What is a Remodel Loan?

OldHome

Congratulations, you’ve finally found the home of your dreams. The problem is only you can imagine it for what it could be rather than the falling down, overgrown mess it currently is. With a conventional mortgage all of your money is wrapped up in the down payment leaving you with little left in your bank account to begin the home remodel you can picture. You’re in luck! Though it isn’t a well known loan the Department of Housing and Urban Development (HUD) offers an FHA 203(k) loan, also known as a Remodel Loan or a Rehab Loan.  This loan allows you to receive your mortgage to purchase the home while also providing up to $35,000 to cover your remodeling, improvements or upgrades.

Pros to Getting a Rehab Loan:

  • One loan covers both your mortgage and the remodel
  • No more procrastinating. With the time limit requirements you will get started right away.

Cons to Getting a Rehab Loan:

  • Your closing period may last from 60-90 days because of the requirements
  • You must work with a HUD approved lender
  • Detailed plans and proposals are required to receive this loan
  • There is a four unit maximum

What Can You Use a FHA 203(k) Loan on?

  • Modernize an outdated home.
  • Improve your home’s energy efficiency.
  • Landscaping and other exterior site work.
  • Roof, gutter, and downspout installation or replacement.
  • Alter the home’s structure and/or reconstruct the home.
  • Eliminate safety hazards.
  • Aesthetic improvements.
  • Plumbing improvements, including well and septic system work.
  • Floor additions/replacements (includes floor treatments).
  • Remodels for a disabled person.
    (Source: http://homerenovations.about.com)

 

To read more about the Remodel Loan, its requirements or to find an approved lender in you area give us a call or feel free to visit HUD’s site.