How Do You Get a Home Loan for a Fixer-Upper?

Purchasing a home of their own is a dream for many people. But the high price of property often means that it can take a long time and a lot of saving to own a home. To save money, many prospective buyers decide to look for a property that needs some TLC. But getting a home loan for a fixer-upper has some nuances to keep in mind.

Securing a mortgage for a fixer-upper is a great way to get into a property that you can afford. Buying a home that needs a little attention is also the perfect way to make the home uniquely yours as you do updates, upgrades, and renovations.

For any home loan needs, the expert team at TwinCity Lending is here to help. Our concierge service ensures you get the best rates, service, and closing process.

Why Choose A Fixer-Upper?

Choosing a house that requires work can seem daunting, but it can also offer a host of benefits:

  • A Lower Price – If you have your heart set on a particular location, but the prices are out of your range, then a fixer-upper could be the perfect solution. Due to their less-than-perfect state, they often carry prices below market rate. The lower price point makes them a fantastic option. You could find yourself living in your dream location for a fraction of the cost.
  • An Older Home – In general, fixer-uppers tend to be older properties. This is perfect if you are looking for a space that is bursting with character and original items. Rather than designing a house that looks like all of its neighbors, you can restore the period features such as windows, cornices, and super-high ceilings. It is exciting to bring charm and majesty back to a faded beauty.
  • A Chance to Make It Your Own One of the significant appeals of a fixer-upper is the opportunity to put your spin on a property, and make it feel like your home. This chance is particularly exciting if you are planning to stay for the long term. You can design your perfect dream home right from the outset.  

What Are Your Options?

When deciding how to get a home loan for a fixer-upper, many buyers opt for a renovation loan. This type of loan package is beneficial when you want to buy a property that needs some work. It allows you to finance the purchase of the home, as well as the essential improvements required into one loan. You only have one monthly payment to cover the mortgage and renovations.

This streamlined home loan package is an ideal way to get started on homeownership without a considerable outlay of cash.  Some of the most popular renovation loan options include:

  • FHA 203(k): This choice comes through the Federal Housing Association and is accessible to those with a lower income and credit score. The FHA 204(k) is suitable for most home improvement projects. You can use the funds to carry out both structural and cosmetic renovations. Even better, work can begin as soon as you close.                                                                                                                                               

It is important to note that these loans are only suitable for primary residences. You will not be able to submit an application for renovations on a rental property or second home. There are also limitations on what you can do with the funds. Luxuries such as a pool or extreme landscaping do not qualify for using the loan money.

There are two types of 203(k) loans: limited and standard. The limited version is available to use for any renovations up to $35,000, as long as they don’t require major structural work.                                                                                                   

The standard option covers projects with budgets over $25,000 or where significant structural improvements are necessary. For this route, you must work with a HUD consultant. They will help the homeowner analyze bids and oversee all inspections.

  • VA Renovation loan: The loans offered by the Department of Veterans Affairs went through a recent update. Now they are eligible for use in the purchase and renovation of a home. Note that for this type of loan, you will need a VA-approved contractor, and there may be a construction fee attached to the loan.
  • Fannie Mae HomeStyle: A HomeStyle loan requires a higher credit score than the FHA 203(k) loans. But almost any home improvement is eligible, including landscaping or even installing a pool. With Fannie Mae backing, this loan is a popular choice if you are planning a total luxury overhaul of a property.
  • CHOICERenovation Loan: Guaranteed by Freddie Mac, this option carries a lot of benefits. It is ideal for those seeking a lower-cost home to purchase since it has a low down-payment requirement. Borrowers can even earn a down payment by making repairs themselves before closing.                                                                                     

A renovation loan is a perfect way to ensure that you can meet all your financial obligations while still working on developing and building your dream home.

How Do I Get Started On a Home Loan for a Fixer-Upper?

If you decide to head down this route, the first step is to talk with your lender. It is best to work with a mortgage broker rather than a loan officer who works with only one institution. The broker will be able to offer you more options for your financing needs. They will walk you through your options and help you determine the best loan for your needs. 

Once you have a plan with your lender, it’s time to go house hunting. Be sure you have an experienced real estate agent who can help you through this process. And unless you plan to do the work yourself, it’s a good idea to have a contractor available to give you some advice and input as well. 

When you are in contract on a property, you will likely need to obtain estimates for the work to be done. Sometimes this information is necessary to close the transaction. 

TwinCity for All Your Lending Needs

No matter what stage of home buying you are in, the friendly staff at TwinCity Lending is here for you. We can help you navigate FHA and VA loans, as well as home equity and jumbo loan packages. Reach out today to get started.

