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These are the best renovation mortgage programs in Georgia

home renovation loans

If you are looking to renovate your home in Georgia, you’ll want to read this post all the way through!

Realizing the full potential of your home often goes hand in hand with significant renovations. Obviously, rehabbing a home can be quite expensive and can require a considerable amount of funding.

But what if I told you there was a way to dive headfirst into those dream projects of yours without needing a ton of money out of your own pocket?

Thanks to home renovation loans, they provide a pathway to amplify your living space, boost your property’s value, and add those personal touches to turn a house into a home.

In this post, we’ll discuss the top renovation mortgage programs available in Georgia that can help you turn your home into your dream space.

What is a Renovation Mortgage or Rehab Loan?

First things first, let’s define what a renovation mortgage program actually is.

A renovation mortgage program, also known as a rehab loan, is a loan specifically designed for both homebuyers or homeowners who want to renovate, repair, or remodel a property.

The difference between a renovation mortgage and a traditional home loan is that the funds from a renovation mortgage are specifically designated for home improvement projects.

Unlike a personal loan or a second mortgage, a renovation mortgage wraps both the loan to cover the property and additional money to fund the projects you are looking to do.

Let’s take a look at some of the top renovation mortgage programs in Georgia.

FHA 203(k) Loan

The Federal Housing Administration (FHA) offers a 203(k) loan program through participating lenders and brokers that allows homebuyers or homeowners to finance both the purchase or refinance of a home and the cost of its renovation into a single loan.

By allowing the combination of the purchase price or existing home value with the estimated cost of renovations into one loan, the FHA 203(k) loan simplifies the financing process for renovations. This makes it an ideal option for buyers interested in purchasing fixer-uppers or homeowners wishing to upgrade their current residence.

The maximum loan amount for an FHA 203(k) loan in Georgia is $498,257 for low-cost areas, but in Metro-Atlanta, it is as high as $649,750. This loan option is great for those looking to make larger renovations and upgrades.

For example, with an FHA 203(k) loan, a buyer can purchase a fixer-upper home that needs $50,000 for renovations. If the price of the property is $200,000, you could take out an FHA 203(k) mortgage for $241,250 after putting a 3.5% down payment.

FHA 203(k) Limited and the FHA 203(k) Standard Loan

The FHA 203(k) loan program is divided into two primary types: the FHA 203(k) Limited Loan and the FHA 203(k) Standard Loan.

The FHA 203(k) Limited Loan is designed for minor renovations and repairs, which do not require extensive work, such as structural alterations. It allows for a maximum of $35,000 in repairs and is ideal for projects like roof repair, HVAC replacement, kitchen, bathroom updates or even purchase appliances.

On the other hand, the FHA 203(k) Standard Loan is tailored for more significant renovations that involve structural changes, such as room additions or reconstruction that necessitate architectural drawings and inspections.

This version has no maximum repair limit as long as the total loan amount stays within the FHA mortgage limits for the area, and it includes a minimum repair cost of $5,000.

Both loan types enable borrowers to finance the purchase price of the home along with the cost of repairs into a single mortgage, offering a streamlined solution to finance home improvements for both minor updates and major renovations.

The Conventional Rehab Loan - Fannie Mae HomeStyle Renovation Mortgage

In Georgia, Fannie Mae offers the HomeStyle Renovation Mortgage, which is a type of conventional loan, to help homebuyers or homeowners finance the purchase or refinance of a home and its renovation costs.

Similar to the FHA 203(k) loan program, the HomeStyle Renovation Mortgage allows borrowers to combine the estimated cost of repairs into one mortgage.

However, unlike the FHA 203(k) loan, this loan option requires a minimum down payment of 3% for first-time homebuyers or 5% down for repeat buyers, and there is no upfront mortgage insurance premium. Additionally, it has a higher maximum loan amount of $766,550 for a single-family home in Georgia. This loan is also eligible for investment properties where the homebuyer is putting a minimum of 20% down or the existing homeowner has at least 20% equity.

The HomeStyle Renovation Mortgage offers two types of loans: the standard HomeStyle loan for major renovations and the HomeStyle Energy loan for energy-efficient improvements.

