Renovation loans are a great financing option for homeowners who want to upgrade their home without moving or putting remodeling costs on their the credit cards. I talked to a lender expert to break down this type of financing.
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To help me discuss renovation loans, I've brought in Peter Lama from Prime Lending.
Renovation financing is for homeowners who are looking to upgrade their house rather than move. They can include all the costs into the refinance without taking out a second mortgage or putting the costs on a credit card. It also works for someone wanting to buy a home that's not up to Fannie Mae/Freddie Mac standards; they can repair the property and include the repair costs into the loan.
VA loan buyers can use this financing too. Prime Lending actually has 13 different programs for renovation, including portfolio products that they specialize in like jumbo products, FHA, VA, and escrow hold-backs for properties needing small repairs.
For refinancing, you can apply for a loan and pull out the cash that you need to factor in on top of the balance. The appraised value will be the future value after the repairs; the appraiser evaluates the cost of the property before the repairs, then factors in the bids for those repairs. You gain equity in the property as you improve it.
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You can get renovation financing for your current home or a new home.
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The qualification process is the same in that you'll still be qualified off of your credit and income, but the process is slightly different. For a renovation loan more people are involved, like the contractor who will provide bids to the lender to help figure out what the loan amount will be.
The process of a typical renovation loan can usually be closed in the normal 30- to 45-day period if contractors are efficient with their bids. Since the contractor is such a critical piece, it could be advantageous for the buyer to have a contractor ready to place bids on a property if they're looking to use this type of financing.
If you have any questions for Peter about renovation financing, he can be reached at 949.254.9356 or you can email him at PLama@PrimeLending.com.
As always, if you have questions about real estate or the California real estate market, give me a call or send me an email. I'd love to help you out.
