Renovation financing should grow exponentially as mortgage rates rise and a slow real estate recovery takes hold. Slow price appreciation will encourage buyers to purchase a home at a discount to account for deferred maintenance or questionable decoration. Moreover, the demand for energy efficient improvements, like double-paned windows and new fuel systems, should grow as people look to reduce their monthly energy bill. Additionally, the IRS allows for a partial tax credit for energy efficient improvements placed into service in 2010.
The challenge is that all these improvements costs money. In this new category, "RENOVATION FINANCING", I'll be exploring some of the mortgage loan programs that allow home buyers to borrow money in excess of the purchase price to implement such improvements. To date, I am familiar with five loan programs:
- VA Energy Efficient Mortgage- allows for $6000 of energy efficient improvements to be financed
- FHA 203-K Renovation Mortgage- allows for larger renovation projects to be financed
- FHA Streamline-K Home Improvement Loan- allows for up to a renovation project up to $35,000 over the purchase price to be financed
- Fannie Mae Energy Efficient Mortgage- allows for energy efficient improvements, up to 115% of the purchase price of a resale home to be financed (up to 105% for newly built homes)
- FHA Energy Efficient Mortgage- allows for up to 105% of the purchase price to be financed for energy efficient improvements.
While I am hardly an expert on construction or renovation loans, I have closed a bunch of them over the past 15 years. I'm proficient at comprehending loan guidelines and asking underwriters lots of questions. Expect me to be writing about this topic a lot here as I take courses and start closing more of these loans.