Renovation Mortgage Programs

If I had a dollar for every time someone responded to my comment about remodeling and DIY projects with the phrase “welcome to home ownership!”– I’d be rich!  Not everyone has the means to build their pinterest-inspired dream home from the ground up– but what if I told you there are mortgage programs designed to help renovate existing structures?  What if your dream home already exists, and just needs some updates to make it your own?  No DIY-ing required!

Renovations programs are not very well known, and were rather unappealing before the housing crisis.  They were thought to be confusing and complicated.  As a result of the distress caused by the negative housing situation, these type of programs became more attractive to potential home buyers who sought ways to buy homes at a lower price and improve upon them.  The shift in the focus of the consumer has brought the Federal Housing Administration (FHA) 203(k) rehabilitation loan and Fannie Mae HomeStyle Renovation Mortgage to the forefront of financing options for prospective home buyers that are in the market for a fixer-upper. Both of these programs function to refinance existing homes as well.

Two Types of Renovation Mortgage Programs

When purchasing a home with a FHA 203(k) Renovation Mortgage or a Conventional HomeStyle Renovation Mortgage, the funds designated for repairs to the property are placed in an escrow account with the mortgage lender after closing. After all repairs have been made, a final inspection takes place. At this time, all contractors may submit their invoices to the lender to be paid. Renovations may not be completed by the homeowner.

FHA 203(k) Renovation Loan VS. Conventional HomeStyle Renovation

Now, you might be wondering, what is the difference between the two programs? Essentially, 203(k) is an FHA Loan Program while HomeStyle Renovation is a Conventional Loan Program. Each program, therefore, must adhere to its respective guidelines for credit score and debt-to-income limits. FHA has more strict requirements on what types of repairs can be complete to the home while the rule of thumb for the HomeStyle Renovation loan is that it can be anything that increases the value of the home and is fixed to the property. The HomeStyle Renovation Loan can be used to buy or refinance a primary residence, second home (vacation home) or even an investment property while the FHA 203(k) loan is only available on primary residences.

Which Renovation Mortgage Program is Best for Me?

If you have low credit and the property is only in need of minor repairs, the FHA 203(k) would probably be best for you, as it allows credit scores down to 580 and only requires as little as 3.5% down. If your credit score is over 660 however, and you have 5% to put down, you may be better off with a HomeStyle renovation loan, as it would likely give you a lower overall mortgage payment. In any case, if you are unsure, contact a loan officer at Riverbank Finance to discuss each program’s specific guidelines and determine which would be the best fit for you.

Take a look at Fannie Mae’s guidelines for HomeStyle Renovation Loans
Also check out FHA’s 203k Renovation guidelines

Have a specific scenario you’d like to run past us?  Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Apply for a Renovation Mortgage

To apply for a Renovation Mortgage call Riverbank Finance today at 1-800-555-2098.

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