If you have ever seen a home that is almost perfect, but it needs a little TLC, there are available loan programs that will allow you to purchase and finance the repair or renovation costs right into one mortgage. These programs are called renovation loans and there are a few different versions available that can accomplish as little or as much renovation work as you might need.
The two most popular programs are called the FHA 203k and the Fannie Mae Homestyle Loan. Both programs have pros and cons, but in the end, both can accomplish the same goals. They will both allow you finance the renovation costs into your mortgage. Whether you choose one program over the other will be based on several factors, but during the pre-qualification process, we will identify the pros and cons of each program with you, so that we determine which program will work best for your situation.
Over the years, renovation loans have gotten a bad rap. It’s true that they are much more complex, with a lot more moving parts and players involved, however with an experienced loan officer to set the expectations upfront for everyone and to help keep you on track during the process, these programs can be just as smooth as any other.
For a home that currently has health or safety issues like water intrusion, mold or termite damage, traditional financing may not be an option. Traditional loan appraisals will identify any evident health or safety issues and the appraiser will make the value SUBJECT TO repairs. In the situation where the seller has no means to make repairs or if the property is a foreclosure or shortsale, repairs prior to settlement may not be possible. This type of situation is where a renovation loan is the only financing option.
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