What is a Renovation Loan?
A renovation loan allows you to finance the cost of your home improvements and renovations into your mortgage loan. You might consider getting a renovation loan if you’re interested in buying a “fixer-upper” at a lower price and taking on the costs of repairs. If you have found the perfect home but it needs a little TLC, a renovation loan may be a good fit for you.
FHA 203K Loan
An FHA 203(k) Loan, also called a Rehab Loan, enables homebuyers and homeowners to finance both the purchase (or refinance) of a house and the cost of its rehabilitation through a mortgage at a low rate.
Eligible Renovations defined by HUD include:
- modernization and improvements to the home’s function
- elimination of health and safety hazards
- changes that improve the appearance and eliminate obsolescence
- reconditioning or replacing plumbing; installing a well and/or septic system
- adding or replacing roofing, gutters, and downspouts
- adding or replacing floors and/or floor treatments
- major landscape work and site improvements
- enhancing accessibility for a disabled person
- making energy conservation improvements
VA Renovation Loans
A VA also offers a similar option for military and veterans to purchase a home and finance the required renovations to bring it up to standards set by the VA. These loans have similar qualification requirements to a standard FHA or VA loan, with additional documentation required.