Wouldn't it feel great to buy a fixer-upper and renovate it to match your style? A kitchen with the tile you've been wanting for years. A master bathroom taken down to the studs and rebuilt with a double sink, walk-in shower, and a soaking tub. Sounds amazing, doesn't it? To make your dream a reality let's look at some financing options for fixer-uppers.
Offered by Fannie Mae, the HomeStyle loan is a conventional loan that includes the amount to purchase a property and remodel it with the help of a contractor. As a first-time home buyer, you'll pay a 5% down payment. If you can afford a mortgage payment but don't have money for the renovations, the HomeStyle loan is ideal. Note: Guidelines are strict.
When you're looking for a loan to help you buy and renovate a fixer-upper, you might consider a FHA 203(k) loan. This FHA-back loan allows you to borrow money based on what the value of the property will be worth after improvements. As part of your main mortgage, you borrow funds to complete the home renovations. A 3.5% down payment is required. Like the HomeStyle loan, guidelines are strict.
Freddie Mac offers a conventional loan program called the CHOICERenovation loan. This type of loan provides you with the money to finance the purchase and the cost of improvements while offering a low down payment. This loan allows you to finance renovations costing up to 75% of the value of the home, after renovations.
When you have a limited budget as a first-time homebuyer, purchasing a fixer-upper can be a great start to the home of your dreams. If you need a loan for a fixer-upper, consider the options mentioned above. Consult with a lender to see what it takes to qualify for one of these loans, then get ready to get your hands dirty as you prepare to purchase a fixer-upper.