Thankfully, that is where renovation mortgage loans take place. Renovation loan is a loan designed for homeowners who are looking to finance their projects when it comes to remodeling. With renovation loans, you are able to obtain the cash needed to buy your very first (or even second) house, and make all of the required repairs. For this in depth look at renovation mortgage loans, you will know everything there is to know about funding your next fixer-upper. You will also be provided with helpful advice on finding the best renovation loan lender in your area.
205 First, what is a renovation mortgage loan? This is a mortgage loan where you have to pay for the renovations only. The amount of money you pay for the interest will depend on the value of the property you want to remodel and the loan amount. The loan terms may include monthly payments and the duration of the loan. Depending on the value of the property you want to remodel, it may be possible to find a low interest rate refinancing. Some lenders provide longer repayment terms.
206 However, it is important to note that not all lenders may approve these kinds of loans. One reason could be that you are a first-time home buyer, or because you have other debt. Also, because of the high risk of lending money for projects that you cannot handle, lenders may also charge high interest rates. These are just some reasons why FHA loans are considered by many lenders as the better option, especially if you have a stable financial situation.
207 FHA loans are offered by many mortgage lenders and are especially ideal for renovations that do not require additional funds, like building a new addition, repairing the roof, or adding a deck or garage. FHA loans can also help homeowners with other types of home repairs, such as basement waterproofing and updating kitchens, bathrooms and swimming pools. There are a few things that you should know about the FHA program, before applying.
208 First, it is important to note that the FHA does not lend money for renovations, only for repairs. Second, in order to qualify for a loan, borrowers must reside in their current home for six months or more. If they are moving out soon, they may need to provide proof that they will still be living in the house six months from now. Third, because these loans are guaranteed by the government, there is no credit check process. Fourth, however, borrowers are required to pay a premium on this type of mortgage, which is determined by their credit rating.
207 The FHA insures lenders against the loss of their investment when borrowers fail to make payments. They are very similar to traditional mortgages, except that they are backed by the federal government. The FHA does not deal directly with homebuyers but provides guarantees and low interest rates for them. Homeowners that want to apply for this type of loan should take a look at their financial situation to see if they qualify. Borrowers who own one of the many fixer-uppers will probably have better luck securing an FHA loan than those who own a single-family home.
20 The first thing that you need to do is talk to your HUD consultant. They can tell you if you qualify for the FHA home renovation loan program. The FHA works under the Department of Housing and Urban Development. HUD boasts a website that will allow you to find out if you will qualify. In order to get your application in the system, however, you will need to call your local HUD office.
21 The second thing that you need to do is understand how the housing market is doing. This is important because first-time homebuyers are often discouraged from taking a look at houses because of how much they cost.
22 Even if a first-time buyer decides to take on some renovations, it is still a good idea to have a plan for them. First, list the total costs for all of the upgrades that you will be making. Include the cost of materials as well as labor for all of the repairs that you will be making. You should also consider additional charges like insurance for the property and the appraisal, if it is required.
The third thing that you should consider before applying for either a loan or a home purchase is to understand the difference between Fannie Mae homestyle renovation mortgage loans and Fannie Mae home purchase loans. The former is a risk-free option that offers borrowers lower interest rates and greater borrowing power. The latter comes with a higher interest rate, but the cost of borrowing is lower. For first time homeowners that may be looking to make home improvements or repairs, it would help to have some extra cash so you can afford the interest rate.
When you apply for either a loan or a home purchase, there is a fair bit of paperwork involved with it. If you are a first-time homeowner or a low income earner, it would help to have a solid understanding of what the typical paperwork process entails. This includes credit score requirements, documentation that must be provided with your application, and your expected closing costs. You should do your best to understand what these forms entail and why you need them. By taking the time to understand them, it will make it easier to figure out how to fill them out and how to obtain the funding that you need in order to renovate or make home improvements.