Renovation Loans

for Your Current or Prospective Home

  • Renovation loans are specialized financing options that allow homeowners to fund home improvements, repairs, or upgrades by incorporating the costs into a single mortgage.

  • These loans are ideal for purchasing fixer-uppers or updating existing homes.

  • Common types include FHA 203(k) loans, which offer government-backed support for renovations, and Fannie Mae's HomeStyle loans, which provide flexibility for various projects.

  • Renovation loans cover structural and cosmetic changes, enabling borrowers to enhance property value and functionality.

  • Typically requires detailed project plans and cost estimates.

  • By bundling purchase and renovation costs, these loans simplify financing and can lead to increased home equity.

Renovation - HomeStyle.jpg

CONVENTIONAL PROPERTY CONDITION RATINGS and questions you should ask the buyer and buyer’s agent when you get a contract. AND of course, how reno loans can be your solution!

 

While I’d love to say that listing photos are always accurate, that’s not always true.  Listing agents are going to post the best pictures possible.  Plus many agents are under the impression that Conventional loans can be strictly as-is.  However that is not always the case and can lead to issues halfway through the loan process when the appraisal comes back either as a C5 or C6 condition or “subject-to-repairs”.  According to our guidelines, we will only lend on property condition ratings of C1- C4.  

 

A renovation loan is perfect for those houses that are in a C5 or C6 condition since all the renovations are financed into the loan to bring the property to a C4 condition.  The appraisal is done with an ARV (as-repaired value).  Meanwhile if you run into an issue when the appraisal comes in OR your Realtor partner calls you in a panic, just remember we can RESCUE that transaction with a Reno! 

Condition Rating & Eligible Financing Type

C1 - Standard Conventional

The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation

C2 - Standard Conventional

The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

C3 - Standard Conventional

The improvements are well-maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well-maintained.

C4 - Standard Conventional

The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.

C5 - Renovation Loan/ Homestyle or FHA

The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability are somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.

C6 - Renovation Loan/ Homestyle or FHA

The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

 I recommend asking the following questions:

  • Is there any discoloration on drywall or in the basement?  (possible mold),

  • Are the utilities on?

  • Is the house vacant?

  • Is all of the flooring in place? (subfloor is not a finished floor surface)

  • Is there any missing or damaged drywall?

  • Is there any evidence of leaks (roofing, plumbing, etc)

  • Are there any foundation issues, structural issues?

  • Are all of the mechanical systems functional?