If you're looking to buy a house that needs some work, a fixer-upper loan can be a great option to finance the necessary repairs. These loans give you the funds to purchase the home and make necessary improvements. Several types of fixer-upper loans are available, depending on your situation.
Here are some of our recommended ways to finance a fixer-upper:
1. FHA 203(k) Loan
The FHA 203(k) loan program is designed to help homebuyers purchase a property and finance the cost of renovations all in one loan. If you are looking to buy a property that needs some work or would like to refinance your current home and make some improvements, a 203(k) loan could be a good option for you. To qualify for a 203(k) loan, the renovations cost at least $5,000, and the property's value must be below the FHA loan limit in your area.
You must meet the same guidelines as other FHA loans to qualify for an FHA fixer-upper loan. This includes a minimum credit score of 500 if you can make a ten percent down payment or 580 if you can make a 3.5 percent down payment.
2. USDA Renovation Loan
USDA loans are available to people living in rural areas who want to purchase a home. The loan can finance the cost of the home, as well as renovations and repairs. No down payment is required, and the loan can be up to 100 percent of the home's expected value.
A home improvement loan is a loan that can be used to fund home improvements like upgrading kitchens and bathrooms, accommodating the needs of people with disabilities, putting in addition, making structural changes or installing energy-efficient features. There are no minimum repair costs, but the maximum is $35,000. These loans can also be used to raze an existing home and build a new one on the same foundation.
3. Fannie Mae HomeStyle Renovation Loan
The Fannie Mae HomeStyle renovation loan is a great way to finance your home improvement projects. With a low down payment of only three percent, you can borrow up to 97 percent of the project's cost, making it a very affordable option. The amount you can borrow is based on either the cost of the renovation or the expected value of the home after the renovation, whichever is lower. This makes the loan very flexible, as it can be used for many projects, from critical repairs and energy upgrades to landscaping and luxury projects.
The HomeStyle Renovation Loan is a loan available to people who want to buy a home and renovate it. The loan is available as a 30-year fixed-rate mortgage, a 15-year fixed-rate mortgage, or an adjustable-rate mortgage (ARM).
4. Freddie Mac CHOICEReno eXPress Loan
The Freddie Mac CHOICEReno eXPress loan is a simpler version of its renovation mortgage, designed for smaller projects. The maximum cost of renovations must be below ten or 15 percent of the home's value, depending on the location, and down payments can be as low as three percent. This loan does not require preapproval from Freddie Mac, making it easier to get approved. To qualify for a Freddie Mac mortgage, you'll need a credit score of at least 620.
When choosing a loan, it's important to compare interest rates, fees, and terms to find the best deal. It's also essential to make sure that the loan you choose will cover the cost of all the renovations you plan to make. With careful planning and comparison shopping, you can find the right loan to finance your fixer-upper.
Lakeview Mortgage Bankers is your premier mortgage team based out of Massapequa, New York. We are a national mortgage lending company focused on providing high-quality service to home buyers. We specialize in a wide range of loan products, and our team will work hard to find you the best loan to fit your needs. If you need a residential loan in Long Island, we can help! Get in touch with us today!