When Spring is rampant in the northern Hemisphere, I like to talk about buying your next home. That larger home or downsized home can make all the difference in your quality of life, if you outgrew your current home. If you are not able or ready to move, maybe what we should really talk about is how to pay for the home repairs you need to turn your current home into your dream home.
From New Kitchen Countertops to a New Addition or Roof: Find the Right Home Loan for You.
The average amount spent by renovators who bought their first home in 2016 is $33,800, according to U.S. Houzz and Home Renovation Trends Study shared by Fannie Mae. That is a larger than many savings accounts, but there are many private and government sponsored home rehab programs available:
- FHA: The 203K rehab loan from HUD (FHA) program is for applicants of all ages and is popular and affordable. The proceeds must be used to cover home improvements ranging from a minimum cost of $5,000. The cap is determined by the specific area of the home, and interest rates are reasonable based on current interest rates.
- USDA has a Single Family Housing Repair program called the Section 504 Home Repair Program. If the applicant is over 62, and cannot afford a loan, Section 504 offers grants up to $7,500 over lifetime. These grants must be used for home repairs which remove, or repair professionally identified safety hazards. Section 504 also makes home loans available for home repair in a twenty (20) year mortgage with an interest rate of one percent (1%)! If you default on the loan payments to NFAOC (Servicer of USDA mortgage Loans), local field offices offer counseling to help you restructure your budget and figure out a repayment plan.
- FNMA (Fannie Mae) has a Home Style Loan program that even covers eligible manufactured homes! Home style may allow as high as 97% loan to value on a fixed rate mortgage (95% loan to value on an adjustable rate mortgage), if you are a first time homebuyer, or refinancing a Fannie Mae loan into this new mortgage. Talk to your loan officer at https://resourceshark.com/places/homerefinetwork/ to find out the rest of the eligibility restrictions for this mortgage product.
- Cash Out Refinance – This may require higher credit scores and carry a higher interest rate, but contains less restrictions than the other loan programs contain. Cash out refinance means you do not have to prove every cent goes toward the home improvement, and does not require contractor to carry out the work, though a good contractor can make the difference from dream home to nightmare.
Each Loan will take the appraised value of the home, once the improvement is completed, into consideration when evaluating the home loan applicant’s eligibility. That said, the right loan product can give you the home you dream of without packing one box.