This is the best time ever to get a Renovation loan in Houston. No longer do lenders make the sign of the cross when you mention a renovation loan. In fact there are actually some brave souls who specialize in these loans. Among the best are Jeannie M. West, Ashley Foxhoven, Okley Post, and Diana Johnson. There companies make many of the loan approval decisions in house and fund their own loans.
A Renovation loan is a 30 year fixed rate mortgage with a construction loan. The FHA 203K Streamline loan and the HomePath Renovation Mortgage are quite similar in design. They both loan up to $35,000 for the renovation and allow for the seller to pay certain closing costs. Each has a low down payment and no seller requires repairs before closing. For buyers needing more money there is the standard FHA 203 K loan and there are renovation loans made by conventional lenders.
What Renovation lending will do:
- Provides the buyer with endless possibilities to remodel and improve their purchase
- Allows the buyer to decide on what repairs, fixtures, appliances, flooring, colors, prior to closing
- Appraised value is based on the “Subject-to-Completion Value” not the “As=Is Value”
- Everything is packaged together at a low interest rate for the buyer
Possible issues for the buyer with a Renovation loan:
- There is no sweaty equity you must hire a general contractor
- The buyer must do their own inspection
- Cannot build a new swimming pool
- Need a higher credit score
- There are multiple people who have to give their approval at every step of the project
- The interest rate is higher than for a non-renovation loan.
- There are higher fees for a renovation loan than for a non-renovation loan
- The buyer cannot move into the home immediately after closing
The bottom line is that with the right combination of lender, realtor, and buyer this can be a great way to buy a home. Generally homes which need a lot of repairs sell for a lot less than they are worth because most loan programs will not approve the home. There is an opportunity for a smart buyer to get more house for the money. The back side is that the buyer needs to be careful to make sure the numbers for all repairs & expenses are correct and accounted for, and the buyer may have to wait months before moving into their home after it closes.