Renovation loans are the best-kept secret in the real estate world. There are a few reasons for this. Just a couple months ago sellers would often get multiple offers and would have the luxury to pick the highest offer with the biggest down payment. Now the market has slowed a bit and houses are not selling with multiple offers on day one. Additionally, sellers would prefer to sell to a homeowner instead of investors who want to flip the home.
Another problem was the lack of great contractors that could renovate the home on budget, on time and at great quality.
The last issue is lack of awareness. Most realtors do not know about renovation loans. Most loan officers don’t try to sell them. With our company, we can solve all these problems!
Without a renovation loan, most buyers would not consider buying a home with cosmetic issues, and definitely not homes with bigger repair issues. Why? Because it would cost far too much in cash! For a home to qualify for a regular mortgage, the property has to be in good condition. With a renovation loan, you can buy a home in poor condition.
Let’s assume you’re buying a home that needs $100,000 in upgrades/repairs for $500,000. After renovation this home will be worth $650,000. With a 10% down conventional mortgage you will need:
$50,000 down payment
$100,000 for the renovation
$5,000 in closing costs
Total cash needed would be about $155,000!  You would still have a loan for $450,000 for a home that is worth $650,000.
With a renovation loan with 10% down, you would need:
$50,000 down payment
$5,000 in closing costs
Total cash needed is $55,000! The bank pays the $100,000 for renovation directly to the contractor. You will have a $550,000 loan on a home worth $650,000.
This saves you a huge amount of cash for you. More importantly, you can design and build your dream home. Pick out your colors, cabinets, fixtures and anything else from your Pinterest dream home board!
Here’s another major point: If you are a military veteran or a first time homebuyer, you could qualify for a renovation loan with no money down.
There are a lot of outdated homes on the market now. Don’t let the appearance deter you. If the home is in a great location and has good bones, let’s use a renovation loan to turn it into your perfect home!