An FHA loan, otherwise known as an FHA loan, is a no-risk mortgage designed for homeowners without good credit scores or large down payments. Homebuyers who qualify for the loan must pay down a certain amount of mortgage debt (usually 20%) before acquiring the first mortgage. Homeowners then use the funds from their second mortgage to pay for the repairs or renovations. The purpose of an FHA loan is to help homeowners remain in their homes and to prevent the real estate market from falling apart.

fha renovation loan

FHA loans are a special type of mortgage that was set up specifically to assist FHA-insured properties in need of major repairs or renovations. FHA loans are offered to borrowers at reasonable interest rates and terms by private financial institutions that specialize in financing the mortgage loans. The loans are sometimes provided through HUD, the U.S. Department of Housing and Urban Development. The purpose of a loan is to provide long-term capital for short-term repairs or renovations that will increase the value of the property over time. In other words, an FHA loan is used to help homeowners take advantage of better prices when they sell their homes. If you have an FHA loan on your mortgage, there are several things you can do to get additional savings.

Refinance Your second mortgage might not be enough to cover all of the repairs you are planning to make. You can save money by refinancing again, and this time you would be paying down the difference between the two mortgages. This would reduce your payment to the point where it would be within your affordable income range. However, if you plan to keep your home, this will result in a higher monthly mortgage payment. If you are planning to use the funds for repairs, an FHA renovation loan may not be worth the hassle.

Call Your Lender The easiest way to obtain a lower mortgage rate when it comes to an FHA loan for home improvements is to talk with your lender directly. If you still owe on your mortgage after the recent downturn, many lenders are more than happy to work with you. You can find many lenders who are willing to refinance your loan at lower rates. However, you should still be prepared to pay for the refinancing expenses out of pocket.

Hire a Professional Contractor If you know how to renovate your home without negatively impacting your credit score, you might feel comfortable getting an FHA loan without a mortgage professional contractor. Unfortunately, it often takes more than one contractor to properly complete large projects, and some contractors charge extra for their services. However, if you are working with a good contractor and have enough money to pay for the total costs of the project, this option may be the best one for you.

Take Advantage of Pre-Submitted Information Most borrowers who apply for an FHA loan are limited to information available within the guidelines of the program. When you apply for a pre-approved loan, the lender will review your credit and other financial documents to determine whether or not you qualify for an FHA loan. While the information is limited, this does not mean that you are excluded from applying for an FHA loan. If you think you will need some type of external financial assistance, you should still apply for an FHA loan. Even if you are not pre-qualified for an FHA loan, it never hurts to have the financing in mind.

As an FHA borrower, you can apply for a loan immediately after completing all necessary repairs. However, there is generally a wait period before loan approval (sometimes as much as nine months), so it’s important to submit all renovation plans well in advance of submitting your loan application. If you work with experienced lenders, you can get the financing you need in a relatively short period of time – even before your credit score raises to a higher level.

Use the funds to Improve Your Property As mentioned previously, most borrowers using the funds to buy a new home are limited by the amount of money they can borrow. For this reason, many buyers choose to purchase a fixer-upper. If your fixer-upper is complete, you can use the funds to make improvements to your home. However, while your credit score will not be impacted as negatively as a traditional mortgage would be, this loan will not help you qualify for lower interest rates on your new home.

When you are preparing to purchase a fixer-upper, it is critical to find out what your mortgage requirements are. The loan officer you speak with will be able to tell you whether or not the FHA loan you are applying for will be approved. You will also want to be sure that the borrower you choose meets all of your other mortgage requirements. Finally, before accepting any proposal, be sure to shop around and look at several lenders before making a decision. By following these tips, you should be able to find a lender that will approve an FHA renovation loan in no time at all.