A Home Renovation Loan: Is It For You?

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Thinking of buying a home that isn’t quite your dream home? Or do you want to remodel your existing home but need attractive financing to do so? Did you know there are home loan programs in place to give you the financing you need and get your home, new or existing where you want it to be?

What are the Benefits of Remodeling a Newly Purchased Home?

It might seem rather counter-productive to purchase a new home, only to remodel it immediately. There are some distinct advantages to this approach of home buying, however, if you are up for a bit of a challenge, with a bit of creativity thrown in.

Here are some distinct benefits it offers:

• Offers a low down payment and flexible mortgage terms (either fixed- rate or adjustable-rate).
• Low down payment as little as 3%.
• Renovation amount is based on completed value as determined by a “what if” value appraisal with renovations completed.
• Depending on the program and loan to value, mortgage insurance may be required
• Renovations are available for primary residences, as well as second homes and investment properties.

Buying a property that needs a little work can be a great way to get something at a great price and custom make it to fit your unique needs. Having a loan to help you with this task makes it easier to make your new home a "Dream Home."

Home Loan for Renovations on Property You Already Own

You may currently own property that could use some remodeling or updating. Sometimes it’s easier to fix up what you already have than to start completely from scratch with a new property.

This type of renovation loan is based on the completed “what if” value of the property. You will also be able to improve your home utilizing a lower first mortgage interest rate. In addition, you can finance mortgage payments for up to 6 months to cover non-occupancy costs during construction.

There are a few things to keep in mind when you take out a home renovation loan on property you currently own:

• It permits you to do nearly any type of repair you need or wish to do.
• Renovation loan amounts up to 50% of the “what if” completed value of the property.
• Maximum loan amount may not exceed Fannie Mae's conforming loan limits.

• Loans are fixed-rate mortgages, fully amortizing with terms between 15 and 30 years.

This type of loan is available to primary residences, second homes and investment property types.

Remodeling Homes Equals a Healthier Housing Market

It might appear on the surface that home remodeling is nothing more than some spackling and paint brushes, but it actually symbolizes much more. During the past few years when the economy dipped, so did home renovations. This was due partly to negative equity, partly to a lack of home buying, and just an overall lack of confidence in investing in housing in general.

The fact that home remodeling is making a resurgence is a positive sign for the housing market, and is a positive sign overall for the economy in general.