It’s not uncommon for homebuyers to select a property that doesn’t perfectly meet all of their specifications. Yet, they may be unsure about obtaining the necessary finances to give the house a makeover. At Champions Mortgage Team, we often answer our clients’ mortgage-related questions, such as “Can you add renovation costs to conventional mortgages?”
You’re not alone if you’re wondering about adding home improvement expenses to your monthly mortgage payments. Consult our guide below to learn more about this process.
How To Include Home Improvement Costs in Mortgage Payments
Can you add renovation costs to conventional mortgages? It’s undoubtedly possible to use a renovation loan for home renovations and property value improvements.
Your mortgage options include the following:
Jumbo Loan Renovation Mortgages
If you want to buy a house that exceeds the conforming loan limit set by the 2022 Federal Housing Finance Agency, it helps to get a conforming jumbo loan or a renovation mortgage. The maximum amount you can use of this loan for renovations is $250,000 or 30% of the total project’s budget.
Fannie Mae HomeStyle®
This conventional loan incorporates renovation expenses into the mortgage. It applies to permanent home upgrades that add value to the property.
Construction Loans
Although construction loans are best for ground-up home construction, they also apply to renovations. You can base the amount you borrow on your home’s future value, which allows you to access more funding.
A downside to using this option for your home improvements is the potential need to refinance in the future. Refinancing can result in higher interest rates, leading to substantial increases in your monthly payments.
Why Attach Renovation Expenses to Your Mortgage
That answer to “Can you add renovation costs to conventional mortgages?” is yes, but when should you take this approach? Combining your renovation expenses and monthly mortgage is ideal if you don’t have equity in your home. You may not yet own the property, or you may have purchased it recently.
This strategy also allows you to make a single payment for multiple loans, helping you avoid additional fees.
Obtain Renovation Financing To Upgrade Your Home Today
Can you add renovation costs to conventional mortgages? You can include the expenses in your mortgage to have a single loan with one payment.
Let Champions Mortgage Team help you explore your mortgage options for your home improvement project. Our knowledgeable staff can also explain the differences between mortgage loans and home loans, as well as answer any questions you may have.
Contact Champions Mortgage Team at (281) 727-2500 to schedule a consultation.
Frequently Asked Questions About Mortgages and Renovation Costs
Learn more about incorporating renovation costs into your monthly mortgage with our answers to common questions.
Do Renovation Loans Have Drawbacks?
A potential drawback of obtaining a renovation loan is the high fees associated with it. Failing to make your loan payments on time can also negatively impact your credit and any collateral you have provided for the loan.
What Kind of Home Improvements Don’t Qualify for Renovation Loan Programs?
You cannot use programs like the HomeStyle Renovation to tear down and reconstruct a house. Installing a home addition or multi-room rehabilitation is allowed.
Can You Add Renovation Costs to Conventional Mortgages for Fixer-Upper Houses?
You can include the cost of renovating a fixer-upper house in your conventional mortgage. The conventional rehab loan is suitable for homebuyers who want to purchase a residence that they can renovate and improve.
What’s the Loan Approval Process for a Renovation Loan?
Getting approval for a renovation loan starts with submitting applications and documents to all relevant parties. Then, schedule a post-renovation home appraisal and submit to underwriting to determine your creditworthiness.
