In the ever-evolving real estate market, finding the right mortgage product can be daunting, especially for those looking to build or renovate their dream homes. Two little-known but highly beneficial home renovation mortgage programs, Fannie Mae’s HomeStyle Renovation Mortgage and the Federal Housing Administration's (FHA) 203(k) program, offer excellent solutions. These programs allow buyers to borrow based on the expected value of the home after renovations are completed. Homeowners can also refinance their existing mortgages, incorporating the renovation costs into a single loan. 🛠️🏠
Demand for home renovation loans has surged, especially following the housing crisis. These loans have become a viable option for purchasing and renovating distressed properties. Unlike traditional credit lines, these renovation loans require borrowers to demonstrate that the funds are used for home improvements. This ensures that the property’s value increases as anticipated. 🔧💰
For the FHA 203(k) program, the borrower hires a consultant to assess the construction plan and perform inspections before each draw is made. A draw occurs when a portion of the funds is disbursed to the contractor. Borrowers typically have six months to complete the project and can request up to five draws. The HomeStyle program, while requiring initial and final inspections, does not necessitate a consultant to monitor the work.
Rehab loans, though more complex than traditional mortgages, are particularly beneficial for those looking to purchase foreclosed homes needing repair. For instance, Bill Rapp assisted a couple who bought a foreclosed house in Houston for $26,000 and borrowed $136,000 for renovations. The FHA 203(k) mortgage covered the house price, renovation costs, and loan fees, minus the down payment. After renovations, the home’s value was appraised at about $135,000, showcasing the potential equity gain from such projects. 💸🔑
Deciding which loan to choose depends on various factors, including credit score and down payment capability. The FHA 203(k) program is more accessible to those with lower credit scores, as it does not set a minimum score requirement, though many lenders prefer a score of 640 or higher. Some lenders might accept scores as low as 580.
On the other hand, Fannie Mae’s HomeStyle loan typically requires a higher credit score, often above 660. To secure the best rates, borrowers need a minimum score of 740. "If you have a 740 score and 10 percent down, a HomeStyle is definitely cheaper," Bill Rapp explains, highlighting the cost-effectiveness of the HomeStyle loan for well-qualified borrowers. 📈💵
The loan limits for the 203(k) program must comply with FHA guidelines, varying by county but generally capping at $314,827 in most areas and up to $765,525 in high-cost regions. The 203(k) loan allows borrowing up to 110% of the home's appraised value post-repair, compared to 95% with a HomeStyle loan. However, the FHA 203(k) loan restricts the use of funds for luxury items, unlike the HomeStyle loan, which permits such expenditures. 💰🏊♀️
For smaller projects, the FHA offers a streamlined 203(k) loan for renovations under $35,000, not involving major structural repairs. This option requires less paperwork and bureaucracy, making it easier to obtain.
Navigating the complexities of one-time close construction and renovation mortgage loans can be challenging. This is where a mortgage broker becomes indispensable. A broker, such as a Renovation Mortgage Specialist, can guide you through the myriad of options, ensuring you choose the right product for your needs and financial situation. They can provide invaluable advice, help you understand the requirements, and streamline the application process, ultimately saving you time and money. ⏱️💡
One-time close construction and renovation mortgage loans, like the FHA 203(k) and Fannie Mae’s HomeStyle, offer robust solutions for buyers and homeowners looking to renovate. However, the complexities involved make the expertise of a broker essential. By working with a Renovation Mortgage Specialist, you can confidently navigate the loan process, ensuring your renovation dreams become a reality. 🌟🏡
For personalized advice and to explore your options, contact Bill Rapp, The Mortgage Viking, at 281-222-0433 today. 📞🤝
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Copyright ©2021 | Mortgage Viking Team
Licensed to Do Business | NMLS # 228246
This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Copyright © 2021 | Medallion Funds
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Corporate NMLS NMLS # 1825831 | Company Website: https://medallionfunds.com/bill-rapp/
Copyright ©2021 | Mortgage Viking Team Licensed to Do Business | NMLS # 228246
This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply
Corporate | NMLS ID NMLS # 1825831
Corporate Address : 2651 N. Green Valley Pkwy STE. 101 Henderson, NV 89014 https://medallionfunds.com/bill-rapp/