Standard HomeStyle Loan vs HomeStyle Energy Loan

The standard HomeStyle Renovation loan is designed for buyers and homeowners looking to finance both the purchase (or refinance) of a home and the cost of its renovation into a single loan.

This loan is versatile, covering major renovations and repairs such as structural alterations, additions such as a pool, and full-scale remodeling, making it an ideal choice for properties that require significant work to meet the borrower’s needs or preferences.

On the other hand, the HomeStyle Energy Loan is specifically tailored for making energy-efficient upgrades.

It offers borrowers the opportunity to finance energy-saving improvements such as solar panels, wind turbines, geothermal systems, and new insulation, directly addressing the growing demand for sustainable and energy-efficient living solutions.

Both loans provide a convenient and cost-effective way to finance home improvements, with the HomeStyle Renovation loan focusing on comprehensive renovations and the HomeStyle Energy loan emphasizing eco-friendly upgrades, each aiming to enhance the value and comfort of homes.

VA Renovation Loan

If you are a veteran in looking to rehab your existing Georgia home, you may qualify for the VA Renovation Loan, which combines the cost of purchasing or refinancing a home with renovation expenses into one loan.

This loan is available to both active-duty military members and veterans with at least 181 days of service. With this loan option, borrowers can make minor or major repairs and improvements to their homes while taking advantage of the benefits and protections of a VA loan. Currently, the maximum amount of rehab funds allowed for this loan in Georgia is $50,000.

Some of the typical renovation projects that can be financed through the VA Renovation Loan include replacing or upgrading HVAC systems, kitchen remodels, bathroom renovations, and new flooring.

This loan offers a streamlined process by allowing borrowers to work with a single lender and eliminate the need for multiple loans or high-interest credit cards. Additionally, it may offer more competitive interest rates, no cash out of pocket except for appraisals and no mortgage insurance.

Georgia Cash Out Refinance for Home Improvements

In addition to the above specialized renovation loans, homeowners in Georgia can also consider a cash out refinance as an option for financing home improvements.

A cash-out refinance allows borrowers to take out a new mortgage loan that is greater than their existing one and receive the difference in cash. This option is beneficial for those who have equity in their homes and want to use it to finance home improvements.

A cash out refinance for home improvements gives you flexibility to use the funds for any project you desire, whether it’s a minor update or a major renovation. Also, you won’t be tied to using a specific contractor, and you can do the repairs yourself.

The downside of a cash out refinance is that you are limited to 80% loan-to-value as the maximum loan amount you can take. Therefore, you must have a substantial amount of equity in your home to take out a significant loan for renovations.

Home Equity Line of Credit (HELOC) for Home Improvements

A Home Equity Line of Credit (HELOC) is another option for homeowners in Georgia looking to finance home improvements.

This revolving line of credit allows borrowers to tap into their home’s equity and use the funds whenever necessary, making it ideal for home improvement projects that may require ongoing funds over time.

The interest rates on HELOCs are typically lower than those of credit cards, and borrowers have the flexibility to use only what they need and repay it over time. However, there is a risk of variable interest rates that may increase over time, making it vital for borrowers to carefully consider their ability to repay the loan.

Like a cash-out refinance, you must have a significant amount of equity in your home to be eligible for a HELOC. Additionally, HELOCs have stringent requirements than a home renovation loan or a cash out refinance.

Benefits for Georgia Homebuyers to Have Access to These Rehab Loans

For the aspiring homeowner looking at a fixer-upper, or the one who found the perfect location but not the perfect house, renovation mortgage programs offer a compelling value proposition.

If you are a homebuyer in Georgia, these are some of the reasons to consider a rehab loan:

Access to Affordable Financing

With interest rates that can be competitive with traditional mortgage rates, these programs make accessing large sums of money for renovation projects significantly more affordable than high-interest credit cards or unsecured personal loans.

Purchasing Power of Fixer-Upper Properties

You’re not limited to what’s ‘move-in ready’ or a cookie-cutter new construction home from a builder. Homes that are typically shunned due to their condition and appraisal values can now be reconsidered, providing an opportunity for savvy buyers to score a deal and customize a living space to their exact liking.

