The ARES team has enjoyed working on a rehabilitation project that our customer was able to finance through a renovation loan through their mortgage company. We wanted to share this experience from the contractor's perspective so that we can help home buyers understand more about this valuable resource.
Extensive Home Rehab Project Funded through a Renovation Loan
Our customer was able to purchase a home that needed a lot of TLC before it could even be inhabitable. The home sat vacant for many years. Their realtor and mortgage broker were able to help them identify a renovation loan that met their unique needs by providing funds for this large project. As this home is transforming from a vacant eyesore to an emerging asset, it is also bringing the energy of rehabilitation to a neighborhood that has been neglected as well.
NOTE: We are not loan specialists and nothing in
this blog post should be considered financial advice.
Home Rehab and Renovation Loan Options
In Washington State, rehab loans offer a valuable resource for individuals looking to purchase homes in need of repair or renovation. These loans provide financial assistance for both the purchase of the property and the cost of renovations, making them a popular choice for homebuyers seeking to invest in fixer-uppers. Here are three options for rehab loans available in Washington State:
FHA 203(k) Rehab Loan: The FHA 203(k) loan program is backed by the Federal Housing Administration (FHA) and is designed to help homebuyers finance both the purchase of a home and the cost of repairs or renovations. There are two types of FHA 203(k) loans available: FHA 203(k) loans have relatively low down payment requirements and flexible eligibility criteria, making them accessible to a wide range of borrowers. However, borrowers must adhere to FHA guidelines and work with FHA-approved lenders.
Standard 203(k) Loan: This option is suitable for major renovations or structural repairs, such as room additions or foundation repairs. With a Standard 203(k) loan, borrowers can finance projects that exceed $35,000, making it ideal for extensive rehabilitation work.
Limited 203(k) Loan: Also known as the "Streamlined" 203(k) loan, this option is suitable for less extensive renovations with a maximum repair cost of $35,000. Limited 203(k) loans are commonly used for cosmetic upgrades, minor repairs, or appliance replacements.
HomeStyle Renovation Loan: The HomeStyle Renovation loan program, offered by Fannie Mae, provides financing for both the purchase of a home and renovations or repairs. This loan is available for primary residences, second homes, and investment properties, offering flexibility for various types of buyers. With a HomeStyle Renovation loan, borrowers can finance renovations ranging from minor updates to major structural changes. Unlike FHA 203(k) loans, HomeStyle Renovation loans do not require upfront mortgage insurance premiums, potentially resulting in lower overall costs for borrowers. HomeStyle Renovation loans offer competitive interest rates and flexible terms, allowing borrowers to customize their loan to suit their needs. Like FHA 203(k) loans, HomeStyle Renovation loans require borrowers to work with approved lenders and adhere to specific eligibility criteria.
VA Renovation Loan: The VA Renovation Loan, also known as VA Rehab Loan or VA Renovation Mortgage, is available exclusively to eligible military veterans, active-duty service members, and certain surviving spouses. This loan program, backed by the U.S. Department of Veterans Affairs (VA), combines the benefits of VA home loans with financing for home improvements. With a VA Renovation Loan, eligible borrowers can purchase a home in need of renovation and include the costs of repairs or upgrades in their mortgage. This option provides veterans with a convenient way to finance both the acquisition and rehabilitation of a property, often with favorable terms and low or no down payment requirements. VA Renovation Loans offer flexibility in terms of eligible property types and renovation projects, allowing borrowers to tailor the loan to their specific needs. Additionally, VA Renovation Loans do not require private mortgage insurance (PMI), potentially reducing monthly payments for borrowers.
Contact ARES for Your Home Rehab or Renovation
In summary, rehab loans in Washington State offer valuable financing options for homebuyers seeking to purchase and renovate properties. Whether through FHA 203(k) loans, HomeStyle Renovation loans, or VA Renovation Loans, borrowers can access funds to rehabilitate homes and achieve their homeownership goals. It's essential for prospective borrowers to research and compare the features, eligibility requirements, and terms of each loan program to determine the best fit for their needs. Working with experienced lenders familiar with rehab loan products can also streamline the application and approval process.