Fixer-uppers come in all shapes and sizes – and the loans needed to purchase them do too. The right renovation loan will help you pay for the updates needed to transform a fixer-upper into a place you’re happy to call home. While working with a jumbo renovation loan may seem like a daunting prospect, it might be the best way to make your dreams of homeownership a reality.
Working with a Jumbo Renovation Loan: What You Need to Know
Every year, the Federal Housing Finance Agency (FHFA) sets limits for loans. Called conforming loan limits, these figures vary by county, and they are important for both borrowers and lenders. That’s because Freddie Mac and Fannie Mae will buy loans that fall below that limit. Their purchases fuel a secondary mortgage market that provides a source of funds for banks. However, Freddie Mac and Fannie Mae will not purchase, guarantee, or securitize loans that exceed the conforming loan limits. As Investopedia explains, jumbo loans are loans for amounts that are higher than the limits set by the FHFA. Without the safety net of Freddie Mac and Fannie Mae, these larger loans are a riskier prospect for lenders, so they tend to hold borrowers to higher standards before approving a jumbo loan of any kind.
Of course, jumbo renovation loans are a special kind of jumbo loan.
Financing for Fixer-Uppers
What’s a renovation loan? As Business Insider makes clear, this particular form of financing is designed to allow a homebuyer to secure the funds needed to purchase a home as well as the funds needed for renovations in a single loan. Once again, this product is more complex than a traditional home loan, so borrowers who hope to use a renovation loan need to be prepared to hop through extra hoops to win over their lender. In most cases, simply being creditworthy isn’t enough. Borrowers also need to come armed with estimates from approved contractors that detail their renovation plans and show how the proposed improvements will add value to the property.
Renovation loans are popular picks for homebuyers who want to turn fixer-uppers into their ideal homes, and there are several to choose from, including the EZ “C”onventional Repair Escrow, the Fannie Mae HomeStyle Renovation, and the FHA 203(k). Each of these programs has pros and cons, including various restrictions and limits. What happens when you need to think bigger for your renovation loan?
Sizing Up Renovation Loans
Jumbo renovation loans are designed for situations where you need a renovation loan that exceeds the conforming limits. When you’re searching for a jumbo renovation home loan that can cover the cost of the property and its renovations with just one loan, one trip to the closing table, and one monthly payment, PrimeLending is ready to help. Here’s a quick breakdown of the PrimeLending Jumbo Renovation Loan program’s basics:
- Our jumbo renovation loans are 30-year, fixed-rate loans. No adjustable-rate mortgages are offered.
- The maximum amount available for renovations or repairs cannot be greater than the lesser of $250,000 or 30 percent of the completed renovation value.
- Only renovations or repairs that are permanently attached to the property and add to its value are allowed. Examples of acceptable improvements include kitchens, bathrooms, swimming pools, exterior living spaces, and hardscaping.
- Renovations that require the addition of new square footage, are not permanently affixed, or are not a source of added property value are not allowed.
You may be a dreamer who has always fallen in love with a house that is in desperate need of some serious work. You may be a hard-headed pragmatist who is seizing an opportunity to secure a larger home in a desirable neighborhood that would otherwise be out of reach. It could be that the character inherent in an older home appeals to you, that the challenge of a renovation project fascinates you, or that the idea of building equity fast by renovating seems savvy. Whatever the reason, when you’re ready to learn more about working with a jumbo renovation loan, turn to the experts at PrimeLending Twin Cities. We’ll listen carefully to help you find the right path forward and guide you along the way. Contact us today to get started.