If you’re interested in purchasing a home that needs significant renovations or repairs at the time of purchase, PRMI has several financing options within our Dream Home Renovation Loan Program that may be right for you. With provisions that allow you to fold renovation costs into your home-financing, you can purchase that fixer-upper and still have the funds to turn it into your dream home.
With several options available, you might be unsure which of these loan types is best for you. Here are some basics about each program to get you started.
FHA Limited 203(k) Program
If the total cost of all repairs and improvements needed on the home adds up to $35,000 or less, the FHA Limited Repair Program might be perfect for you. This number is for total repair costs, improvements and upgrades, or a refinancing addition to a current mortgage that includes repairs. It’s common for homebuyers to use this program to pay for any repairs identified by a home inspector or FHA appraiser during the underwriting process.
There are numerous repair types that can be financed using the Limited 203(k) program:
Repair or replacement of: Roofs, gutters, downspouts, existing HVAC systems, existing flooring, plumbing and electrical systems, exterior decks, patios, porches, windows, doors, siding, well, septic system
Purchase and installation of: Appliances (fridges, washers/dryers, microwaves, dishwashers, etc.), accessibility devices for people with disabilities
Remodeling for basements and kitchens – so long as structural repairs are not included
Weatherization for storm windows, doors, insulation, weather stripping
Stabilization or removal of lead-based paint hazards
Waterproofing of basement
FHA Standard 203(k) Program
This is similar to the limited program, but with a greater variety of options. Cost of rehabilitation or renovation can range from $5,000 up to virtually limitless numbers, including almost complete reconstruction in some cases – the only requirement is that the foundation system remains in place if a home has been demolished or razed.
The following improvements fall under Section 203(k) financing:
Structural alterations or home reconstruction
Removal of health or safety hazards
Modernization and functional improvements
Reconditioning or replacement of plumbing
Installation of well or septic system
Adding or replacing roofing, gutters, downspouts, floors, or floor treatments
Energy conservation changes
Landscaping work or site improvements
Increasing accessibility for those with disabilities
Converting any property to a one-to-four unit structure
In addition, Standard 203(k) loans allow you to finance up to six mortgage payments on your loan if the home is uninhabitable during the renovation period.
Fannie Mae HomeStyle Renovation Loan
Known as a cousin to the FHA 203(k) program, the HomeStyle renovation loan is a single-close loan that brings certain additional advantages. It allows you to finance up to 95 percent of costs for a principle residence, with lower financing amounts that also allow you to avoid paying private mortgage insurance. Repair types allowed here include all of those listed above, plus the following:
Installing a new pool
Adding a detached garage or gazebo
Like with the Standard 203(k) program, the HomeStyle program allows you to finance six mortgage payments if the home is uninhabitable while you wait for it to be suitable for you to live in again.
For more information on which home renovation program is best for you, or to learn about any of our other mortgage services, speak to the pros at Primary Residential Mortgage today.
If you're ready to take the next step, work with a team that can provide the personal attention you deserve. Our mortgage company has helped over 200,000 borrowers fulfill their dream of home ownership. We'd love to help you too!