When To Use Renovation Financing

 When To Use Renovation Financing

People often associate renovation financing with dumps; foreclosures and bank owned properties; but that's entirely true.  You can also use Renovation Financing for outdated properties as well or even in situations where you would like to build onto your existing home with improvements such as a room addition or second story.  Anything light to moderate from kitchen updates, flooring, electrical to a complete tear down and rebuild on the existing foundation....you really do have many options available.

The most popular renovation loan is the FHA 203k loan.  This loan has been around since the early 80's and was designed to help revitalize communities and renovate the aging housing stock. This in of itself a stimulus package.  It creates economic activity on many fronts from the purchase of the home (or refinancing) to hiring of contractor(s), purchasing of the materials, and keeping money flowing through the economy. 

Even though this loan has been around for many years, very few lenders know how to originate them or even offer them.  I think you'll see this change as more foreclosures hit the market to which renovation financing is the only way to get loans on these properties because in the as is condition...they don't meet minimum property or appraisal standards for financing. 

I'm calling it right now that renovation financing will be the next real estate trend.  See my previous post on this here ====> http://swigartsmortgagejournal.blogspot.com/2012/09/the-new-real-estate-trend.html

The key to completing these loans in a timely manner is:

1. Going to a lender that specializes in these and speaking a renovation specialist. Not all loan officers are trained properly to originate these and it could get ugly if they don't know what they are doing.
2. Having your plans for renovations decided on early.  If you're purchasing a home make sure have the walk through with the contractor to determine needed and/or desired repairs. Also if your doing a 203k it's advisable to have a HUD Consultant inspect upfront so that you know what minimum repairs are needed early in the process.
3. Do not make multiple changes to the scope of work after beginning the process because each time you change the scope of work, this triggers needed paperwork changes that delays the process.
4. Turn your documents in as quickly as possible.  Read my blog post on being prepared at application here ====> http://swigartsmortgagejournal.blogspot.com/2012/09/how-to-be-prepared-at-application.html 
5. Again - work with a specialist, work with a specialist, work with a specialist.  They have the experience and training to advise you and lead you down the path to closing as quickly as possible.

Now I can give you many more tips but just follow these above and you'll be just fine.  Using renovation financing is an awesome tool to help turn a home you just like...into one you really love.  Not only that but your getting the financing at low interest rates and spreading the cost over 30 yrs....and...you're increasing or even building equity with the improvements so that in the future when you sell; you can get top dollar and have money left over for a bigger down payment on the next one.

I've had people purchase foreclosures at $40 and $50k and putting $20-$30k into them and walking away with 20% equity to build on for the future.  You just can't go wrong with these loans.

Until next time..

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Thanks,