As we near the fall season in Sarasota and the surrounding area, many are planning and strategizing what they want to accomplish for the remainder of the year. According to buying trends in our region, this is around the time people start seriously deciding they want to buy a home.
Everyone wants a shiny new house with the latest features and finishes. The best location and the best amenities are top concerns. But sometimes the best location may not have the residence of your dreams…or does it?
If you are looking to purchase and your approved loan and budget is not finding what you want, it may be time to look at those diamonds in the rough you keep passing by simply because they aren’t updated. Getting approved for a renovation loan in addition to a mortgage loan could be the answer to realizing your dream home.
Whether you’ve been looking for a pool or something with a new kitchen, or you’ve found a home you really like but the roof needs to be replaced, renovation loans can help.
There are a few renovation loan options to look into, specifically with our partner, MSC Mortgage, by your side.
Homestyle® Renovation Loan
This Conventional, fixed-rate loan allows you to finance the cost of improvements on a newly purchased or refinanced home, second home, or investment property by calculating it into the loan amount1. The financed amount is based on the estimated home value after the renovations2. Improvements can include the kitchen, bathrooms, structural repairs, heating and air conditioning, electrical, roofing, updated flooring and appliances, or even a pool and spa. There are some limitations and terms, so check with MSC Mortgage if this is right for you.
FHA 203K Standard Rehab Refinance3
If you purchased a home knowing it needs to be updated or wanting to get it ready for a competitive market, this Standard Rehab Refinance loan could be the ticket. There are limited-allowable repairs and standard-allowable repairs.
Limited repairs are features and finishes that need some improvements, such as roofs and gutters; HVAC systems; plumbing – including septic – and electrical; flooring; weatherization including windows, doors and wall residing; and accessibility for residents with disabilities such as wheelchair ramps. Minor repairs also fall under this category including nonstructural improvements to the kitchen, painting, new appliances, repairing or replacing exterior features like a deck or patio, and minor pool repairs up to $1,500.
Standard repairs are the more involved structural repairs such as modifications and additions being built, installation of a well or septic, landscaping and site improvements, and work exceeding $35,000.
Non-allowed repairs on any FHA 203(K) repairs or modifications include luxury items such as swimming pools, barbecues or outdoor kitchens, gazebos, spas, boat docks and more.
VA Limited Renovation Loan4
Veterans and military personnel can apply for this loan to finance both the purchase and renovation of the home or just refinancing for repairs up to $35,000, so everything is calculated at one low rate on a first mortgage loan. It is a convenient and economical way to make updates without having to take equity from the home, use savings or take out additional loans.
The Right Home for Renovations
If you have been looking for a home for quite some time, but what you want is either already updated and now out of your budget or off the market too quickly, looking at a home that needs some work maybe your best option.
But it’s all about location, according to MSC Mortgage Loan Consultant Megan Kendrick, NMLS# 653671. “Look for a home that has been sitting on the market for a while but in a good neighborhood, preferably where many of the homes in the same age range have been updated or renovated already. The sweet-spot are homes built from 1985 and older.”
There are important factors to consider. First, speak to your Michael Saunders & Company real estate agent about the options of older homes and the features or finishes on your must-have list. Second, ask your agent to connect you to MSC Mortgage for more details about what loans best match your needs. Third, get a licensed contractor as soon as possible to review the properties you are interested in and secure a quote and timeline (this part is crucial, and your agent can recommend highly qualified contractors through their connections).
Making the Numbers Work
Kendrick stresses the importance of knowing the numbers. If the home costs $270,000, for instance, and the renovations are appraised at $80,000, then the loan will be $350,000. Also, this means the down payment of 10% is based on that $350,000, not the original $270,000.
“Be sure that the homes in the neighborhood are comparable in value to that $350,000 and above. You don’t want to over-improve and then the home value not fit the marketplace,” she said.
Since this a two-part process, two actions are occurring simultaneously in the background to get you to closing. First is the loan process; second is the renovation loan department must work with the contractor and the buyer so as soon as the loan closes on the home, the renovation is cleared to begin. If it sounds complicated, just have the assurance of knowing MSC Mortgage is working diligently to make it a smooth and seamless process.
If you are interested in buying a home, the first step is contacting MSC Mortgage to learn what loan you qualify for. Then, contact an MSC agent in the area you wish to live and begin the journey to real estate success.
1 The limit on eligible renovation funds may not exceed 75% of the lesser of the purchase price plus renovation costs, or the “as completed” appraised value for purchase transactions; and 75% of the “as completed” appraised value for refinance transactions.
2 Only on a refinance transaction and the lesser of initial sales price and renovation costs or the “as completed “appraised value on a purchase transaction.
Restrictions apply. Rates, terms, and availability of program are subject to change without notice. By refinancing the existing loan, the total finance charges may be higher over the life of the loan. Please see your Loan Consultant for details.
3 Check out www.hud.gov for a more complete list of allowable repairs. By refinancing the existing loan, the total finance charges may be higher over the life of the loan.
4 Subject to VA Eligibility. Rates, terms, availability of programs are subject to change without notice.
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