Cobwebs, chipped paint, creaky floorboards, oh my! It might sound like the perfect Halloween haunted house, but these are all characteristics of a fixer-upper that is ready for a fresh look. Typically listing at a lower price, fixer-upper houses are one way to create your dream home when you can’t find a turn-key one on the market. Here’s how you can tackle your no-fear fixer-upper!
Is it cheaper to renovate or build a new house?
One of the reasons people choose to become homeowners is the freedom to tailor their space to fit their personal styles. Two common ways to achieve that is to custom build a new home or find a fixer upper with tons of potential.
Usually, it is cheaper to renovate a home than it is to build one. However, depending on the scale of your remodeling project, the cost of financing either a new construction or a home renovation may be the same no matter which method you choose. That’s why if you plan on updating a fixer upper, it’s important to talk with licensed professionals about renovation costs and renovation mortgage options.
Can I get a mortgage to renovate a home?
Getting a mortgage to renovate a home is the same process as getting a tradition mortgage. The main difference is that a home renovation loan rolls the cost of your renovations into the cost of the mortgage. You can also get a renovation mortgage to update your current home, make cosmetic fixes, or add a pool. Home sellers can also utilize a renovation mortgage to make appraiser or borrower requested repairs.
Popular renovation mortgages for when you want to buy a fixer-upper or update your current home include:
- FHA 203k—The Federal Housing Administration (FHA) backs this loan to help borrowers finance the purchase and renovation costs of a home while helping keep costs as low as possible. With lower down payment requirements and lower refinancing interest rates, an FHA 203k loan can be used for both cosmetic and structural repairs. And, to provide borrowers more options, it is available as FHA 203k Full/Standard and FHA 203k Limited.
- VA Renovation—Partially guaranteed by the U.S. Department of Veterans Affairs (VA), this reno loan offers all the same savings as a traditional VA mortgage with the convenience of one application, one closing, and one monthly payment. This loan allows borrowers to finance renovations for up to four units and provides loan amounts up to $1 million.
- HomeStyle1/CHOICErenovation2—Offered by Fannie Mae and Freddie Mac, respectively, these loans can help you buy and repair a fixer-upper or make updates to your current home. The costs of the updates are rolled into the sales price of the property, so borrowers don’t have to open a second line of credit to make their repairs.
Other renovation mortgages offered by PrimeLending include EZ “C”onventional, repair escrow, and pool escrow. Learn more about all of our renovation mortgage options on our renovation loans page. If you have any questions about home renovation loans or want to talk to a local lender, connect with a PrimeLending loan officer today.
1Homestyle® is a registered trademark of Fannie Mae.
2CHOICERenovation MortgagesSM is a registered service mark of Freddie Mac.