Amplifying Buying Power

Renovation mortgage programs can increase the amount of money you’re qualified to borrow, allowing you to consider a wider range of properties and ensure that your dream home doesn’t remain just a dream.

You love your home but it’s starting to show some wear-and-tear or you simply want to make it better or maybe, you are considering selling it soon. No matter the reason, home improvements become a strategic financial move rather than a financial burden.

Financing Fit for Improvements

Whether it’s a kitchen remodel or a new roof, these programs offer financing specifically for home improvement, allowing homeowners to tackle larger projects and often sustainably enhance energy efficiency or home functionality.

Property Value Proposition

It’s no secret—renovations can significantly boost the value of your home. Investing in your property through a renovation mortgage program can lead to a substantial return on investment, making your home a more lucrative asset.

A More Pleasurable Living Experience

Beyond the financials, improved living spaces foster a better quality of life. Personalized renovations can increase the comfort and functionality of your home, enhancing your living experience day to day.

Case Studies

To see the tangible benefits of these programs, we need only look at successful case studies. Real-life homes transformed from drab to dazzling, all thanks to the support of a renovation mortgage.

The Smith Family’s Story

With a HomeStyle conventional rehab loan, the Smith family managed to turn a dated 1970s home in Marietta, GA into a trendy, modern space.

The result? A significant boost in their property’s value and a new dream home without the budget nightmares.

The Johnsons loved their school district and area but not so much their home

For the Johnsons, an FHA 203(k) loan was the key to making their “OK” home into what they really wanted from the beginning.

With the FHA 203(k) loan, they were able to obtain a rehab budget of $70,000 for their project. After renovating the kitchen, opening up their living room space, changing their floors throughout and finishing up with the bathrooms, the home became perfect for them.

Expert tips to help you choose a home renovation loan in Georgia

When considering a home renovation loan, there are several important factors to keep in mind:

Type of Renovation Loan 

As mentioned, there are different types of renovation loans available, such as the FHA 203(k) loan, HomeStyle Renovation loan, and VA renovation loan, each with its own requirements and benefits. Choose the one that aligns with your project needs and financial situation.

Loan Requirements and Qualifications

Understand the qualifications for the loan, including credit score, debt-to-income ratio, and equity requirements. Some loans may require the homeowner to occupy the property. The best way here is to talk to an experienced Rehab Loan Officer who can help you navigate this through.

Scope of Project

The scope of your renovation project can affect loan approval. Some loans have restrictions on the types of renovations that can be financed or require the work to be completed by licensed contractors.

Cost Estimates and Budget

Accurate cost estimates are crucial. Lenders often require detailed project plans and quotes from contractors to approve the loan. Ensure your budget includes a contingency for unexpected expenses.

Interest Rates and Fees

Renovation loans may have higher interest rates than standard mortgages due to the perceived higher risk.

Loan Amount and Terms

Consider how much you need to borrow and the loan term. The loan amount typically depends on the after-renovation value of the home. Longer loan terms mean lower monthly payments but more interest over the life of the loan.

Impact on Home Value

Consider how the renovations will impact the value of your home. Ideally, renovations should increase your home’s value or make it more marketable in the future.

Timeline and Contractors

Having a great contractor is key to a successful rehab loan closing

Renovation projects can take longer than expected. Choose reliable contractors and have a clear timeline. Some loans require work to be completed within a certain timeframe. Additionally, due to the scope of work, some loans will require a General Contractor.

Insurance and Permits

 Ensure you have the necessary permits for your renovation project. Some renovations might require you to update your home insurance policy.

By carefully considering these factors, you can select the right home renovation loan for your project and ensure a smooth renovation process.

Conclusion

If you are looking to embark on a home improvement project, a renovation mortgage program could be the way to go.

It’s an opportunity to transform not only your living space but also your approach to home financing, and explore the potential of your property to the maximum. As we’ve explored, these programs don’t just benefit one party but rather offer a network of advantages that extend to buyers, homeowners, and the specialists bringing these projects to life.

We at Andes Mortgage are committed to helping you navigate the renovation mortgage process and make your dream home a reality. With our expertise and personalized service, we can guide you towards the best loan option for your unique needs. Give us a call or set up an one-to-one appointment with our team to learn if a home improvement loan is the right option for you.

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