I will take an application and carefully review your specific scenario. We can then base our decision on credit, the cost of the project debt-to-income ratios, etc…
Keep in mind that…
- You want to have a realistic idea of timelines
- You do not want to miss any extra costs in the estimate
- You do not want to over-improve or improve in a way that is not beneficial to the value
In conclusion, there is a home improvement loan for almost every scenario. Approval and repairs will dictate which program will be most beneficial to you.
Ashley Socquet
Office: 844.788.7237 x7627
Email: Ashley@northeast-mortgage.com
