House Renovation With An FHA Mortgage
There are two types of home renovation projects; the one you are planning and the unexpected renovation you may need to do if a sudden problem occurs in the home after your purchase.
An unexpected home renovation can be caused by many things that were irrelevant at the time of your home inspection; a water pipe can burst, a stove can fail prematurely, or storm damage can cause a leak in your roof.
Repair professionals and contractors will be quick to point out that even a home that passes an inspection can develop such problems through no fault of the builder or seller.
An unexpected home repair situation is not uncommon for homeowners. So what can a borrower do when the need arises?
You can finance your home repair out of pocket or consider an FHA refinance loan to pay for the work.
In this situation there are two basic options to consider; an FHA cash out refinance loan that has no restrictions on how the cashback can be used; or an FHA rehabilitation mortgage that can be used as both a new purchase loan (for those looking to buy a fixer-upper property) and a refinance loan (perfect for Your renovation needs).
Important Things to Consider When Doing Renovations Using FHA Loans
- FHA rehab loans are available for small projects (the limited 203 (k) FHA rehab loan) and for major renovations.
- You do not have to commit yourself to the larger rehab loan if your work does not involve any structural changes such as load-bearing walls, etc.
- FHA rehab loans have certain restrictions – you can’t use them to add a luxury feature like a brand new swimming pool or tennis court.
- However, you can use them to upgrade, repair, and upgrade the property in many ways.
FHA cash out refinance loans are preferable for those who have more equity in their home and do not want to deal with the limitations of the FHA rehab loan (see above) and may be a better option because more money is available for rehab work Available.
It is important to note that FHA rehab loans do not allow cash to go to the borrower like a disbursement refinance. The funds from the FHA rehab loan must be used for the renovation costs.
Talk to your lender about your repair needs to see which type of FHA loan is best for you.
Find out more about the path to home ownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Home Buying Rights
Step 3: basic mortgage terminology
Step 4: buy a mortgage
Step 5: shopping for your home
Step 6: Make an offer to the seller
Step 7: get a home inspection
Step 8: home insurance
Step 9: what to expect upon graduation