CHOOSING THE RIGHT HOME LOAN
What if the house needs updating and remodeling?
If you bought a home with an older kitchen, bathrooms and flooring ...would you leave it that way or would you update and remodel?
That's the question lots of home buyers ask because many of the homes for sale have dated interiors, old appliances, worn floors and dingy walls.
If you've ever seen any of the kazillions of house remodeling shows on TV like Property Brothers, Flip or Flop, or Love It or List It ...you know how incredible the before and after photos look.
Why not do your own home makeover when you buy your home?
For most buyers, what stops them is money
After all, they plunked down money for the down payment and closing costs, movers, some new furniture, a washer, dryer and refrigerator ...where's another $100,000 to $500,000 for upgrades and remodeling gonna come from?
An all-in-one purchase and renovation mortgage could be the answer
This type of mortgage includes money to purchase the home plus additional cash for remodeling. These loan programs are available through mortgage brokers, banks and credit unions and are available as Fannie Mae, Freddie Mac, and FHA loan products so that home buyers with varying credit history, income, and work history can qualify.
The way it works is simple:
Let's say your budget is $800,000. Instead of buying an $800,000 home that's move-in ready, you buy a $700,000 home and do $100,000 in renovations. Or maybe you buy a $650,000 home and do $150,000 in renovations? Of course, different purchase prices and renovation budgets are available. What purchase price do you have in mind?
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Offer Accepted
Once your offer to buy is accepted, you'll meet with your general contractor at the home to look over the house and review your renovation plans and budget.
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As Is Value
Your contractor gives a copy of your remodeling plans to the lender's appraiser, who will issue two values. The first is an "as is" value, meaning this is what the house is worth now without any remodeling.
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Your Contractor
Your contractor may also act as your project manager, basically steering the project to completion. You'll come to an agreement on deliverables, time lines and the estimated costs to turn this house into your dream home.
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After Repair Value
The lender's appraiser will issue two values. The second is an ARV ...or After Repair Value which estimates what your home will be worth once your remodeling plans are completed and you've personalized the home to your tastes and specifications.
Traditional loans base your minimum down payment off the purchase price. This program rolls your purchase money and remodeling money into one loan and your down payment is based off the total of your purchase price plus your cash for renovations.
Over the years, we've dealt with a lot of remodeling contractors ...some good, some bad. It's really important for you to choose someone competent, who takes pride in their work, and knows how to get things done on time and budget.
We hope this information helps you buy the home you've been dreaming about
You may enjoy some of our other home buying special reports
Here's some great news
If you enjoyed this article, then you'd really enjoy The Home Buyer's Kit. Whether you're buying your first home or your 101st, the home buying process can be tricky.
One wrong move in the home buying process and you lose the perfect home to another buyer, pay too much, or get stuck with a house that's falling apart.
The Home Buyer's Kit helps you navigate the buying process. It shows you what steps to take, where to turn, and which pitfalls to avoid. For FREE and with no obligation.
What to do next
If this sounds interesting to you, we've posted a short description of The Home Buyer's Kit here: TheBuyersKit.com. Check it out and let us know.
Karin Aguilar & Brian Smith
Karin and Brian have more than 38 years of combined experience in real estate and mortgages. They founded Showcase Agency, Inc, a real estate and home loan company, in 2017. They live in Irvine with their two daughters.
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