The condition of the home must be turn-key and move-in ready in order to finance it. However, there are some properties that are not in this condition, and may have missing sinks and toilets, holes in walls, or broken windows. Are there loan products for properties in this condition?
Yes, there are renovation loans where you can include the cost of the repairs into the loan. For each of these loans, licensed contractors would prepare bids that would have to be approved by the lender.
For FHA, you would apply for a 203(k) loan. There are two types of 203(k) loans. The limited 203(k) is used for minor non-structural repairs and allows for improvements or upgrades up to $35,000 in repair escrow. The standard 203(k) is for renovation costs in excess of $35,000 and allows for improvements to outdated homes, kitchens, bathrooms and structural deficiencies. This loan applies to primary residences.
For a conventional loan, you would apply for Fannie Mae’s Homestyle loan. There are no required improvements or a minimum dollar amount for the repairs. The repairs or improvements, however, must be perm-anently affixed to the property and add value to the property. This loan applies to primary residences, second homes, and investment properties.
VA loans also have a renovation loan program for primary residences. Improvements can be included in the loan like the above loans.
If you are considering purchasing a less than perfect property that needs repair, or want to remodel your existing home, consider one of these loans to finance your project. Contact us and we can help.
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