Renovation loans, HomeStyle or 203k, can be the answer for many new home buyers and existing home owners. Funds can be provided to bring the property up to a condition that qualifies for financing or to suit the home owner needs. Conventional and FHA loan options are available for purchase loans or for refinance loans.
Many real estate agents and home buyers are not familiar with renovation lending. Some may have heard that renovation loans are difficult. Actually renovation loans are not difficult. They simply have an additional processing tract that an inexperienced lender may not understand sufficiently.
Alongside the normal loan approval, a renovation loan must process for the contractor and renovation proposal approvals. Requirements are detailed, and typically delays in renovation loan final approvals result from poor processing of the renovation proposal. These must be finalized prior to the appraisal.
Renovation loans base the loan amount generally on the after value, the new home value after the work is completed. The loan is closed with the funds for repair set aside. The draw schedule can vary from percentage completed to a portion upfront and a final draw when all work is completed.
The contractor also must be fully informed of the process, including the draw procedure and time frame. If the contractor is not aware of the steps then there can be difficulties completing the renovations.
The conventional, HomeStyle program, and the FHA, 203k program, are excellent programs to make your home your dream home. Contact me with any questions about renovation in general and specifically which program, conventional or FHA, will be best for your needs.
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