Renovation Loan

Home Renovation Loans have become a popular option for families buying home that will need significant immediate renovations. For any breadth of project, whether it be big or small, Renovation Loans are a great way to finance your next home improvement project. There are two main types of loans available for home renovation purposes, and Fannie May and the Federal Housing Administration offer your two options. These programs lend out based on how much the home is supposed to be worth after the renovation is completed.

Home renovations loan have been around for years now, but have recently seen a large spike in popularity recently. Many borrowers currently are still unaware of these loans or even find them to complex to use effectively, but the truth is that is not as difficult as it may seem. Renovation loans are different from credit lines in that they make the borrower actually show that the money borrowed in the past was in fact used in home improvement renovations to the house. 

The main type of borrower who benefits from these great Renovation Loans are those who are buying homes in distress or foreclosure. When buying foreclosure homes there is typically a great deal of work and money that must be put into them to restore or renovate them. With these Renovation Loans you are able to borrow thousands of dollars based off of what the house will be worth upon completion. For example, if you were to buy a home in foreclosure for $33,000 and the home renovations was expected to raise the homes value to $133,000, then you would typically be loaned the difference in order to get the house to what it could be worth. 

When considering whether taking the Fannie May style loan or the FHA style loan it is important to know that there are key differences between the two. For instance, the FHA loan will not allow you to spend the loan on luxury items such as a pool or putting green, while the Fannie May loan will allow you to use this money on luxury items like these. So prior to taking one of these loans it is important to look specifically at the pros and cons of each.