Renovating? Get home improvement costs baked into your loan

Homeownership is an exciting milestone, but when you’re looking at a home that needs a little elbow grease, it’s not always cut and dry. In fact, the cost of home improvements can be a significant hurdle that many hopeful homeowners have to face head-on.

Having a home that reflects your personal style and meets your needs is so important! The good news is that there are government programs available that have made it possible for home improvement costs to be included in the mortgage loan amount you’re applying for, making it easier for people to afford the home of their dreams.

The same applies to refinancing — when you have no intention of moving but want to spiffy it up a little, and you need a loan to get the work done.

Let’s look at a few renovation-friendly mortgage loan and refinancing loan options that can help you turn a property with potential into a home you can love and be proud of.

Say hello to the FHA 203(k)!

Whatever your situation, an FHA 203(k) loan — backed by the federal government — could be just what you need to make your living space truly special.

An FHA 203(k) renovation loan allows prospective homeowners to get mortgage financing, including funds for repairs and upgrades to their dream homes.

So whether you want to add some new features to your home or bring it up to date with modern standards, an FHA 203(k) loan makes it easy and affordable to get the job done. No more worrying about multiple loans or trying to save up for renovations – you can borrow what you need to buy your home and take care of planned home improvements all in one go.

What to know about an FHA 203(k) Loan

FHA 203(k) loans require a minimum 620 credit score and are available for either purchasing or refinancing a home. Amounts can be up to 110% of the home’s after-improved appraisal value, and you can roll 6 months of payments into the loan. And the best part? It comes with minimal closing costs and a low down payment of just 3.5%. Even better — the entire 3.5% down payment can be a gift from parents, relatives or an employer!

What kind of repairs do you have planned?

Depending on the extent of home improvements you need, one FHA 203(k) loan may be a better fit than the other. Let’s dive in and explore the differences!

• Standard 203(k): 
  • The Standard 203(k) loan is typically used for major renovations and repairs. This might include full kitchen or bathroom remodels, structural additions or alterations, moving or altering a load-bearing wall, or even knocking the house down to rebuild it as long as you leave part of the existing foundation intact.
  • It can also cover new flooring or carpet, energy-efficient upgrades, and appliance replacements. With a Standard 203(k), at least $5,000 of the loan must be used for renovations, but there is no set maximum amount.
• Limited 203(k): 
  • The Limited 203(k) loan covers a max of $35,000 toward repairs. This will allow you to tap into cash to pay for minor property improvements and is excellent for repairs or upgrades that are less invasive than a more intrusive remodel.
  • This could cover new appliances, a cosmetic kitchen or bathroom redo, interior and exterior painting, new flooring, plumbing repairs, replacing windows, doors, and HVAC systems — even a new roof!

Say hello to HomeStyle®!

For home buyers planning to live in the home:

• If you want to renovate the home but don’t want to pay for the costs out of pocket, the HomeStyle® Renovation Mortgage may be the right option. It allows you to include renovation costs in one loan to either purchase a new home or refinance an existing one.
• One of the great things about this loan is that there is no minimum renovation cost required, so there’s some flexibility when it comes to the scope of your renovation project.
• Additionally, the loan amount can include estimated renovation costs of up to 75% of your property’s “as completed” appraised value, giving you plenty of funding for even significant renovation projects.

For real estate investors: 

• For investors looking to purchase and renovate single-unit properties, the HomeStyle® Loan for Investors is a great option.
• This investment-specific loan allows for all types of renovation work, including luxury additions, making it perfect for those looking to create high-end rental properties.
• With a minimum downpayment of 15%, the HomeStyle® Loan for Investors enables investors to purchase investment properties with an up to 85% loan-to-value ratio (LTV).

Note: Like the FHA 203(k), you’ll need a FICO score of 620 or higher to take advantage of either of the HomeStyle® loans outline above!

Renovation loans aren’t just about aesthetics. 

Whether you’re a first-time homebuyer looking to make your mark on a fixer-upper or a seasoned homeowner looking to breathe new life into your existing property, a Movement Mortgage renovation loan could be just what you need.

Our programs include assistance with down payments and closing costs, low fixed interest rates and even options with no or low points for qualified borrowers.. So, if you’re thinking of buying or refinancing a home that needs a little TLC, reach out to one of our local loan officers to discuss baking home improvement costs into your loan.