As time passes, many homeowners start to imagine how their homes might look if one or two features change. Maybe it’s for aesthetic or practical reasons, or perhaps because they’re thinking of selling their property someday. Updating your home with significant renovations can substantially increase its market value, but there’s just one problem. Where will you get the funds to support them? At Atlantic Bay Mortgage Group, we offer many renovation loans that will supply you with the funds for your next home remodel. You can renovate your home with these financing options without needing a second mortgage or line of credit. Continue reading to learn more.
FHA 203(K) Standard
The Federal Housing Administration (FHA) 203(K) Standard loan is a government-backed mortgage most frequently used when a house is rebuilt from the ground up. FHA loans are typically fantastic options for borrowers with less-than-perfect credit scores, but remember, their long-term costs will be more than that of a Conventional loan.
The maximum loan-to-value (LTV) is 96.5%, and it’s 97.75% for refinancing. Repairs must cost at least $5,000, but there is no maximum. However, the loan amount cannot exceed FHA loan limits.
To qualify for this loan at Atlantic Bay, you must have a credit score of at least 640. As for the mortgage insurance (MI), you’ll need to meet the standard FHA premiums, and this loan type is offered to primary residences only. The FHA 203(K) Standard covers complex repairs and renovations so long as you provide architectural exhibits.
FHA 203(K) Limited
FHA also offers a 203(K) Limited loan for borrowers. The limited option has the same maximum LTVs for purchases and refinances as its standard counterpart, but there is a maximum repair cost of $35,000, hence the name “limited.” This loan was created for minor cosmetic repairs, so the borrower only receives 50% of the funds at closing. They award the remaining funds once the rehab is complete. The 640 minimum credit score, MI premiums, and primary residence requirement are the same as the FHA 203(K) Standard.
Borrowers with a strong financial profile should consider the Conventional Standard loan option. The maximum LTV is 97% for primary homes, 80% for secondary homes, and 85% for investment properties. Per Fannie Mae, or the Federal National Mortgage Association, the maximum purchase amount is 75% of the “as complete” appraised property value (refinance max) or the sum of the purchase price and renovation costs, depending on which option is the lesser value.
At Atlantic Bay, the Conventional Standard loan requires a 680-credit score for primary residences, 700 for those self-employed, and 720 for investment homes. This loan type features credit and LTV-based MI premiums, and complex repairs and renovations are allowed. Like the FHA 203(K) Standard, architectural exhibits are required.
There is a limited version of the Conventional Standard loan as well. The maximum LTV, credit score requirements, and MI premiums are the same, but repair costs must fall between $5,000 and $35,000. Conventional Limited is for minor cosmetic repairs, and just like the FHA 203(K) Limited, borrowers receive 50% of funds at closing and the remaining funds after the rehab.
The VA Renovation loan is available to active and retired military personnel, reservists, and surviving spouses who already have a VA loan. There is a 100% maximum LTV, repairs must cost between $5,000 and $50,000, and the property must be the primary residence. To qualify, refinancing borrowers must have a credit score of at least 660. With no monthly MI, this loan type can fund alterations, minor repairs, and improvements to your home.
So, How Do I Get Started?
Planning a home renovation is exciting, but you’ll need to plan first. That way, you’ll make the best-informed decision for your family’s future! To learn more about how you can renovate your home with these financing options, contact Atlanta Bay Mortgage Group. You can fill out our inquiry form online, call us at 704-307-4694, or EMAIL US (firstname.lastname@example.org) to get started today.