At some point in your life, you will probably buy a home that needs fixing up and you’ll need construction loans to supplement the cost. It could be anything: cracked walls, outdated appliances, damaged flooring or that ugly floral wallpaper you’re itching to tear down. Perhaps you want to add on an extra bathroom or remodel the kitchen.
Maintenance tasks such as these will add up if your home requires multiple repairs or renovations. Some buyers may even dodge fixer-uppers due to the risk of added expenses. As a new homeowner, there are already plenty of costs involved with the purchase of a home, so taking on more can seem overwhelming. However, there are some options available to you when it comes to financing renovations. Here are a few construction loans that can help you achieve the home of your dreams without the sweat of paying right away.
Fannie Mae HomeStyle® Renovation Mortgage
With this option, buyers looking to renovate their new home (or current homeowners looking to refinance to incorporate the costs of renovation) can finance their spending with some added benefits. This construction loan is a great choice for those seeking luxury upgrades or financing for minor projects, as the loan allows for both. There is no minimum cost for renovations. In addition, some funds can be used for repairs you make yourself.
A few stipulations for Fannie Mae construction loans include:
- This option is only suitable for primary residences with one to four units, second homes with one unit, and investment properties with one unit
- You must have a credit score of at least 620
- Repairs and renovations must be finished within 12 months of closing
FHA Standard 203(k) Rehabilitation Mortgage
These construction loans are popular with buyers since they provide funds quickly. The FHA Standard loan contains financing for both the renovations and the cost of the property, which lets buyers get to work after closing. You can also roll the cost of temporary living arrangements into the loan, which is highly convenient. Property owners can choose to make either small or large-scale renovations. However, unlike the Fannie Mae program, luxury upgrades are not permitted. There are several other conditions that must be met as well:
- You must spend at least $5,000 in renovation costs
- Work has to start within 30 days of the loan’s activation
- No DIY work is allowed
- An “as-completed” appraisal has to be included in your final appraisal report
- All projects must be finished within 60 months
Department of Veterans Affairs (VA) Renovation Loans
VA Renovation construction loans are ideal for veterans, service members and their families. While extensive renovation work is not permitted, this is a great option for minor repair work to improve the overall quality of the home. There is no minimum cost requirement, and no down payments are necessary. Like the previous loans listed above, there are a few requirements to be considered:
- You must have a credit score of at least 620
- Work must be completed within 6 months
- Contractors have to register with the VA and carry an appropriate insurance policy
- No cash-out refinancing is allowed
Golden Lenders Can Help With Construction Loans
Are you in need of construction loans? Golden Lenders helps home buyers in Colorado, Florida, California and Ohio understand the different types of mortgages that are available and provides loans to help people achieve the dream of homeownership. Since the specifics of which mortgage to choose is dependent on a variety of factors, we encourage you to call us for more information and find out which is right for you. Need more info about appraisal and inspection? Call us! Our number is (303) 482-2361, or you can send us a message.
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