Can You Finance Home Improvements Into Your Mortgage Loan?

Can you finance home improvements into your mortgage loan?

Can you finance home improvements into your mortgage loan?  The short answer is yes, indeed, you can finance home improvements into your mortgage loan. There’s a couple of ways you can go about it. The most commonly known renovation loan is called an FHA 203k. This is the one that most people know about. And with an FHA 203k, this is a primary residence only loan. Now, there are options for second homes or investment properties, I’m going to talk about that in a little bit, but FHA 203k loans are only for primary residence financing. There are two types of FHA 203k, there is the streamline 203k, which is more like cosmetic things. You can’t finance quite as much, it’s a lower dollar type thing.

Improvements like paint, carpet, appliances, countertops, and other improvements that are more cosmetic, are something you can do with the streamline FHA 203K loan. Windows is another example, if you need to replace your windows. The other 203K loan is a full 203k, and you can do an awful lot with the full 203k. For example, you could even put an addition on your house, you could do structural things like moving walls, you could reconfigure your house. There’s a lot you can do with the full 203k Now, if you have a second home or an investment property that you want to do renovation work on, don’t fear because there is an option for you. It’s called the HomeStyle Renovation loan. This is a Fannie Mae product, and it’s the same concept as a 203k, but it enables you to also do renovations on a second home or investment property. So this is a really good thing for an investor, maybe that doesn’t have the cash to rehab one of their rental properties.

The good thing too is that you can do either a 203k or a HomeStyle Renovation loan, either when you buy the house or on a refinance. So when you purchase the home, you can go in with your renovations in mind, and do those renovations as part of the rehab. Now, there’s a couple of things to be aware of with renovation loans that are very important going in. The first is, is that you cannot do the work yourself. You can’t swing that hammer yourself. It has to be a licensed contractor that does the work. So if you’re a handyman, a do-it-yourself homeowner that wants to do the work yourself, this would not be the right route for you.

Now, there might be other options like taking a cash-out refinance, or doing a home equity loan, that could help you with that. But we can’t do a renovation loan if you want to do the work yourself. The other thing is that there are more costs involved with the renovation loan. They have things like they have to send out inspectors to make sure the work is progressing like they expect, and that it’s being done in a timely manner, in a workman-like manner. They have fees involved with dispersing draws to the contractor. So this is just something to keep in mind, that there are additional costs. But with rates at all time lows, it can still be very affordable to finance renovations this way.

Give me a call if you have any questions about a renovation loan and how this might apply to you. We can talk about all the ins and outs of it, talk about your project, and talk about what exactly you want to do, and see if a renovation loan makes sense because it may not, and we can talk about other options if it doesn’t. Give me a call, text me, or email me at 303-670-0137 or baxterteam@fairwaymc.com. And I appreciate you guys watching. Have a great rest of your day.

Can You Finance Home Improvements Into Your Mortgage Loan?