Renovation Loan

When using a renovation mortgage loan to purchase a new home, Cornerstone First Mortgage will combine the amount of the purchase contract and the necessary repairs and improvements to calculate your adjusted sales price. You can also use a renovation loan to refinance your existing mortgage and finance the costs of your desired repairs and improvements into the new home loan.

If the house is uninhabitable while being renovated, you can finance up to six months of your mortgage payment into the loan to prevent you and your family from having to make two payments at the same time.

Eligible repairs and upgrades may vary from loan program to loan program, so be sure to ask your Ridgeway Team mortgage advisor about all your options when discussing the specific details of your project.

When shopping for a home, you may come across properties that aren’t quite what you’re looking for but have the potential to be your dream home with some repairs or renovations. With a renovation loan, you can roll the cost of financing or refinancing a home and repairs into one loan – saving you time and money.

• HomeStyle Renovation Loan
• Limited 203(k) Rehabilitation Mortgage
• Standard 203(k) Rehabilitation Mortgage

Renovation mortgage loans allow homebuyers and homeowners to borrow against the home’s subject-to-completion value today, rather than the value of the home in its current condition. The home's subject-to-completion value takes into account the value added after repairs and improvements have been completed.

For example, if the Jones family found a home in their ideal location listed for sale at $250,000, they could opt for a traditional home loan to finance the purchase of the property. While the Jones family may have enough money for a decent sized down payment, they may not have the funds needed to pay for desired upgrades or repairs out of pocket at this time. This is precisely where the benefits of a renovation mortgage come into play.

Using a renovation loan at the time of purchase, the Joneses can not only finance the purchase price of the property, but the costs of the necessary repairs and home improvements as well. So if the home needed $50,000 of upgrades in the bathrooms, the Joneses could roll all $300,000 of the home’s price, plus the project price into one home loan.

Minimum down payment requirements vary from loan program to loan program, of course. But imagine the savings (in both cash and in headaches) of being able to finance 95-97% of the total$300,000 loan amount it would take to turn this home the Joneses are considering into their dream home.

Renovation mortgage loans are also a great way to upgrade your home at the time of refinance, rather than at the time of purchase. This is especially true if the home’s current value — before repairs — is significantly limiting the amount you might be able to borrow in a refinance.

If the home you are living in or the home you are looking at for purchase needs repairs, or if you simply have a wish-list of upgrades that you would like to make, a renovation mortgage might be right for you. Keep in mind that since renovation costs are being financed into your home loan along with the mortgage amount, this could result in a higher monthly mortgage payment than other mortgage loan options.

At Fairway, your renovation loan will take the form of a fixed-rate mortgage, which protects you from rising interest rates in the future. Remember, though, that renovation mortgage programs will differ in terms of their down-payment requirements and types of eligible repairs, so speak with your Ridgeway Team mortgage advisor about all your options today!

If you are active-duty military, an eligible veteran or a surviving spouse, Cornerstone First Mortgage has a VA renovation loan option available. An advantage of the VA renovation loan is that eligible borrowers may be able to borrow up to 100% of the future home value*, along with an additional $35,000 in alterations to make minor, cosmetic, non-structural improvements. There are also Conventional renovation loan programs and FHA renovation loan programs out there, for those who are not eligible for a VA home mortgage loan.

If you are not eligible for a VA loan, you may still be able to finance 100% of the purchase and necessary renovation costs with a USDA renovation loan**. Ask your Ridgeway Team mortgage advisor what you qualify for today!

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*A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits.

**USDA Guaranteed Rural Housing loans subject to USDA-specific requirements and applicable state income and property limits.

You can use a Fannie Mae HomeStyle Renovation loan to finance just about any type of upgrades on a primary residence, a second home or an investment property. This even includes some “luxury” items like a brand new in-ground swimming pool. There are no required improvements or restrictions on the types of repairs allowed, nor is there a minimum dollar amount for the repairs. However, repairs or improvements must be permanently affixed to the real property and be completed by a licensed contractor, according to the FannieMae HomeStyle renovation loan guidelines.

In addition to financing the purchase of your new home, an FHA Limited 203(k) can provide up to $35,000 in additional funds for alterations to your new or existing home. Keep in mind that the scope of repairs is limited to minor, cosmetic, non-structural items, such as updating a kitchen or bathroom with new flooring or cabinets, or for purchasing new appliances.

If the home you are considering needs more than $35,000 in repairs and improvements, or if the repairs needed are structural in nature, the Standard FHA 203(k) might be the right solution. The Standard FHA 203(k) option is ideal for more intensive home remodels and can provide additional funds*** to help with eligible repairs, including adding additional square footage.

*** Final disbursement of funds is subject to final inspection.