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Renovation Home Loans – Loan Smart

Renovation Home Loans

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Overview

Fannie Mae and the Federal Housing Administration (FHA) have home renovation mortgage programs that allow buyers to borrow based on what the house is expected to be worth after the home rehab (ARV) is completed. Homeowners can also use both programs to refinance their existing mortgage plus the renovation costs into one loan. Included below are various types of renovation loans to assist with a multitude of mortgage projects.

You can typically use funds in a multitude of ways such as to repair or replace: kitchen remodeling, flooring, finish basement, roofs, gutters and downspouts, decks, patios and porches, heating and cooling systems, windows, doors and exterior siding, plumbing and electrical systems.

Types of Renovation Home Loans

With a USDA loan, you don’t have to make a down payment; and you’re required to take a fixed rate loan. ARMs aren’t available via the USDA rural loan program. Rural loans can be used by first-time buyers and repeat home buyers alike. Homeowner counseling is not required to use the USDA program. For USDA you must qualify for the program and your home must be qualified, too. Check below if you may be eligible for USDA Products.

HUD REO Repair Escrow
This loan can be used on HUD REO listings only where the appraiser has required MPR (minimum property requirement) type repairs. These are loans for homes that failed to sell at a foreclosure auction, which have been claimed by the lender and put back up for sale. These homes are REO (real estate-owned property), for which HUD, (The Department of Housing and Urban Development), has paid off the mortgage

FHA 203K Full
The FHA 203K is a government-insured loan allows you to buy a home that’s in need of major repairs and/or renovations. The repairs can be structural and/or cosmetic in nature. An important benefit is you can buy a home and complete the repairs using just this loan. This loan offers fixed rates with only a 3.5% down payment required. The home must be your primary residence. The FHA 203K is also available for refinance transactions.

FHA 203K Streamline
This is similar to the FHA 203K Full loan, but is more limited in its scope. The repairs can only be cosmetic in nature and are limited to a maximum of $35,000. Because the repair costs are smaller, there is less red tape to get the loan, which is why it’s called “streamline.” These loans can also be used to refinance existing mortgages and rehab homes.

EZ “C”onventional
The EZ Conventional is used for both appraiser-required repairs or repairs the borrower wants done to the property. The repairs must be non-structural in nature (no exceptions) and they must be attached to the property.

Weather-Related Escrow
Can be used on an FHA or conventional loan. These loans can also be used on a VA loan by exception only if the seller is funding the repairs. Repairs do not have to be appraiser-required but the appraisal must be subject to those repairs being completed.

USDA Repair Escrow
To be used on a USDA-financed loan where the appraiser has required MPR (minimum property requirement) type repairs. For designated rural properties, they are guaranteed by the Department of Agriculture. Benefits include financing up to 100% of the purchase price and no monthly mortgage insurance premium.

Buyer / Seller Funded Repair Escrow
Can be used on an FHA or conventional loan. Can also be used on a VA loan only if the seller is funding the repairs. Repairs do not have to be appraiser-required but the appraisal must be subject to those repairs being completed.

Jumbo Renovation Loan
To be used on a jumbo renovation loan for either appraiser-required repairs or repairs the borrower wants done to the property. The repairs must be non-structural in nature (no exceptions) and they must be attached to the property and add value.

HomeStyle Renovation
To be used on conventional loans for both appraiser-required repairs and repairs the borrower wants done to the property. It can be used on second homes and investment properties. The repairs can be structural in nature or cosmetic, but they must be attached to the property and add value.