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Home Renovation Loans

Mortgages for Houses That Need Repair

There are many properties in the Chicago area that need work / updating.  Every neighborhood or suburb has them.  If financing stopped you from buying one till now, read this article.  If you’ve not tried to refinance your in-need-of-work property because you thought it would be impossible or, at least, too expensive, read this article.

If you’re a builder / general contractor looking for a cheaper way to acquire and rehab properties, these loans are not for you.  Though, for some, you can do the work on the property… but the labor part of the costs cannot be included in the loan.

Brief Overview

This type of home loans allow people to buy or refinance a property that needs work or build an addition or, even, an entire home.  They’re a less expensive option than getting a first mortgage, then getting funds to repair.

There are several types (products).  On the expensive end, there are the hard money loans.  (Those are not the ones I am covering here.)  On the affordable side, there are Freddie Mac’s Renovation Mortgages, Fannie Mae’s Home Style Renovation mortgages, and the FHA’s 203K mortgages.

All three can be used for a 1-4 unit property.  The FHA requires that the property used as collateral be the borrower’s primary residence, while the other two allow it to be a 2nd home or an investment property.

The total loan amount (purchase price and rehab funds) cannot be higher than the whatever the loan limit for the entity is.

The LTV (loan-to-value) ratio is the same as the LTV’s for other loans (i.e., Fannie Mae and Freddie Mac can go up to 95% for a 1-unit, owner-occupied property, while the 203K allows it to be as high as 96.5%.  The percentage is based on the sale price for FHA or on the lower of the purchase price + rehab loan or future (as if repaired) value of the property.

Rehab Loan Limits

The part of the loan that goes to rehabbing can be 50% of the sale price / value as far as Home Style Renovation mortgages are concerned.

The FHA allows it to be as high as $75,000.

Call 847-235-6221 if you’re looking for a renovation mortgage in the Chicago area.

Each mortgage loan type has many more requirements, but this should be enough to get you thinking that you do not need your property to be in great shape to get a mortgage loan on it.  Call 847-235-6221 to find out which loan type you and your property qualify for.

Interested in other types of Chicago mortgages?