….to almost every VA Buyer I know – you find a home in the perfect neighborhood. A home, in the perfect school district. Finally, a home you can afford! But then you are told you cannot buy that home because it will not qualify for VA financing. If only, you could buy the home and roll the cost to remodel into the mortgage. This is a fair question; a commonly asked question which is always snuffed out by Lenders. The VA Renovation loan – often called the ‘Unicorn Loan’ because most believe it does not exist. But – It Does Exist!
Distressed Property Solutions for VA Buyers
In today’s market there are new and varied means of financing distressed properties – of which many consumers are unaware. As a knowledgeable REALTOR®, both Toni Hedstrom and Selena Stamm are able to identify various types of distressed properties and understand the specific programs that are available to help with the purchase of distressed real estate while allowing for the renovations that will make the property habitable. Hedstrom & Stamm understand how to make virtually any property, regardless of condition, available for financing – FHA, VA and/or Conventional financing. Their understanding of available programs allows more buyers to purchase homes that might previously been out of reach due to lack of adequate financing that includes the necessary repairs, inspections, contractor bids, appraisals, etc.
These financing options are crucial in a market where Sellers are unwilling to commit funds for repairs, where there is an overwhelming percentage of “As-Is” listings in inventory, or where Sellers are unable to make repairs prior to closing. Buyers are also more demanding and desirous for upgrades and energy features available but not readily present in the current inventory at affordable prices.
With these ‘Distressed Property Solutions’ a Buyer has the ability to find a not so perfect home in a perfect location or school district and make it their ‘Dream Home’. The process enables Buyers to buy a stripped foreclosure – take advantage of an ‘As-Is’ market – and, instantly improve their quality of life. And yes, even VA Buyers!
What You’ve Been Told and What is Actual Truth
Buyers in the market, especially those using government loans, are often told a home “does not qualify for financing” or is a “cash only sale”. This is almost always a result of the home’s current condition. So, what if a Buyer could purchase the home and roll the cost to renovate into the mortgage?
What if you could utilize a renovation loan for even minor decorative repairs such as removing ‘popcorn’ ceilings? Or, to increase the energy efficiency of a home by replacing its windows and doors? How about reducing insurance costs by replacing the roof?
The truth about renovation loans are: There is only one loan, there is no ‘floating rate’, repairs are completed after closing, there is only ONE closing, there is only ONE appraisal, a consumer needs only ONE contractor bid. The typical timeframe for closing is 45-days and some programs allow several months of mortgage payments to be deferred while renovations take place.
Renovation Lending Solutions
Conventional Loans /Fannie Mae Homestyle Renovation Loan: this is the only renovation loan that allows for items defined as ‘luxury items’ to be included in the loan such as pool, garages, boat slips, etc.
FHA 203k Streamline and VA Renovation Loans: repairs allowed for roofs; gutters and downspouts; HVAC systems; Exterior wall residing; window and door replacements; painting exterior/interior; wood rot repair; plumbing and electrical systems; flooring; minor remodeling (i.e. kitchens and baths). Also, new appliances, weatherization, exterior decks and patios, and improvements for handicap accessibility. These loans have a maximum remodeling cap of 35k but the loan will finance up to 110% of the home’s improved value. There is no minimum for the remodel amount which allows a buyer to do even the slightest repair such as replace the flooring or paint the interior.
FHA 203K Standard: This loan carries a minimum remodeling budget of 5k. A HUD Consultant write-up is required **(a service that should be utilized even when not required)**
A consultation with a renovation specialist will offer a better understanding of these programs. This brief provides an overview, but there are additional features available on these loan types. Furthermore, a specific Renovation Pre-Qualification Letter must be obtained prior to submission of an offer to purchase using a renovation loan.
Having a renovation loan specialist is crucial to this process. Their understanding of the program and ability to guide the Buyer Agent and Listing Agent through the process are imperative. The purchase offer requires specific verbiage and each renovation loan has specific requirements for the consultation and bid process, all of which are made easy when using a renovation loan specialist. These qualified lenders assist with contractor validation – checking references, insured status, licenses, etc. The renovation loan specialist consults the contractor in regard to timeline on start and completion of the project, the draw process, submission of permits and paperwork, and confirms the contractor’s ability to financially take on the project with proper lines of credit.
Time for Closing
Once the consumer is satisfied with the bid, the appraisal is ordered with the scope of the work provided by the contractor for a “Subject To” valuation by an Appraiser. Once the appraisal order is received, it is reviewed for any additional work required by the appraiser. If necessary, the contractor’s scope of work will be modified to include the additional repairs. The loan will then close and the renovation will begin.
Hedstrom & Stamm Home Solutions, LLC invites you to schedule a consultation today. The team will coordinate with a local iMortgage Renovation Loan Specialist to lay out a game plan for your renovation purchase journey. We can help you find a home that may not be perfect and MAKE IT PERFECT with creative financing.