Unlocking the Potential of Purchasing a Less Than Perfect Home

Homes & real estate
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Unlocking the Potential of Purchasing a Less Than Perfect Home

Homes & real estate

The Benefits of Renovation Loans

When it comes to purchasing a home, finding one that checks all the boxes can be difficult, especially in a low-inventory market. So, how do you overcome those deal breakers and get into your dream home more quickly? Don’t sweat it, renovate it!

Many borrowers are unaware that there are programs available not just to purchase a home but also include certain renovation aspects. Whether you're eyeing that charming fixer-upper or can’t seem to find the perfect match during your home search, renovation loans offer a compelling solution to bridge the gap between your vision and reality. In this post, we'll explore the various options available, with a special focus on the Streamline Renovation loan, designed to simplify the process and maximize convenience.

Traditional Renovation Loan Options:

FHA 203(k) Loan: The FHA 203(k) loan has long been a popular choice for homebuyers looking to purchase a property that needs repairs or renovations that can be completed within 6 months after closing. With this option, buyers can finance both the purchase price of the home and the cost of renovations into a single home loan, often with a lower down payment than conventional loans. This opens doors for individuals who may not have substantial cash reserves but are willing to invest in a property's potential.

Fannie Mae® Homestyle® Renovation: Great for small additions, updating a bathroom, or replacing a roof, the Homestyle Renovation program also offers a one-time close option but up to 11 months after closing to complete the renovation work. This option is ideal for more complex renovations that may take longer to complete. You can also include up to 75% of the as-completed appraised value in your home loan for renovations.

Streamline Renovation Loan: While traditional renovation loan options provide valuable avenues for financing, the process can sometimes be complex and time-consuming. This is where the Streamline Renovation loan shines, offering a simplified approach to financing both the purchase and renovation of a home.

Great for cosmetic fixes such as kitchen or bath updates, windows, or roofing, the Streamline Renovation loan simplifies the process with minimal builder approval and often doesn’t require permits or plans due to the nature of the renovations. This, in turn, can often reduce upfront expenses that could eat away at your funds for the renovation – up to 15% of the as-completed appraised value. The renovations do need to be completed within 120 days of closing, so you’ll want to make sure your renovation expectations are reasonable for that timeframe.

Overall, the Streamline Renovation loan offers borrowers the opportunity to personalize their living space according to their tastes and preferences quickly and easily. Whether it's modernizing outdated fixtures, expanding living areas, or enhancing energy efficiency, the loan empowers homeowners to unlock the full potential of their property without breaking the bank or taking 6+ months to complete.

What if you want to renovate your existing home?

You are in luck; you can use the above programs to help you update an existing home you own, or you can use a traditional cash-out refinance.

Cash-Out Refinance: For homeowners who have built up equity in their property, a cash-out refinance can be an effective way to access funds for renovations. By refinancing their existing mortgage and borrowing against the equity, homeowners can secure a lump sum to finance improvements, whether it's a kitchen remodel, bathroom upgrade, or adding extra living space. This option offers flexibility regarding loan amounts and repayment periods, making it suitable for various renovation projects.

Get started on your dream home today!

In conclusion, renovation loans offer a compelling solution for individuals looking to purchase or upgrade their homes. While traditional options like FHA 203(k) loans, Homestyle Renovation, and cash-out refinances provide valuable avenues for financing, the Streamline Renovation loan stands out for its simplicity and convenience. By bundling the cost of the home and renovations into one manageable loan, borrowers can realize their vision of a dream home without the hassle. So, if you're ready to embark on your home improvement journey, consider the benefits of a renovation loan and unlock the potential of your home today.

Northpointe Bank is authorized to originate FHA loans, but it is not an agent of, or affiliated with, the U.S. Government.
Fannie Mae and Homestyle are registered trademarks of Fannie Mae.