When it’s time to buy a new home, some of the costs associated with each potential house may be obvious, while others may be more subtle and surprise you if you’re not careful. Renovation expenses fall into the latter category. You may find yourself thinking a seller’s asking price is low, and subsequently realize that the home will require significant post-purchase renovations to reach a comfortable condition.
While the need for renovation adds another wrinkle to shopping for a home, the work and related costs don’t have to be deal breakers. You may be able to finance the home of your dreams, with some added expenses, at a price you can afford.
Don’t skip the home inspection
When you arrange an inspection for a home on the market, you gain important insights into the house’s condition. This is separate from an appraisal. The inspection is an opportunity for you to work with an independent inspector who will look for any issues with the house’s foundation, roof, HVAC systems and more. The Consumer Financial Protection Bureau (CFPB) recommends scheduling the inspection as early as you can during the homebuying process.
Once you’ve made a thorough overview of the house – the CFPB recommends accompanying the inspector so you can get as much firsthand information as possible – it’s time to determine whether anything found during the inspection would require a costly renovation to fix. If so, the added expense doesn’t have to be a deal-breaker.
Consider a renovation loan
If you need funds to perform large-scale repairs on a new home, there are loan options that can help. These are loans backed by government-affiliated financial institutions to enable homeowners to accomplish work on their new homes, and they simplify the process of buying and renovating a house. Whereas applying for a mortgage and a renovation loan would ordinarily be separate processes, the FHA 203K and HomeStyle loans combine buying the house and funding its refurbishment. You’ll only have one closing, one interest rate and a single payment each month, rather than two.
When you apply for the HomeStyle Renovation loan from First Centennial Mortgage, you can gain the funds to commit to major home improvement projects, rather than sticking to less expensive cosmetic changes. The HomeStyle Renovation loan is available with a fixed rate or adjustable rate, low down payment options and is applicable to value-adding structural elements. You could renovate existing features, add fences and decks or even perform landscaping.
The FHA 203K renovation loan, funded by the Federal Housing Authority, is another option if you’re interested in a home that needs renovation based on your pre-purchase inspection. These loans are designed for single-family homes, and can fund the remodeling of a room like the kitchen, or enable you to complete projects such as replacing the carpets or repainting the house’s interior.
Combining your mortgage with a renovation loan is one way to hit the ground running on essential home improvements, allowing you to widen your home search to properties that need a little work.
Do you have more questions? Contact the loan officer who shared this blog post or send us a message.