If you enjoy working around the house and doing various DIY projects, then perhaps you are ready for the Holy Grail of DIY-a home improvement project through a home renovation loan. By repairing and renovating your home, you’ll build instant equity into your property, whether you’re completing a minor home renovation or a full-scale home rehab.
When taking on a home renovation loan for your rehab project, you’ll oversee the general contractors and their sub-contractors. You may even decide to do part of the work yourself to save some money and build some extra sweat equity into your property, for the true DIY enthusiasts. If you do go this route, just make sure your home renovation loan will allow for it.
A home improvement project is an opportunity to put their skills to good use, for many DIY lovers. When you fix up your home through a home renovation loan, you can make a variety of repairs, from minor cosmetic changes to full, structural tear-downs. There are many examples of homeowners who do much of the labor themselves, from framing all the way through to landscaping, depending on the extent of the home renovation project.
However, most home renovation loans will require you to contract out much of the labor and concentrate on doing only the minor repairs that do not require licensed work, such as painting or landscaping. Every bit of labor that you do yourself, though, becomes extra sweat equity that you build into your home. And, right now, there is no better way than a home renovation loan to build instant equity into a property in the current market.
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Once the house is built, it’s worth whatever a potential buyer is prepared to pay for it. Therefore, cutting the costs of a home improvement project by doing a portion of the work yourself means your new home will be worth a lot more than you spend to rehab it.
The home improvement tips help minimize the likelihood of home improvement project failure and errors. Usually, the home remodeling tips and home dcor tips are provided by experienced interior decorators, who’ve the ability and expertise in designing homes of varied types and styles. They are informed of the latest home dcor designs and trends and therefore help a person with little knowledge in the same, get the maximum of his home improvement project.
The home renovation tips may include suggestions for deciding the right floor plan to deciding the length, width, and design of windows and doors to home flooring till tips on choosing the right colors for walls and home exteriors and finally on buying furnishings, the right furniture, and fixtures for one’s home, and much more. One can assure oneself of having a home that he has always dreamt of, with the assistance of the right home improvement tips.
Though, these tips are easily available in books on home dcor designs and magazines on designer home dcor, the Internet is one of the top and the most important source for getting the best tips on home remodeling and improvement. You will find articles and blogs on home renovation and videos and images on a few of the best designer homes from around the world.
But, do not worry if you think you are not ready (or willing) to assume an entire project on your own. The key to success is more about project management than it is a matter of actual physical labor.
Even without doing either of the labor yourself, there is plenty of instant equity to be made through a home improvement project (I.e., a home renovation loan). When you consider the amount of homes on the market, especially the large number of foreclosures, so you can see that there are some amazing bargains to be purchased-most of them simply need some repair work to maximize the property’s value.
So, if you feel you’ve got the management skills to supervise the project, then assuming a home improvement project may be right for you. To squeeze as much equity as possible outside of the project, you’ll want a home renovation loan that has low costs and competitive rates.
Beyond having to fully understand the planning and project management involved in construction, a successful homeowner also understands the financing that is needed. It’s fair to say that most people who rehab a home don’t have the cash on hand to carry out the project without financing some (or all) of the construction.
With the current belt-tightening by the mortgage industry, home renovation loans are getting harder to find, even if you’re a well-qualified borrower. The good news, though, is that there are programs still available-you just need to understand some of the main points about the financing that may affect your capacity to fix up your dream home.
Home renovation loans are a specialty product that represent more work to the lender. On the other hand, they are also a greater opportunity for you, the borrower, to save a ton of money. It should be a fair trade all around.
The second important thing to realize is that home renovation loans will typically have stricter requirements than a mere purchase or refinance loan. These requirements may mean you are required to qualify based on stricter credit score guidelines or tougher debt-to-income ratios.
A good exception to that rule is the FHA 203k home renovation loan. This is a government insured home improvement financing product that has very flexible borrower qualification requirements. The credit score requirement is set as low as 620. The down payment is as low as 3.5%. There are no reserve requirements.
So, what’s the drawback for the FHA 203k home renovation loan? There are only two. First, not many lenders are qualified to provide them. So, you should work with a lender who specializes in home renovation loans and the FHA 203k program. Second, there is an extra fee of 1.75% that comes in the shape of an Up-Front Mortgage Insurance Premium (UFMIP). Fortunately, though, you can wrap this fee into the financing of your home improvement project, so it is not an out-of-pocket expense. As long as you are building lots of equity into your new home, the additional 1.75% shouldn’t make a significant difference to you if it means getting the financing you need to renovate the property.
The third important point to recognize about home renovation loans in general is that they’ll always be intended to protect you and ensure there is sufficient money available to carry out the project. Nobody, meaning neither the bank nor you, wants an unfinished home. So, it is fairly common for home improvement loans to demand that you qualify for extra amounts of money in your rehab line of credit on top of your strict budget numbers.
You may have a little pot of money wrapped into your loan as a contingency fund in case you slightly under-budgeted, for instance. It’s a protective feature to make sure you do not run out of money during the rehab and end up with a home without a roof. However, have no fear-whatever you do not use from this contingency fund will simply be applied to paying down the director of your loan. This means more equity for you.
As far as down payments are concerned, the FHA 203 (k) program is a major home renovation loan, because the borrower will only need to come forward with 3.5% at closing. Looking at our first scenario of an individual who owns his home, he can use the equity he may have in his property to cover that small down payment requirement. In other words, if he already has a small number of equity in his property, he may not have to bring any cash to the bureau for a down payment. Indeed, if there is sufficient equity in the family, all of the loan’s closing costs can be financed, costing the borrower no money out of pocket.
But, what if you’re gonna buy and fix up a new house through a home renovation loan? What can the FHA 203 (k) program do for you then? Well, in this case, the good news is that the down payment requirement is still only 3.5%. And, even better, there are ways to get assistance to reach that requirement if needed.
In today’s mortgage industry, most lenders want to see larger down payments for construction projects or home renovation loans. It’s not uncommon to have to make down payments as large as 20% or 30 percent of the project costs. However, if you work with a lender who specializes in home rehab loans and the FHA 203 (k) program specifically, then you can restrict your down payment to 3.5% or less.
But, what if you do not have the cash to cover the 3.5% requirement? Will you have to walk away from that perfect property and opportunity to create your nest egg? Fortunately, the FHA 203 (k) home renovation loan will enable you to get the aid of a family member for that 3.5% down payment. This is a great option for many first time homebuyers. Often, parents or guardians will support the new homebuyers with some cash toward the purchase price of the home. The entire down payment can be subject to a gift from the family members with this particular home renovation loan.
So, if you’re a fan of DIY projects, and you think you’re the management skills to supervise the project, then maybe a home renovation loan is right for you. The large amounts of savings can make it a very profitable experience. Just make sure you understand the planning and the financing involved.