If you're thinking about moving in the Spring, it's never to early to start planning the financing for your new home, and that should include considering a renovation loan. Interest rates are very favorable so many families are making the move. Landlords are hiking up rent to compensate for pandemic losses. When homes for sale are in short supply, buyers offer above asking price and that could mean finding that perfect home is going to be a challenge.

Renovation Loan for a Home Purchase or Refinance

But whether you are looking for a starter home or ready to move up to a bigger place, you don't want to overlook this option. Many people aren't familiar with all the different loan types available to Pennsylvania home buyers. And if you're looking to buy your dream home - and a creative solution to the tight housing market - the 203k Renovation loan, along with the Conventional Fannie Mae Home Style Renovation Loan, will not disappoint.

BMC Keystone has lots of experience dealing with lenders who offer Renovation Loans in Pennsylvania. We enjoy enlightening our clients on how they can buy a house AND renovate it...all with the same mortgage loan. Our biggest piece of advice is keep an open mind. Especially when you can't find your wish list of features in your price range, or you can't find a place within your desired location. The Renovation Loan could be a game changer.

Buying in a Under Developed Area Has More Potential

Think of what Collegeville or Conchohocken was in the 1990s. They used to be outside the town center, now they have their own town centers. The advantages of getting into an area before it builds up are undeniable. You not only get a lot more house for the money, but as the area develops, property values soar and so does your equity. So learn about Renovation Loans and how they work, and transform your new house into your dream house.

BMC Keystone can help guide you. As mortgage brokers based in southeastern PA, we're plugged in to the local housing market and very aware of the median home values in Philadelphia and the surrounding counties. We're quick to spot these pockets of untapped potential and they're all around us:

Honey Brook and Spring City, Pottstown, Phoenixville, Chester County

Green Lane, Skippack, Harleysville in Montgomery County

The Advantages of Buying an Ugly House

We've often said that buying an ugly house is the way to go. A house that doesn't appeal to your tastes could still be a diamond in the rough! Ugly bathroom, small kitchen, boxy layout...we say go for it! It can all be changed. And when you finance the home along with the renovations in one loan, you're not draining your bank account or maxing out your credit cards at high interest rates. Your not dragging out the improvements either. They're done right, done upfront and to your specifications. Learn more here.

How does a Home Renovation Loan Work?

As with any loan, there are requirements to meet, steps to follow and deadlines to respect. A Renovation Loan can be FHA (government insured) or Conventional (privately insured), but the processes are fairly similar. Both can span from 45-60 days, so it's never too early to get started.

Here is how a renovation loan typically works.

• You find the home you want to buy and select a licensed General Contractor to work with
• The GC provides a bid for your renovations
• A lender approves you to borrow the total amount, purchase price + renovation funds
• The home is appraised for a BEFORE and an AFTER value
• The AFTER value is used to calculate buyer's ability to borrow funds! Buyer has instant equity which will help them qualify for the funds.
• At settlement, the check for the renovation funds is made payable to the homebuyer and the contractor
• The work gets done before the loan is finalized

Requirements of a Renovation Loan for a Purchase

• Minimum 620 credit score
• As little as 3% down if FHA loan
• Home must be primary residence
• Must remain in the home for a period of time. We can do "fix-and-flip" loans but that is a different type of loan.

Renovation Loan with a Refinance

What if you don't want to move. When you factor in closing costs and transfer taxes, moving could be out of reach.

Need an in-law suite?

Recovering from storm damage or flooding?

Determined to have an open floor plan and a chef's kitchen?

You don't have to purchase a new home to take advantage of the benefits of a Renovation Loan. You can stay in your home and refinance. A home renovation loan refi gives homeowners access to funds for home improvements by tapping into the equity they have in the home. You can remodel a single room, increase your square footage, or remodel the entire home with a Renovation Refinance Loan. With this special type of refi loan, you are leveraging your equity to borrow cheap money. Imagine paying for those same improvements on your credit card!?

Read more about the benefits of refinancing here.