Your Loan Options When Buying a Fixer-Upper

As opposed to a move-in ready, entry-level home, a fixer-upper may be a lower-priced, established house that requires some repairs. While fixer-upper homes can be a home-buying solution to those with a limited budget, there are also renovation expenses to consider. Fortunately, certain loan options can help cover the cost of common home improvements such as:

• Home modernization and functionality improvements
• Health and safety hazard elimination
• Disabled accessibility enhancements
• Energy conservation upgrades
• Exterior aesthetic improvement changes
• Landscape overhaul
• Roofing, flooring, plumbing, gutter, and downspout addition or replacement
• Structural reconstruction and alterations 
• Well and/or septic system installation

Fixer-Upper Loan Options

The following renovation loans help you finance a house and its improvements at the same time. 

1. FHA 203(k) – Offered through the U.S. Department of Housing and Urban Development’s Federal Housing Administration, the FHA 203(k) loan is a single, long-term mortgage that is applicable toward both the purchase and improvement of a lower-value home. Comparable to conventional mortgages, this loan can be used with 15-, 20-, 25-, and 30-year fixed-rate, as well as adjustable-rate mortgages. The FHA 203(k) is eligible to homeowners who have a minimum credit score of 580 and requires a minimum down payment of 3.5%.
2. HomeStyle® Renovation Loans – Fannie Mae Homestyle® mortgages may be used for many home improvements, including luxuries like swimming pools. A great option for single-family homes, HomeStyle® loans are available in adjustable-rate as well as 15- and 30-year fixed-rate mortgage terms. Qualifying manufacture homes are also eligible under the HomeStyle® Renovation Loan.
3. CHOICERenovation® Loans – These Freddie Mac loans allow improvements that help your home withstand natural disasters along with other upgrades. CHOICERenovation® Loans follow standard credit score guidelines as opposed to FHA 203(k) loans. Therefore, they require a higher credit score from borrowers who put down less than a 25% down payment. However, borrowers can also make repairs themselves to earn a down payment credit.
4. VA Renovation Loans – A VA-approved contractor is required for this loan available to eligible veterans. However, projects are limited, and your lender might charge a construction fee.

There is no doubt that a fixer-upper is more work compared to a move-in ready house. However, the reward might match the effort you put into it. When everything is done and dusted, your first home will be full of personal touches that will make you an extremely proud homeowner. In addition to the above programs, there are other renovation loans available as well. Quite possibly, one of them will fit your individual needs.

Your Best Option for Quality Loan Services

For help making your dream of homeownership a reality, turn to Butler Mortgage. For over 25 years, we’ve worked with both first-time and seasoned buyers wanting to own a home in Central Florida. By filling out our free consultation form online, we’ll see what type of loan you qualify for and help you get the financial support you need. For the right loan solution for you, call Butler Mortgage today at 407-931-3800.