Renovation Loans: The Key to Buying a Home That Needs a Little Love

Home renovation loans are a fantastic option for people who want to buy a home that is in need of some upgrades or repairs. With the changing times in real estate, it's important to explore all your options, and renovation loans are definitely worth considering. In this blog post, we'll be discussing the basics of home renovation loans, including what they are, how much down payment you need, what kind of renovations you can do, and more.

What is a Home Renovation Loan?

A home renovation loan is a loan that allows you to purchase a home and finance the improvements and renovations all in one. This is a great option for people who don't have the extra cash to make repairs after they buy a home. Ashley Kutz from Assurance Financial explains that "if a buyer finds a home that's not really upgraded and what they want exactly, we can offer renovation loans that allow borrowers to purchase a home and then finance the improvements and renovations all into one."

Down Payments

One of the most important things to consider when applying for a home renovation loan is the down payment. The minimum down payment for a home renovation loan is five percent, unless you're a first-time home buyer, in which case you can put down as little as three percent. The FHA requires a minimum down payment of three and a half percent.

Types of Renovations

With a home renovation loan, you can do a variety of renovations, from minor cosmetic upgrades like adding tile or painting to major improvements like gutting and renovating a kitchen or upgrading your heating and air systems. Ashley explains that "you can do minor cosmetic things such as adding tile, paint, adding light fixtures, to even more major problems or improvements such as gutting and renovating a kitchen, adding on structural repairs, even upgrading your heating and air systems."

However, there are some restrictions on what you can do with a home renovation loan. For example, with the FHA, you can't have a luxury item like a pool. But, if the pool needs repair, you can do that. If you're using another loan package, you may be able to add a pool if you want.

Hiring a Contractor

Most loan programs require that you use a licensed and insured contractor for your renovations. Ashley explains that "most loan programs want to have a licensed and insured contractor, so the short answer would be no." However, if there are repairs you want to do yourself, as long as they don't impact the appraisal or code inspection, you can do them. Ashley adds that "if there's some repairs that you want to do on your own that's not going to make the appraisal or code inspection fail, then of course you can do those."

In conclusion, home renovation loans are a great option for people who want to buy a home that needs some upgrades or repairs. With low down payments, the ability to finance both the purchase and the renovations, and the flexibility to do a variety of renovations, home renovation loans are definitely worth considering. Thank you to Ashley Kutz from Assurance Financial for taking the time to educate us on home renovation loans. If you want to learn more about home renovation loans or any other real estate-related topics, be sure to like and subscribe to our YouTube channel for more valuable content.