Help us find our dream home.
This is a simple directive you’ve no doubt gotten dozens of times from clients who are ready to buy the perfect home. But not just ANY home. They want THE home. A house in the right school district, near family (or away from them, in some cases), in the safest neighborhood, with a perfectly manicured lawn and constructed with all the top-of-the-line materials.
We know that because you’re a great real estate agent who works 24/7, you’ll come through. You’ll comb through all the “nice” homes to find that fantastic home for every single one of your clients. Right?
Maybe not every time. But that’s OK because you understand that sometimes the best homes – the dream homes – are hidden in plain sight. All it takes is a little imagination, patience, and an expert real estate agent who knows how to help their clients see how they can transform an already nice home into the one they’ve always wanted.
One way we recommend you do this is by telling your clients about home renovation loans. This blog will give you a crash course in these special types of home loans and help you understand how they can benefit your clients who know the kind of home they want but are struggling to find it.
What are home renovation loans?
Let’s say one of your clients found a home that’s almost what they were looking for but needs some updates. They could be minor renovations or things that are involved enough that your client considers the house a “fixer-upper.” But, this place has some serious potential.
A home renovation loan could help. This type of mortgage loan gives homeowners access to the funds needed to fix up their homes. They can roll that cash into their mortgage loan when they buy the house. That’s just one of the benefits of home renovation loans. Here are some ways our clients benefit from home renovation loans:
Reasons to consider renovation loans
Limits Closing Costs: Why have two home-related loans when you can have just one? One of the most significant benefits of a home renovation is that borrowers can combine the funds needed for home updates with the overall home mortgage. That means one payment but also limits closing costs.
Increases Equity: Buying a home is a substantial investment, and home equity is powerful. Instead of waiting years to increase the equity in their new home, your clients can score some instant equity with a home renovation loan. The renovations can often increase the home value and curb appeal right away.
Unlimited Customization: Unless your client builds a home from scratch, they’d have to settle for the design and materials in any home they buy. Or, they can renovate. If they’ve always wanted a certain kind of kitchen countertops or fancy lighting, now is the time. While there are some slight limitations on the types of renovations that can be done using this type of loan, it does leave plenty of room for customization.
Doesn’t Require Collateral: Another benefit of a renovation loan is that it doesn’t require collateral, so their lender won’t consider the equity of your client’s home. That means the lender can’t foreclose the home if your client defaults on the loan.
FHA 203(k) renovation loans
While there are several types of home renovation loans, we’ve found that the FHA 203(k) renovation loan is one your clients would benefit most from. There are two types available and can be used for both purchase and refinance.
The streamlined version is for properties that need non-structural repairs valued at between $5,000 and $35,000. Projects like adding flooring, updating kitchens and bathrooms, weatherization, plumbing, and wall treatments are allowed with these loans.
The full version of the FHA 203(k) renovation loan, also known as a Standard 203(k) home loan, is for houses that need more than $35,000 in repairs (including structural repairs).
In addition to the benefits the home renovation loans provide in general, the FHA 203(k) renovation loan offers its specific benefits like:
- One monthly payment
- Loan amount based on the final value
- Relaxed credit score requirements
- Available for projects worth at least $5,000
- Down payment of only 3.5 percent
Home renovation loans are an excellent way for your clients to get the dream home they’re looking for while earning instant equity. For more information about renovation lending, you can share with your clients, click here.