In recent years, the homes that are available in your price range need too many repairs for the asking price. Or, they are missing key features like a second bathroom, outdoor kitchen, or pantry. A renovation loan may be your answer. You can end up with the home you have always wanted and you can combine the improvements and purchase into one loan.

What is a Rehab Loan?

A Rehab Loan, formally known as a renovation loan, is a great way to get what you want. We offer rehab loans for Conventional and FHA products as well as Fix and Flip loans (located on it’s own loan description page on our site).

Freddie Mac CHOICERenovation allows you to put down only 5% of the purchase price and all improvements and have minimum score of 580 and above. And, Investment properties may be eligible. You may be able to use a local home improvement store, such as Lowe’s, to oversee the renovations and hire and pay all sub contractors.

FHA 203(k) loans allow a minimum score of 620 and down payment of only 3.5% of the purchase price and all improvements. You will need a contractor to oversee the work but some of the projects can be pretty major in scope.

How Does it Work?

The process begins with a thorough assessment of the property’s renovation needs. You will need estimates from a contractor for the items you would like to repair of improve. The down payment is then calculated on the purchase price and the estimated renovation costs. This can eliminate the need for multiple loans or credit lines. In addition, the interest rates on these loans are much lower than using your credit cards.

Investment Opportunity

For those with a keen eye for real estate, Rehab Loans may present an excellent opportunity to invest in undervalued properties, renovate them, and potentially sell them at a higher price. (Also see Fix & Flip Loans on our website for more details).