 

What Is a VA Home Loan Certificate of Eligibility?

United States Veterans

When it comes to home loans, the VA program is one of the most popular programs on the market. And rightly so, in our opinion here at TwinCity Lending. But many veterans aren’t sure how to start the process of securing a VA mortgage. It may feel overwhelming to get started, but the first step is to obtain your VA home loan certificate of eligibility.

This vital document also called a COE, is where your VA lending process begins. The VA loan eligibility letter tells the lender that you can receive home loan funding through this unique program.

The team at TwinCity Lending is proud to serve our nation’s active and veteran military members. It is an honor to help you secure a home loan so that you can enjoy the many benefits of the American Dream.

What Is a VA Home Loan?

Before getting too far into your eligibility journey, let’s clarify what a VA home loan is and how it works. This program has been vital in the stability of our nation.

VA Home Loan

The United States Department of Veterans Affairs oversees the VA home loan program. Passed in 1944 as part of the Servicemen’s Readjustment Act, the VA home loan provides backing for mortgages for those who serve in the military.

The Department of Veterans Affairs does not extend the loan for a home purchase. Instead, it guarantees the loan so that a lender has less risk in making it. Many service people leave the military without a credit history. And obviously, someone who is actively serving or recently discharged doesn’t have a traditional job history either.

With traditional home loans, these two factors would be stumbling blocks. Lenders would see this sort of borrower as too big of a risk. The VA-backed loan, however, provides partial repayment of the mortgage if the borrower cannot pay. This minimizes the risk that a lender must take.

In addition to backing the loan, the VA program also offers:

  • Low or zero-down payment requirements
  • Lower credit score requirements
  • More lenient income requirements

Those who qualify can use the VA home loan option to purchase a condo, mobile home, or single-family dwelling for their primary residence. It also allows borrowers to secure a loan to build or refinance their primary residence. It is not available to use for second homes or investment properties.

A home loan through the VA provides an incredible opportunity for military members and their families. It is a well-earned benefit for their service.

How Do I Get a VA Home Loan Certificate of Eligibility?

To secure your crucial COE, you will have to verify that you are eligible for the loan. There are specific requirements based on when you served, whether it was during war or peace, and how long you served. The reason for your separation from the military is also a factor.

Once you know that you are eligible for the program, you need to obtain the VA loan eligibility letter. To secure your certificate of eligibility, you can apply online through the Department of Veterans Affairs website. You can also apply by mail, although this takes more time.

As soon as your document arrives, you are ready to work with a lender to secure a home loan. The COE will work for any lender who offers VA mortgage options. Take the time to choose a lender you trust and who will answer all your questions. Many veterans opt to work with a mortgage broker such as TwinCity Lending to receive the best service, selection, and interest rates.

What Is the Process for Getting a VA Home Loan?

Military Family

When you have your COE in hand, obtaining your home loan will look much like it does for anyone else. Once you have chosen a lender or broker, the process is generally quite simple. It typically breaks down into five steps.

1. Get a Pre-approval Letter from Your Lender

Whoever you choose to work with for your VA home loan will generate a letter of pre-approval. This letter tells you and your real estate agent how much you can spend on a home. Once you are ready to make an offer on a property, this letter is crucial. It shows the seller that you are prepared to move forward right away. Buyers without this letter have a harder time entering into a contract.

2. Find Your Perfect Home

Work with an experienced realtor to find the right house for you and your family. Unless you have a critical time frame to work within, you don’t need to rush. Buying a home is one of the most significant investments you will make, so go ahead and take the time you need. 

3. Enter into Contract on a Property

Your real estate agent will help you make an offer once you find the home you want. If the seller accepts, then you are under contract to buy the house. Congratulations! This step is when your VA home loan lender will kick into high gear. There will be an appraisal and inspection, and you will likely need to provide more documentation to the lender. 

4. Close the Transaction

At TwinCity Lending, once we have all your documents, we typically can close on your home loan within two weeks. Assuming nothing significant shows up in the inspection and appraisal process, this is a relatively speedy part of buying a home. When you and the seller have signed everything, the paperwork will go into the county records. At that point, you will have the keys to your new home.

5. Move into Your New Home

VA Home Loan for Military

Now it’s time to enjoy this well-deserved reward of homeownership. You served with bravery and honor, and now you can cherish a home of your own. Thank you for your service.

Connect with a Premier Mortgage Broker

TwinCity Lending offers personalized concierge service to all of our clients. And it is an honor to serve those who have served our nation.

Reach out today with any questions about the VA home loan process. Our expert team will help you on your road to buying your very own home.