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Thinking of Remodeling or Home Renovations in 2012?

Thinking of Remodeling or Home Renovations in 2012?
April 1, 2013 wpengine

A Look At Financing Options to Make This Dream a Reality:
By: Fred Arnold

Last summer we discussed the many benefits of making aesthetic upgrades to your home. Not only can you increase the value of your home over time through updating your kitchen, or having a pool installed, but most importantly you get to enjoy these added amenities and upgrades while you’re living in your home. What better time to welcome a brand new addition to your home than the New Year?

Of course, any sort of new construction or remodel will require money. The upside to this however, is that due to the slow economy, the cost of labor has gone down, and contractors and builders are eager to compete for your business. This is particularly true of the early months of the year when construction typically slows, even here in sunny California.

There are several places you can turn when you need a loan for construction on your home. One viable but vastly underused loan is known as the Streamline Rehabilitation Program, aka Streamline 203(k). With this loan you can refinance your home or even purchase a new home while taking out up to $35K for repairs.

The Streamline 203(k) is available as long as you do not have a loan through Fannie Mae or Freddie Mac. It is a particularly good program for homeowners with loan of more than $417K, but less than $625K. With the Streamline 203(k), you can refinance over 100% of your home’s value in order to make home repairs and improvements that are necessary. Another added benefit of utilizing this program, is that it will require that you have very little equity in the home.

The Streamline 203(k) won’t be a good fit for everyone, so you’ll definitely want to call your local, trusted mortgage professional. They will gladly shop lenders for you, for either a cash-out refinance or a Home Equity Line of Credit. Home Equity Lines of Credit are available both through traditional banks, and through credit unions. Home Equity Lines will generally be offered at the going Prime Rate, and you will need to use some of your own money to finance the renovations and upgrades.

You may also consider looking into lenders that your business does their banking with. Banks are willing to loan money, but they need to feel like they know you, so applying for a loan at a bank that your company or employer does their banking with, will give you an extra leg up in terms of the approval process.

Finally, another option, though it will likely come with a higher interest rate will be through private money. Private money will come from a smaller lender, and thus will typically carry a higher interest rate (8-9%). If you’re unsure of where to look for a private money loan, check with your builder or contractor. They will often have terrific contacts they’ve worked with in the past that they can refer you to.

If you’re ready to take the next step in upgrading or adding onto your home in the New Year, there are great options available to help with the financing aspect of new construction. As always though, call your mortgage professional first, as they can certainly save you a great deal of time in determining which lender is best for you.

Fred Arnold is a Certified Mortgage Consultant, Past President of the California Association of Mortgage Professionals, and mortgage professional at American Family Funding in Southern California. Fred hosts the radio show The Santa Clarita Business Hour on AM 1220 KHB, as well as the televised program Out of The Rough on SCVTV.com, channel 20.

He can be reached at Fred@fredarnold.com or via phone at 661 284-1150 x 109.