If your home is something that you plan to live in and enjoy for a long time, it makes sense to invest in it with a home renovation
Remodeling your home can increase your property value and ensure that you have a home that meets your needs. Whether you want to create additional space, remodel an outdated kitchen or transform outdoor space into a living area, a renovation loan can help your vision become a reality.
You have many options when it comes to financing a home remodeling project. There are hundreds of loan programs for remodeling and renovation projects. Even if your credit is less than stellar, you can find financing to fit your particular needs at a fair price. Before searching for financing, there are a few things that you will want to do first.
Determine How Much the Renovation Will Cost
Contact a trusted contractor to obtain an accurate, written estimate of the cost of your remodel or renovation. Most lenders will need to have a specific figure before they can work with you. Ask your contractor to provide a firm bid that breaks down the materials and labor costs.
Check Your Credit Report
Obtain a free copy of your credit report and review it carefully. If you notice any errors, immediately dispute them with the credit reporting agency. If you have excellent credit, meaning no late payments in the past 12 months and no derogatory items on your credit report, then you will likely qualify for the best terms and rates. Late payments will not result in your not being able to get a loan, but you might end up with a higher interest rate.
The next step is to learn about the different types of home remodeling loans. This will help you make informed decisions about financing your home remodeling project.
Home Equity Line of Credit
This type of loan allows you to receive a line of credit based on the amount of equity that you have in your home. You can use funds when you need them and you only pay interest on the amount used. Another plus is that there are no closing costs with these loans. The rates and terms vary so it is advantageous to shop around a bit.
Home Equity Loan
This loan is also based on the amount of equity in your home. You receive the money all at once with a home equity loan. In addition, the interest rates are fixed over the term of the loan.
FHA 203K Mortgage
These FHA-insured loans allow you to refinance your first mortgage and roll your home improvement costs into the new mortgage. An advantage of this loan is that the loan amount is based on the value of your home after improvements.
There are many different types of finance programs for home renovations. Choose the one that works best for your particular situation.