FHA Streamline--K Loan
With the mortgage market constantly changing to meet the current needs of borrowers, this is a relatively new product. The Streamline-K loan is a loan for buying a home that needs immediate remodeling or repairs.
Many buyers would pass on these types of homes before because they either didn't have the money to remodel or they would have had to do two separate loans. They also had the option of the FHA 203-K loan, which was complicated and required an enormous amount of paperwork and technical specialists.
The Streamline-K loan was created to simplify the process and give you one loan that can be a fixed rate or a variable rate loan. You can do up to $35,000 of repairs or remodeling, but their are some exclusions.
The best part is a home inspector or an appraiser can list the repairs or improvements for the property. And you can do the work yourself as long as it is done in a professional manner.
Some of the improvements allowed with this loan are minor kitchen and bath remodels, improvements for handicapped access and basement completion and waterproofing, just to name a few. If your requested amount is under $15,000, the lender won't even be required to inspect the finished work.
Normally, this loan can help a buyer get into a much larger home or better location than they would have been able to with a home in pristine condition. Plus, they get to fix it up the way they want to.
FHA loans are full documentation loans, but are not credit score driven. This means if a buyer has a good job history but his credit has some blemishes he should still try to apply for this loan.
A Construction Loan
Most people don't even think of using construction loans for remodeling. They think of construction loans for new construction.
However, if you find a home that needs major remodeling, or live in one, the construction loan is an excellent loan for the job. Some construction loans will even make the payments on the home while the remodeling is being done.
With this type of loan you can even put on an addition, add a pool or construct a tennis court. The value base to write the loan will be the value calculated when the remodel is completed, not the present value.
Depending on your ownership situation you can go up to 100 percent of the loan to cost ratio. There are full documentation loans and stated income loans for the self-employed.
A stated income loan will probably carry a slightly higher interest rate depending on your credit score. This is a great loan for the major rehab of you existing home, especially for the growing family who loves their location.
Equity Loan or Line of Credit
The home equity loan or line of credit is based on the current value of your home, minus you current mortgage. Depending on your credit score and economics, you can apply for 75 percent to 125 percent of the value of your home.
For example: You own a home worth $200,000 and owe $100,000 on your current mortgage. You have $100,000 in equity.
You can apply for an equity loan or line from $50,000 to $150,000. When economic times are not good for the real estate market though, the lenders usually won't lend more than 80 percent of the value.
This money can be used to remodel any part of your home or put on an addition. It can even be used for landscaping.
Most times a home owner can use the equity loan for anything he wants, but there are specific remodel loans where the value of the improvements are adding into the value when applying for the loan. In this case you would take the loan out in draws to pay for materials and/or contractors.
You can apply for equity loans at almost any bank or lending institution and they are almost all variable rate loans. This is a great loan if you have very good credit as most times the interest rates are pretty low.
However, if you already have a first mortgage, you will end up with two separate payments.