K.M. Minemier & Associates is a certified Woman Owned Small Business (WOSB) engaged in full service real estate asset management and marketing.

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Renovation Loans - Preparation is KEY

August 14, 2020

Renovation loans as a viable option for purchasing a HUD property have pros & cons.  Some lenders have renovation loans for FHA, VA, Conventional & USDA.  Understanding the process and having that understanding will help agents & buyers to consider them when searching for their perfect home & set realistic expectations into this process.

A renovation loan allows a buyer to purchase a home that does not qualify for financing 'as is', or to make it exactly what they want prior to move in.  This is a great option for people when there are not many homes on the market or the buyer is specific about their wants.  Purchasing a home 'as-is' and including the costs of renovation into the loan amount has helped many satisfy their desires.  This allows a one-time closing with the funds to make improvements to the home.

There are two types of renovation loans.  A limited RL allows up to $35K in repairs/renovations when nothing structural is needed.  A standard RL is required for these items over $35K OR if there are structural issues that need to be addressed.

These loans are much more in depth and require more time to process.  60 days is an estimated amount of time needed.  Buyers who have prepared beforehand with their documents, plans for renovations, bids, etc are crucial to closing timely.  Typically delays are caused by contractor delays.  It is important to work with a reputable licensed & insured contractor.

When considering if a RL is suitable for a buyer, have deep conversations with buyer, lender & contractor PRIOR to submitting an offer on a home needing renovations. 

With the right preparation, a RL can be a GREAT product to get buyers into the home of their DREAMS!!

 


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