Fixer Upper Loans
With the right renovation loan, transforming a fixer-upper into your perfect home is easier than you think. Explore financing options designed to help you bring your vision to life.
A Renovation Loan may be a good fit If…
A renovation loan is ideal for buyers who find a property with potential but need additional funds to make the necessary updates and repairs. Consider a renovation loan if:
You have found a home in a desirable location but it needs significant work to meet your standards.
You want to make custom changes or improvements that will increase the property’s value.
You’re ready to take on the challenge of managing a home renovation project, with professional guidance.
You have a vision for your home that includes more than just basic updates, like adding rooms or remodeling the kitchen or bathrooms.
Types of Fixer-Upper Loans
There are several types of renovation loans designed to meet different needs. Here’s a look at the most popular options:
FHA 203(k) Loans
The FHA 203(k) loan allows buyers to finance the purchase of a home along with the cost of its renovation in a single mortgage. This loan is perfect for homes that need significant structural repairs or updates. The 203(k) loan comes in two forms:
- Limited 203(k): For less extensive repairs, with a maximum repair amount of $35,000.
- Standard 203(k): For major renovations, including structural repairs.
Fannie Mae HomeStyle Renovation
This loan allows you to finance nearly any type of renovation, from luxury additions to simple repairs. It can be used for primary residences, second homes, and investment properties. It’s ideal for homeowners looking to finance both the purchase and renovations with one loan.
Freddie Mac CHOICERenovation®
The CHOICERenovation loan is designed for homeowners who want to purchase a fixer-upper and finance the cost of repairs. This loan allows you to include luxury renovations such as detached structures and swimming pools, and it can be used for primary residences, second homes, and investment properties.
VA Rehab Loans
A VA Renovation Loan is a great option for eligible veterans and service members looking to purchase and improve a fixer-upper. This loan allows you to roll the cost of the home and renovations into a single loan without the need for a down payment or mortgage insurance. Eligible improvements include safety updates, new windows, roofing, and more.
Pros and Cons of Fixer-Upper Mortgages
Pros
- Customizable: Renovation loans allow you to personalize your home to fit your vision and lifestyle.
- Lower Purchase Price: Fixer-upper properties often cost less than move-in-ready homes, allowing for potential savings.
- Increased Property Value: Renovations can significantly increase the value of your property, providing a return on investment.
Cons
- Higher Costs: Renovation loans may come with higher interest rates and additional fees.
- More Complex Process: Combining a home purchase with renovations means more paperwork and longer timelines.
- Project Risks: Unforeseen complications during renovation can increase costs and stress.
Fixer-Upper Loans FAQs
Fixer-upper loans can be used for various property types, including single-family homes, multi-family properties, and, in some cases, condos. The property must meet the specific requirements of the loan type you’re applying for.
Down payment requirements vary depending on the loan type. FHA 203(k) loans typically require a 3.5% down payment, while VA Rehab Loans often require no down payment for eligible veterans.
Most renovation loans require that the renovations be completed within 6 to 12 months of loan approval, depending on the loan type and the scope of work.
While minor repairs can sometimes be done by the homeowner, most loans require that major renovations be completed by licensed contractors. This ensures that the work meets all local building codes and loan requirements.
It’s important to budget carefully, as most renovation loans do not allow for additional funds once the loan is closed. Consider adding a contingency reserve to your loan amount to cover unexpected expenses.
Additional Resources
Buyer’s Market or Seller’s Market? 10 Key Indicators Every Agent Should Track
Beyond the List Price: Understanding the True Cost of Homeownership
How to Help Clients Understand & Adapt to Market Shifts
Ready to Renovate Your Fixer-Upper?
Our loan officers can help you secure financing to turn your fixer-upper into the home of your dreams. Start the process today!
