With the our housing stock aging, new construction inventories dwindling and the suburban flight back to urban America the need for renovation and has increased dramatically in recent years.
When most think of home improvement financing the first thought that pops up is your good old Home Equity Line of Credit (HELOC). In the past that may have been the best direction to go and for a very select few it is still the best way to go. However, this mortgage market is different than the past.
With home values plummeting, equity disappearing and guidelines ever in flux new home improvement financing options have taken center stage.
Whether it be purchase and renovate or refinance and renovate this new crop of players have shown they are better suited and more flexible then your traditional 2nd loan and HELOC financing options. SO, who are the new players and how do they work?
While has been around for years, the loan was hardly ever utilized until put back into play by declining values, beat up foreclosure stock and tightening credit guidelines.
The offers flexible credit qualification, low down payments on purchases, minimal equity needed on refinances and an appraisal bsed on after-repair value.
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Passable, serviceable veterans of the industry, HomeEquity loans suitable for certain situations. If you have significant equity then a HELOC is usually the cheapest way to tap into it for renovations.
However, unlike & renovation products, Home Equity Loans use the current value of your property without consideration how much value your home improvements will add.
This, along with lower allowable loan to values, typically means fewer dollars to tap into for your renovation. Finally, the credit qualification guidelines for s are much stricter than that of .
When you combine as-is valuation and tough credit qualification you get fewer qualified customers and a loan product that isn’t always suited for this mortgage market
A relative newcomer to the home improvement scene, the Homestyle is the conventional sister to the 203K.
More flexible when it comes to repair, but harder to get approved. This loan fills some large gaps left by FHA renovation financing though.
Unlike FHA loans, the works for 2nd homes and investment properties. It also works for unfinished builder foreclosures which is huge if you’d like to get a great deal on a new construction home.
An added bonus is that you can have more than one Homestyle loan, FHA typically only allows you to have one loan at any given time.
For years cash-out refinances were THE way to tap into your homes equity for improvements.
However, much like HELOC’s they are based on the current value of your house and not the after repair value like & renovation loans. This means less room to renovate and with declining home values, fewer qualified customers.
In closing, for you lucky folks that still have significant equity in your home you may be able to complete you home improvements by tapping into your equity via a or a .
For the vast majority of folks across this great land who simply don’t have enough equity you’ll need to explore renovation products like the and renovation loans that are based on after repair value.
For those of you that are looking to purchase a fixer upper those two renovation products are likely your ONLY option to find financing
