The amazing reality of home buying today is that loan providers have more options for you than ever. Many of us recognize home buyer programs for first-time buyers or low-income families, but renovation loans are an often-overlooked option that can help realize your dream home. Most of us think of renovations in terms of our favorite home makeover shows (such as HGTV’s Fixer Upper), but the definition of a renovation in financing terms does not require busting out walls and cabinetry. And in addition, when used smartly, renovation loans can help home buyers navigate a competitive market (like ours) and save money!
Renovation financing covers a wide variety of work on the home, from cosmetic to structural. The one limitation is that you may not set a new foundation using renovation funds, but with most programs, almost every other scenario will be covered without question. Need to cosmetically update your house before selling? Covered. Want to purchase a particular home but need an extra bedroom? Covered. Are you changing the exterior paint color and fencing the yard? Covered. Simply put, these loans are a tool to help homeowners make changes to their home now that will give them long-term gains. Think outside of the box!
These renovation loans are simple!
One of the most attractive features of renovation loans is the simplicity of repayment. These loans are typically rolled into a 30-year mortgage, making the billing simple and the monthly payments affordable. Mortgage interest rates are stabilizing at a historic low of around 4%, and your renovation loan will accrue interest at the same low rate. Qualification for these loans vary depending on who will be living in the home. Owner occupants qualifying for the loan must have 3-5% of the down payment, second home buyers must have 10% down, and investors must have 15% down. Credit scores are also considered in the pre-qualification as in a standard loan. Looking for an Asheville mortgage lender? Give us a call for our recommendations on lenders in Asheville.
How can renovation loans help sellers?
You can benefit from renovation loans even if you are not personally obtaining one. Think about this scenario: You have inherited a home that is in desperate need of updating. You are looking to sell the property because you are busy and the maintenance has become a burden. Traditionally, buyers are looking for move-in ready homes, and it would be necessary to pay out of pocket to update the home before listing it. But we say “use your resources!” Consult your realtor and have them assist you in creating a vision board for your home. Vision boards are a compilation of suggested updates in flooring, cabinetry, structure, appliances, and the like to help
potential home buyers envision what your home could become. In addition to the vision board, have a mortgage lender provide pamphlets on renovation financing to include at your next open house. Without spending a dime of your money, you will provide a desirable vision of the home space for potential home buyers and inform them on the financing that will make that vision a reality. Even if your home is not in ideal condition, you may not have to be the one to pay for the restorations!
They are other situations where renovation loans may help. The situation may arise where a home for sale has missing or broken utilities, making the home unlivable. If a buyer applies for a renovation loan, you may close on the transaction without having those systems repaired. The funds for the repair are available immediately after close, so contractors can get right to work. Some Asheville mortgage lenders will settle invoices with the contractors directly, rather than pushing that responsibility on you. How convenient!
How can renovation loans help home buyers?
If you are a home buyer looking to purchase in Western North Carolina, home inventory is incredibly low, and some of the properties for sale are not in the best condition. Instead of competing with buyers over move-in ready homes (which often end with multiple offers over asking price), look for real estate steals in the area and obtain the renovation financing before closing to alter the home to your liking. You could save money and have a more suitable home if the price is right. Additionally, consulting your realtor can help you make targeted decisions on what improvements will guarantee higher appraisal and market value. With a plan in mind, don’t delay your home renovation projects until you have all the money in place. Take advantage of the low mortgage interest rates and get the funds you need now!
This article has only scratched the surface on the situations that renovation loans can help you. For more information on loans in Asheville, please feel free to consult our team at (828) 585-7370.