REALTOR® Magazine-Daily News-Loan Assistance for Buyer Renovations

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Daily Real Estate News | January 30, 2007 | Loan Assistance for Buyer Renovations
Lenders offer increasingly attractive loan options for buyers who want to remodel a property before they move in.

Renovation loans cover the cost of the remodeling with the total loan reflecting the predicted value of the home after the work has been completed. Wells Fargo, for instance, offers three types of renovation loans. The most popular requires a down payment of 5 percent.

Lenders generally require borrowers to submit architectural drawings of the proposed renovations. The value of the completed home is then based on those plans. Interest rates on renovation loans are slightly higher than they are on standard 30-year fixed mortgages. Lenders generally break payments into six parts during construction and require borrowers to demonstrate completion of the previous stage before they issue a check for the next.

Some lenders fold the first six months of interest into the overall loan amount, freeing borrowers from payments during the construction period. That allows many buyers to live elsewhere during the renovation.

Source: The New York Times, Bob Tedeschi (01/28/07)