Renovation loans such as FHA 203(k) or FannieMae HomeStyle® allow you to finance the purchase or refinance of your primary 1-4 family residence and to repair, improve, or upgrade the home with one loan closing – all with as little as 3% to 3.5% down. A home renovation mortgage is an ideal solution for home buyers, or homeowners, that are looking to make improvements to a property after closing with minimal down payment or equity.
Locating the perfect home that has all the amenities, upgrades, and features you desire can be a challenging task. And in today’s competitive market, chances are if you locate that home several other buyers have located it as well, creating a frustrating bidding war.
Avoid the competition - The FHA 203k and FannieMae HomeStyle® home loan gives buyers the advantage of shopping for a property based on location and affordability since many of their desired property upgrades and amenities can be added to the home after the closing using the renovation funds provided.
Properties being sold at a discount, such as distressed or older homes in need of repair/ modernization, do create buying opportunities. However, most traditional lenders will not loan against a home in need of repair. Even if the home was in decent enough shape to purchase in its present condition, do you have the extra funds - or desire to use your own funds - to make the necessary repairs and improvements after closing?
With a 203(k) or HomeStyle loan, the present condition of the property is of little concern to the lender, allowing buyers & sellers to avoid typical repair issues that block real estate closings.
Most homeowners are under the false impression that they can secure a home equity loan after closing to make desired improvements to the property. However, most home equity lenders will only lend up to 80% of the current property value, less any outstanding lien. That is, if a home was purchased in recent years with 20% down or less, chances are there is no equity left to lend against. With a home renovation loan, the loan is based off the anticipated “after improved” value, providing homeowners with access to future equity!
Because a home renovation mortgage is a simple one-time closing, just like a traditional purchase or refinance, you eliminate the need for a second mortgage, construction loan, home equity line of credit, or other more costly methods of financing.
Available for both minor cosmetic or major structural home renovation work, the FHA 203k and FannieMae HomeStyle® Loans can be used when buying a home as well as for current homeowners through a refinance. Here is a list of common eligible improvements:
Kitchen and bathroom remodels
Add-a Level
Roof replacement or repair
Painting or wall repair
Structural or safety repairs
Converting multi-families into a single-family home
Additions, adding bedrooms and bathrooms, etc
Energy efficient improvements, replace septic systems
Appliance replacements, carpeting, flooring
Landscaping...and more
The Fannie Mae Homestyle® loan and the FHA 203(k) loan are very similar in that both renovation mortgages allow you to borrow based on the after-improved value of the property. And at today’s low interest rates, this is about the least expensive way to fund a home renovation project. Both loans are “one-time-close” mortgages. That means you apply for a single loan, with one set of documents and closing costs. Some other renovation loan programs require a construction loan upfront, and a refinance later, adding unnecessary cost and hassle. Your American United Renovation Specialist will help you to determine which choice is best for you using factors like; property type, down payment amount, and of course your credit and income profile.
FHA loan that allows for 3.5% down on 1-4 family owner occupied properties
Credit scores as low as 620
Accepts higher debt-to-income ratios than HomeStyle
Single family loan amounts from $250,000 - $970,800, 2-family homes to $1,243,000, 3-4 family homes to $1,502,475 - $1,867,275
Conventional loan that allows for 5% down on owner occupied single family (3% for first-time buyers)
10% down for single family second homes
15% down for single family investment property
Best for those with higher credit scores and low debt-to-income ratios
Owner occupied 2-4 Units also eligible with more down
Single family loan amounts from $250,000 - $970,800, 2-family homes to $1,243,000, 3-4 family homes to $1,502,475 - $1,867,275
Any FHA or Fannie Mae approved lender can offer you renovation financing, and when times are slow in the lending business, you will see more and more lenders jumping into the renovation market. But do they really have the expertise, back office support, and hands-on experience to truly guide you through this process?
My team and I have provided New Jersey area residents with home renovation financing for over 20 years. And as a local New Jersey Mortgage Banker, we treat each client as if they are our only client – not just a number like most national chains.
Renovation financing has many moving parts. You deserve a lending partner that is knowledgeable in this area, and most importantly, accessible to answer your questions along the way. I am extremely proud of the American United team and their commitment to helping every client achieve home buying and financing success. We welcome the opportunity to be of service to you as well.
On your team,
Joseph Farella
While we understand the value of online research, to us home financing has always been about finding the right relationship – a true lending partner that becomes your friend in the mortgage business, guiding you every step of the way. Take your time and browse the different sections of our site, and I believe you will come away with a good feel for what American United is all about. If you don’t find what you are looking for, please let me know. - Joseph Farella, Executive Vice President - Mortgage Banking Division
