Planning Your Next Home Improvement? Here Are 3 Financing Options That Can Help You Drive Down Costs
With the housing shortage still underway, 61 percent of American homeowners are gearing up to renovate the homes they have instead of moving, according to iPropertyManagement. Some see this as a necessary evil, while others were planning to fix up their home anyway. Whichever camp you belong to, you can certainly benefit from money-saving financing options to cover the costs of a potentially pricey remodel.
The Energy Efficient Mortgage program
Looking to go greener? The Energy Efficient Mortgage program lets you borrow a larger amount if you decide to add energy-saving features to your home. These benefits also extend your loan limits, and your down payment doesn’t increase no matter the amount you borrow. To obtain an EEM benefit, you would have to get a home energy rater to assess your home and the improvements you’re planning. They will then verify for lenders that your home will be more energy efficient once these features are applied.
FHA Title 1 home improvement loan
For many homeowners, this is the go-to home improvement financing option because you can borrow up to $7,500 without having to secure it against your property. The loan is government-insured, so the lender can afford to be more lax with the borrowing terms. You also don’t need home equity to apply for a loan. Owners of a single family home can borrow as much as $25,000, paid over the course of 20 years. One thing to note, however, is that your improvements must not fall under what the FHA considers to be a luxury. Also, you will still have to apply with different credit unions or banks, so variables such as interest rates are going to vary. Hence, you’re best advised to make use of tools such as a home loan calculator to ensure you won’t be in the red at any point in the payment period.
Freddie Mac’s CHOICERenovation Loan
Although federally backed, Freddie Mac mortgages are conventional loans, meaning that they are not government-insured. The main appeal of this option is its low down payments, going as low as 3 percent of the full amount of the loan. This financing option was conceived in an effort to strengthen homes against natural disasters, but it is also open to people who want to develop an investment property or to refresh a second home. The CHOICERenovation loan is a lot more lenient with what you can borrow the money for. So, it’s a great alternative to the FHA’s Title 1 if you’re looking to redecorate or otherwise make improvements that can be considered luxuries. Freddie Mac also offer their own borrowing limit bumps for those who want to add energy efficiency features, similar to EEMs.
Considering that the minimum cost for most home improvements can reach up to $10,000, you’re going to appreciate all the discounts you can get from any of these financing options. With some careful consideration, you can save a lot of cash and have the home of your dreams.