What’s the difference between a “Standard 203k”, a “Limited 203k”, a Fannie Mae HomeStyle and a VA Renovation Loan?
- Standard 203k requires the help of an approved HUD Consultant and is for projects that meet the following criteria:
- Total renovations costs exceed $35,000
- Projects requiring structural changes, or having severe mold problems
- There is a minimum $5,000 worth of work on the property for a Standard 203k.
- Limited 203k’s do not have a minimum spend or require you to work with a HUD consultant. The main difference is that the allowable enhancements for a Limited 203K cannot include any structural improvements or luxury items and cannot exceed $35,000 in repairs including applicable fees.
- FNMA HomeStyle loans allow you to renovate primary residences, second homes, investment properties or condos with a 5% minimum down payment. The renovation cost limited to 75% of the “as-completed” value -must be built-in and add value and LUXURY items such as outdoor BBQ & pools are allowed!
- VA renovation loans help veterans to buy homes needing updates or repairs that would otherwise put homes out of reach for veteran buyers. Similar to VA construction loans and FHA 203k limited renovation loans, the VA renovation loan is guaranteed by VA for veterans to buy and renovate existing property using their VA benefit for purchase or refinance.
For a line-by-line breakdown, please refer to our “Compare Your Options” chart above.
Do I have to submit a minimum number of bids?
We certainly recommend getting bids from several contractors; however, it is not required. We only need the final bid from the contractor you’ve chosen for the final renovation work.
Can I do the work myself, and borrow less money?
CFI does not allow any self-help.
Can my relatives do the work?
Unfortunately not. CFI requires an arm’s-length transaction.
Who picks the contractor?
Although we have preferred partners that we can recommend, it is up to you to make the final selection on which contractor you prefer to do the renovations.
Does the contractor have to be licensed?
We follow state or county requirements with regard to licensing of contractors. Your selected contractor not only has to be licensed, but properly insured, bonded, and have trade references as well.
Can I purchase appliances with a renovation loan?
Yes. But, be aware you will have to have cash or credit to complete the purchase of the appliances, and you will be reimbursed in the second draw once the work is complete.
How long does it take to close my loan?
Our recommendation is that you plan for 60 days from your contract date to close your loan. We work diligently and aim to close it as quickly as possible; however, because a renovation loan can get complicated due to a variety of factors and unexpected events, we ask for your help in being flexible on timelines.
Do I have to borrow a contingency reserve?
Yes, please refer to our “Compare Your Options” chart above to see contingency reserve requirements per loan type.
What happens to the contingency reserve if I don’t use it?
Once the projected renovations are done, any remaining contingency reserve will be applied to your principal loan balance.
Can I get cash out to pay off debt with a renovation loan?
Not for a 203k loan, VA loan or FNMA HomeStyle. Unfortunately, these loans only allow for a purchase and renovation amount (and closing costs if you are refinancing to renovate your house and your project qualifies). Getting cash-out is not allowed.
If you are refinancing your current home to use the equity for remodeling, a cash-out is the primary goal of the transaction and a great option for existing homeowners.
Where can I get more information?
Contact us today!
This program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims of major disaster who have lost their homes and are in the process of buying another home. This program helps victims in Presidentially Designated Major Disaster Areas (PDMDA) recover by making it easier for them to purchase a new home to occupy if their existing home is affected by the disaster. The new mortgage may be used to finance the purchase of a one-family home that will be the principal residence of the applicant. The applicant is eligible for 100%financing, therefore, no down payment is required. Closing costs and prepaid expenses must be paid by the applicant through premium pricing, or by the seller (subject to a 6% limitation on seller concessions).
