Renovation Home Loans can be an extremely attractive option for home owners in Colorado looking to upgrade their home. Whether you are getting ready to put your home on the market or simply have more time at home due to the COVID-19 pandemic, a renovation home loan can help you secure the money you need.
Renovation lending is a great alternative take advantage of great mortgage rates, especially in 2020 while interest rates can be found below 3%.
Renovation lending is not as difficult as you may think, and it is offered as a Conventional Loan through Fannie Mae. Renovation home loans will come into the picture quite frequently as it seems all the good homes get snatched up, and the ones that need some work, they usually get passed on.
The following will be a breakdown in how a renovation loan works, and after that I will go over an actual CASE STUDY for a Denver loan in process now, for your potential home buyers to follow.
There are other types of home loans that are similar but just to be clear... IT IS NOT A CONSTRUCTION LOAN. IT IS NOT AN FHA 203k LOAN. This program is a Renovation home loan for homebuyers considering moderate home improvements, avoiding a 2nd mortgage, Home Equity Line of Credit, or a hard money private loan with outrageous terms.
You can use this as either a refinance or purchase mortgage. The loan amount will be based on the "as-completed" value of the home, not the current value. This requires an appraisal of the current value as well as an estimated appraisal based off the plans for the renovation.
In this case we will use a $249,900 purchase that will not appraise the way the property is at value.
We use a Fannie Mae HomeStyle Renovation Loan and the renovations are costing $42,795 with repairs of the following to be completed, with a 10% contingency included
The appraiser will do 1 appraisal based on the as is value, and the specifications of repair estimate, to determine the as-completed value.
The buyer now will be paying the purchase price $249,900 plus renovation costs of $42,795
Total Acquisition cost will be $292,695 and if the renovations now make the home worth this much, the buyer will bring in 5% of this amount which is $14,634.75
The Fannie Mae Homestyle Renovation Lending program is a great mortgage tool to utilize and have as one of your choices. If you are looking to upgrade your existing home or you want to upgrade a home you are buying, this is a great option.
If you have any questions about this product, you can reach Brian Quigley at email@example.com or call him at 720-949-5630