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What's the HomeStyle Renovation Loan?

Before and After pic of home remodeling projectHave you found a neighborhood where you'd like to live but the only house for sale is a fixer-upper? Unsure what to do? You could: 

 

  1. Buy the house and make improvements a little bit at a time, as your budget and time allow, which unfortunately can take YEARS.
  2. Take a pass and keep looking. Who knows, maybe you'll find another great neighborhood just like this one.
  3. Buy the house with a HomeStyle Renovation Loan and get the funds you need to finance the mortgage and cover the costs of repairs or renovation.

The challenge with buying and making improvements a little at a time means you're living in a substandard home for years (popcorn ceilings, wood paneling, bathroom carpet). It also means you can't do the work until you've saved the money, further delaying your project. Or, if you choose to charge it on a high-interest credit card, in addition to your monthly mortgage payment, you've got to pay the credit card bill as well. Not too appealing, is it?

 

You could choose to keep looking. Who knows, maybe you'll find another really nice neighborhood with tree-lined streets, an excellent school district, and a coffee shop within walking distance. You just never can tell.

 

Or you could snatch up the house at below-market value and get the funds you need to buy the home and cover the costs of repairing it or renovating it with a HomeStyle Renovation Loan. The beauty of this type of mortgage is that you can bundle the costs of buying a home with the expense of remodeling it and make a single monthly mortgage payment. This eliminates the need for a second mortgage, home equity line of credit or other, most costly methods of financing. The loan amount you receive is based upon the estimated value of your home AFTER renovations are made (up to 75% of the "as completed" home value). There are no required improvements or restrictions on the types of repairs allowed or a minimum dollar amount for the repairs. Repairs or improvements, however, must be permanently affixed to the real property and add value to the property.

 

 

How it works:

 

ONE. Find a home.

TWO. Choose a contractor.

THREE. Get a bid for the work.

FOUR. Get an appraisal based on future value once renovations are complete.

FIVE. Close the loan and start remodeling.

young couples at dinner in backyardHighlights:

 

Properties financed with a HomeStyle mortgage can be a one- to four-unit primary residence, a one-unit second home, a one-unit investment property, a manufactured home or a unit in an eligible planned unit development (PUD), condo or co-op project.

  • Buy and remodel or refinance your current mortgage and remodel
  • 5% minimum down payment for primary, single-family residences* (10% for second homes)
  • You can use gift funds for down payment and closing costs for owner occupied, primary residences after you contribute a minimum 3% down payment
  • 3% seller contribution allowed
  • Cosmetic and structural renovations allowed
  • Allowable improvements can include landscaping, appliances, swimming pools and more

Work you can do:

  • Kitchen/bath renovations
  • New appliances
  • Room additions
  • Swimming pool and spa
  • Landscaping
  • New flooring, painting
  • Basement remodel
  • New roof
  • Structural changes and more!

The HomeStyle is a conventional home loan which means you'll need to meet the basic credit and income requirements to qualify (good credit score and lower debt-to-income ratio) for the traditional mortgage. And while it lets you finance primary, vacation and rental properties, if you put less than 20% down you'll be required to pay private mortgage insurance. If you're looking for a renovation loan with more flexible lending requirements, check out our 203(k) renovation loan. Or compare the 203(k) to the HomeStyle Loan to find the one that best fits your needs.

 

With the HomeStyle loan you can add an extra bedroom, remodel the bath or take down a dining room wall. To help you get started, we've put together this handy ebook that can answer all of your questions about buying a home with a renovation loan. It's yours, free!

 

Our Ultimate Guide  to Renovation Loans

 

*A 5% down payment will require approval from Amerifirst Financial Corp. management. Down payment and other figures shown are for informational purposes only and are not intended as an advertisement or commitment to lend. Not all borrowers will qualify; contact us for a specific quote and more information on fees and terms.

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5 Reasons Not to Skip Your Home Inspection

You found a house you love—hooray! But with lots of other buyers breathing down your neck, you feel like you need to act fast. To make your offer more attractive to the seller, you might be tempted to skip your home inspection, but here are five good reasons not to! 1.) Not all problems are obvious. It’s easy to spot issues like a crack in the sink or a broken light fixture. But do you know how to recognize foundation problems, termite infestations, outdated wiring, or sewer system problems? Trained home inspectors do and taking the time to have them go over the entire property before you sign the papers can prevent you from buying a headache instead of a home. BOTTOM LINE: The great thing about an inspection is that if you see major problems you’re unwilling to take on, you can change your mind and walk away. 2.) You may not be able to afford the repairs. If you’re like many new homeowners, you may not have much set aside to pay for needed repairs after saving up for your down payment and closing costs. While you may not mind waiting a bit to repaint or update appliances, waiting on problems like leaky roofs, broken plumbing, or infestations will only make them worse, and some issues, like broken furnaces, may need to be repaired right away. BOTTON LINE: You don’t want to go deep into debt to keep your home safe and comfortable. Instead, it’s worth negotiating with the seller to pay for repairs. If they refuse, you can simply walk away. 3. Some problems can make it harder to insure the home. Getting home insurance is essential because lenders need to see an insurance policy before you can close on your home—and of course, you’ll want to have your home protected in case anything goes wrong. However, some companies may decide that your home’s older electrical systems, plumbing, or building materials make it too risky to insure. BOTTON LINE: If essential updates are needed, the only choices are to ask the seller to pay for them, pay for them yourself if you can afford it, or walk away from the deal. 4. Serious issues can affect the resale value of the home. Your home is probably the biggest investment you will ever make. However, if it has major problems, instead of building your wealth, it could turn into a lousy investment that threatens your financial well-being. BOTTON LINE: While a home inspection typically costs a few hundred dollars, it’s an excellent investment in your peace of mind and financial health. 5. Some problems can threaten your family’s health or even your life. This sounds scary, but it’s no exaggeration. Issues like lead paint, black mold, radon (an odorless radioactive gas), or carbon monoxide leaks can cause serious and sometimes fatal health problems. BOTTON LINE: These issues are also easy to miss without a professional home inspection, and it’s simply not worth taking the risk. While it’s not easy to compete with other buyers who are bidding for the house you want, home inspections are one area where you don’t want to cut corners. To protect your physical, financial, and mental health, there’s no substitute for a professional home inspection.

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  If apartment living is getting old, or you've outgrown your parents' basement and house rules, you may be thinking about buying your own place. For this reason, you may be interested in learning about home loans that offer low and no-down payment options and have flexible lending requirements. One of these is the FHA loan. Let's take a closer look. 

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