It’s that constant game of tug-of-war: your imagination runs wild and your bank account reins it back in. For homeowners dreaming of their perfect house, this can be a source of great frustration. Many homeowners push aside thoughts of major home repairs or fun projects because they don’t have enough money saved up, but renovation loans can help make your dreams a reality. If you want to know more about the basics of renovation loans, head on over to this previous blog post because today we’re delving into the details: renovation loan options, project possibilities, and more.
Renovation loans are a handy tool for anyone hoping to renovate their current or future home. Compared with improvement loans, renovation loan options tend to be less expensive, easier to process, and don’t come with balloon payments or such high interest rates. With all the renovation loan options available, it’s important that borrowers research the different types in order to find the loan most suitable for their home, their finances, and the nature of their renovation project. Let’s look at some of the possibilities.
Renovation Loan Options
The 203K Full Loan is a popular option that allows borrowers to spend up to 50% of the improved value of the home or $150,000 in renovations. The repairs can be structural or cosmetic, but they must be completed within 120 days and use at least $5,000. Families can consider very large renovations with this loan, like adding a room or repairing the home’s foundation. Older homeowners might consider improving their handicap accessibility, while young families can repair an old swimming pool. The 203K Full Loan could also be used for fencing and landscaping projects, amongst other possibilities.
A similar but slightly more modest option is the 203K Streamline Loan, which allows up to $35,000 in renovations. The project must be cosmetic in nature and (like the full 203K) must be completed in 120 days or less and cost at least $5,000. With this loan, borrowers can repaint their home, update floor coverings, and add or repair a roof. Other options include updating the HVAC (perhaps to a more environmentally-friendly system) and repairing termite damage.
A HomePath Renovation Loan lets homebuyers purchase a house that will require light to moderate renovation. With just one loan, these buyers are able to purchase and renovate their new home. The minimum loan amount required depends on whether the home is being used as a primary residence, second home, or investment property. HomePath Renovation Loans must add value to the property and cannot cost over 35% of the improved appraised value (and no more than $35,000). Like the two previous renovation loan options, the renovations must be completed in 120 days or less. There are many different ways to use this loan, but homeowners cannot use it for detached garages, pools, repairs completed by the borrower or a friend, manufactured homes, and items that are not permanent and don’t add value to the property.
HomeStyle Renovation Loans are another convenient way for borrowers to improve their home. They, too, can be used on a primary residence, second home, or investment property and the minimum loan amount differs based on the home’s purpose. HomeStyle renovations must be permanently attached, add value, be completed in 120 days or less, and cannot cost more than 50% of the home’s improved appraised value (and no more than $150,000). They also cannot be used for manufactured housing and repairs completed by the borrower or a friend.
Finally, there are the “EZ” Renovation and Repair Loans, which help with smaller projects. Projects should be non-structural in nature and take only 30 days to complete. They cannot be used on investment properties and cannot be applied toward repairs that will affect the home’s livability or marketability. The loan can be used for up to 10% of the home’s improved value or $15,000. Homeowners looking to install a pool or complete smaller, cosmetic improvements should look into this option.
There’s a lot to take into consideration, isn’t there? If you’re looking into purchasing a renovation loan, consider the nature of the project, the cost, the timeline, who you will be contracting, and the purpose of the home. All of these things and more will be important when you make that final decision. Or if you’re in the southwest Missouri area and would like more assistance researching renovation loan options and making that final purchase, give the lenders at Prime Lending a call at 417-616-0782. We would love to help.