Sometimes, buyers find their dream home only to realize it needs some updates. You're ready to take on the project, but how do you finance it? Premium Mortgage Corporation, serving Buffalo, Rochester, and Syracuse, NY, as well as Barre, VT, has the answers you need. Find out how to fund the costs of your new home and its renovations with a mortgage loan.
How to Finance New Home Renovation Costs With a Mortgage Loan
Typically, when you want to buy a home, you apply for a conventional or FHA loan. Unfortunately, neither of these mortgage loans will allow you to include the cost of updates even if the post-renovation value of the home exceeds the desired loan amount. These traditional types only cover the approved cost of the home and nothing more.
However, there is one type of loan that combines the purchase cost of the home with the estimated renovation amount into one mortgage payment: the FHA 203(k) loan.
What Is an FHA 203(k) Loan?
Like a traditional FHA loan, the 203(k) loan is a federally backed loan program, which means it is insured by the government. There are two types of 203(k) loans: limited and standard.
Limited 203(k) loans are typically approved quicker than the standard option. The limited version sets the maximum renovation costs at $35,000. Larger renovations, like structural updates, are typically reserved for the standard option because of their high cost.
Requirements for an FHA 203(k) Loan
As with any loan, there are certain requirements with an FHA 203(k) loan. While a credit score of at least 620 is required, most lenders prefer a minimum of 640. The loan rates are also usually higher than the traditional options because of the risk involved with renovations.
A minimum cost of $5,000 is required for approval, but the overall cost of the mortgage when combining the house price and update must still fall within your area's FHA loan limit. There are also various restrictions placed on the types of renovations.
Don't let your dream home get away simply because it needs a little work. Learn about your mortgage loan options by contacting Premium Mortgage Corporation. With locations in Rochester, Buffalo, and Syracuse, NY, as well as Barre, VT, the mortgage broker strives to offer their clients convenient, friendly, and honest service. Hear what other customers are saying by visiting the team's website, and speak with a loan officer today by calling (844) 793-0177.
Corporate Contact Information:
2541 Monroe Avenue,
Rochester, NY 14618
NMLS #3254 | Equal Housing Lender
Licensed Mortgage Banker NYSDFS