If you’re out looking for a home, you’ve probably noticed that inventories are tight: there are not as many homes available as you would like, and the homes in good locations at the right price will go fast, often with multiple offers. Similarly, there are many homes that sit on the market for a long time due to their condition: perhaps due to the home not being updated in many years, or due to a physical problem with the home that needs to be fixed before occupancy. In these cases, a simple fix for this problem is the renovation loan.
Buying the Ugly Duckling
Sometimes, it makes sense to buy what many would call the ‘ugly duckling’ – a home that needs some updating or several repairs. An updated home in a good location will often be very expensive, and a discounted ‘ugly duckling’ home can be a better financial decision, even including the cost of renovations. Homes that need some work can be updated to the buyer’s preferences, all while building equity in the process.
FHA 203k vs. Conventional Renovation Loans
There are two types of renovation loans: the government-backed FHA 203k renovation loan, and the conventional, home-style renovation loan. Both types of renovation loans have a similar purpose, giving buyers the option to buy a home in need of repair or updates that builds the cost of renovations into the home loan. This gives buyers the money necessary to not only purchase the property, but also to fix it up to their preferences. Buyers can make these repairs or upgrades following the closing on the home.
While renovation loans have more moving parts and can be more complicated, they are not a bad way to go when purchasing a home. Renovation loans are a great option for buying a home in need of some updates or repairs, giving buyers a viable solution when some renovation is needed. If you have questions or would like to figure out the best options for you, contact Pete Thompson at (630) 481-7188 or visit www.PeterThompson.team. You can also view our YouTube channel for a video on this topic.