Whether you need your roof replaced, structural alterations, or a full kitchen or bathroom remodel, a renovation loan can help you get the job done. With interest rates still hovering at historic lows, now is a better time than ever to create your dream home. Not to mention, you can build tens of thousands of dollars in additional equity in a short time by making some key home improvements. Erica Paige, Buyer Specialist at The Loken Group, and Paige Bowman, Loan Officer with Movement Mortgage, help to break down how renovation loans work and the various avenues you can take to fund your remodel.
Renovation Loans 101:
1. Where has the rise in popularity of home renovations come from?
TLC brought the trend of home renovations and DIY home improvement projects to life with their show “Trading Spaces” in the early 2000’s, and the home remodeling mania has only continued to grow with popular HGTV series like “Fixer Upper” and “Property Brothers”. Not only are home renovation projects an exciting way of turning the old into new, homeowner equity has also given many homeowners the confidence and means to tackle the repairs and upgrades they had been putting off for years.
2. How do home renovation loans work?
How a home renovation loan works will depend on the type of financing you decide to apply for. Of conventional, FHA, and VA loans, a VA renovation loan will have slightly more strenuous guidelines than the others. There’s no difference in down payment for conventional and FHA loans, meaning that you can still do a 3.5% down or 3% down program. As far as interest rates, there will be a slight variation between the different types of loans depending on what you’re having done.
3. What types of repairs and remodeling can be covered with a renovation loan?
A renovation loan can cover home improvements as minor as fresh paint and HVAC repairs, or as big as a complete kitchen or bathroom remodel, floor repairs, or plumbing and electrical upgrades.
4. What are some key takeaways that everyone should know about renovation loans?
Firstly, if you know that a renovation loan is something you’re interested in, find a trusted contractor that you want to work with and bring them with you on the walk through, inspections, etc. so that they can go ahead and begin work on the bids. Secondly, utilize your buyer’s agent to find out if your renovation plans will actually add value to the home. Lastly, be sure that you fully understand the process and the timeline – depending on how slow or fast the contractor is, you can close a loan in as few as 30 days or as many as 45 days.