Searching for your first home is an exciting time, but it may be tricky to find a house that meets every item on your wish list, from its location to its cost and condition. If you come across a home in your ideal neighborhood that needs repairs or is a bit outdated, a renovation loan may be a great solution for you.
A renovation loan may allow you to finance renovation costs within the same monthly payment as your regular monthly loan payment. These loans could benefit first-time homebuyers—there are even products for borrowers with limited funds.
Below we explore some possibilities so you can start weighing your options. When you’re ready to find out more, our loan experts are here to help.
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FHA 203(k) Rehabilitation Loan
This FHA-insured loan enables buyers to roll a wide range of renovation costs into their monthly mortgage payment. The FHA 203(k) Rehabilitation loan is a strong option for first-time homebuyers because of its flexible qualifying criteria.
- Lower Credit Score Requirement: Buyers can qualify for this loan with a credit score as low as 580, lower than allowed for conventional loans.
- Low Down Payment: This loan enables buyers to put down as little as 3.5% on the property, potentially easing the upfront financial burden.
Depending on the extent of the needed repairs, you can choose between a limited or full 203(k) loan. Limited plans are capped at repairs that cost $75,000 or less, but may close more quickly than a full plan.
Keep In Mind: Renovation loans require that your lender be provided with detailed information about the needed repairs. An appraisal is also required.
VA Renovation Loan
This loan backed by the U.S. Department of Veterans Affairs is a solid option for Military borrowers looking to buy a home, and includes several benefits designed to help Military borrowers achieve homeownership.
- Zero Down Payment: Qualified borrowers with full entitlement often don’t have to make a down payment at all.
- Simple Financing: Qualified borrowers may receive up to $50,000 towards repairs and minor remodeling.
Homestyle or CHOICERenovation® Mortgage Loans
Conventional renovation loan options also exist for borrowers looking to roll renovations in with their regular mortgage payment. Go here to learn more about renovation loans.
- Cover Many Potential Upgrades: Works for a wide range of renovations including kitchen remodels to structural changes.
- Not Just for Primary Homes: Can also cover second homes and investment properties.
Get Caring, Professional Guidance
If you think one of these options could work for you, or you’re still unsure how to fund your home purchase and/or renovation project, reach out to a Newrez mortgage expert. We will be glad to guide you through your options and answer all of your questions.
CHOICERenovation® is a registered trademark of the Federal Home Loan Mortgage Corporation and is not affiliated with Newrez LLC.
This is not a commitment to lend. All loan programs are subject to credit, underwriting, and property approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions apply.
