A common mortgage myth related to renovation is that you have to own your home for a million years before you can renovate. When in fact, you can take advantage of a renovation loan before you ever step through the front door. So how does it work? Well, we’re glad you asked.
Beginning the home renovation loan process
Just like a traditional home purchase, the renovation loan process starts with a pre-approval. Once you’ve been greenlighted with a realistic price point, finding your fixer-upper and making an offer comes next. Your Homebridge Mortgage Loan Originator will then suggest the best renovation loan choice for you.
Two of the most popular renovation loans are the FHA 203(k) loan, insured by the Federal Housing Administration, and the HomeStyle loan, guaranteed by Fannie Mae. It’s important to consider what you want to change or update on your home, as both the 203(k) and Homestyle loan provide financing options for structural or cosmetic changes.
The difference between a FHA 203(k) and HomeStyle loan
An FHA 203(k) is backed by the government and is a great option for prospective buyers with less-than-perfect credit scores. A standard FHA 203(k) loan can be used for major remodeling projects. One requirement is that you hire a qualified consultant to oversee every step of the work, from the plans to the finished product.
HomeStyle Renovation loan products are a conventional mortgage that allows buyers to finance improvements for up to 75% of the property’s as-completed value (that’s the appraised value of the home once the upgrades are completed).
No matter what loan option you and your Mortgage Loan Originator decide upon, the Homebridge team is here to guide you through every step of the way. Have questions? Talk with a Homebridge Mortgage Loan Originator and get all the details on renovation loans.