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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

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.

Have questions? Give us a call or email us at hello@newwaymortgage.com. .

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