Many home buyers and investment property owners are considering or own properties in need of extensive repairs or renovation. Fortunately, the Home Style Renovation mortgage is a great option. The mortgage is available for both home purchases and refinancing, can be used on primary residences, second homes, and investment properties, and exists as a first mortgage instead of a second or home equity line of credit. The Home Style Renovation mortgage is a convenient and affordable option allowing homeowners to create their dream home, improve their ability to rent, or generate equity for a future sale.
The current housing market is loaded with homes that require a lot of work. A stumbling economy, the market collapse and resulting glut of foreclosures, and constantly aging structures have left many homes that can be purchased affordably if you are willing to fix them up. In some cases, renovations are an absolute necessity in order for the home to pass inspection. In other cases, the home may just need some serious sprucing up. Either way, the ability to obtain a Home Style mortgage instead of the more traditional options such as a home equity loan or other more costly line of credit has become much easier and cost effective.
It used to be that once a home was purchased, another source of financing would be needed to make any improvements on the property. It was then up to the buyer or owner to hire a contractor or use sweat equity to make the needed improvements. For many, this additional financing may not be available, or they may not have the time and other resources needed to complete the work on their own. Fannie Mae created the Home Style Renovation mortgage program to solve this problem. The Home Style mortgage is similar to a construction loan and a mortgage in one package.
Homes that require a little extra TLC, or just need a new look can be purchased with the Home Style mortgage. In addition to the purchase price of the home, the mortgage can also include funds to cover up to 50% of the as-completed appraised value of the home. The funds may be used for repairs, renovations, and improvements in energy efficiency. Because there are not two separate loans, there can be a significant reduction in closing cost expenses and may also provide a better interest rate than traditional options. There are no restrictions on the work and no minimum dollar amount for any repairs. As long as the improvements are permanently attached to the home and add real value they are approved. Also, if the repairs are related to energy-efficiency, an energy report is required that provides the recommended improvements and an estimate of their related cost savings.
Although many of these expenses can be included in the mortgage, there are certain things that may be required to obtain a Home Style Renovation mortgage. Inspections, appraisals, engineering, permit fees, energy reports, and other things are a few examples. You will need to hire a licensed contractor; however there are some projects that are allowed to be done by yourself. The contractor must be approved by your lender, be qualified and experienced, and follow all license and insurance standards for the home’s location. The renovations must begin within 90 days of the mortgage closing, and all need to be completed within 180 days.
Other than the likely benefit of less closing costs and the possibility of a lower interest rate, the Home Style Renovation mortgage provides some great benefits. There are additional financing programs available in some situations that would allow for up to 105% of the as-completed appraised value. It is more convenient, easy, and can take less time than traditional options. And of course, it can make a home with issues or outdated style and transform it into a real place of beauty.
Navigating mortgage and loan rates is complicated! Why not let our team do the hard work for you? Equity Source Mortgage is a trusted mortgage broker in Minnesota. We believe that people deserve a home to call their own. At Equity Source Mortgage, our number one goal is to match you with the best loan for you. Contact us or call us at 763-657-2000 to begin exploring your home ownership journey – YOUR Dream Is Calling!