Home improvement loans sound pretty amazing since, in theory, someone gives you money to fix your house. However, there are several different loan options and you want to make sure that you choose the right one. So let’s explore some of your loan options.
FHA 203(k) Loan
FHA stands for Federal Housing Administration which is a type of loan that only requires you to put down 3.5% down. Homeowners can use the money to redo a kitchen or bathroom, change out the floors, buy appliances, or add a room. This loan can even be used to tear-down and rebuild as long as the original foundation remains. Really the only thing you really can’t do with this type of loan is to pay for luxury items like a pool or fire pit.
Fannie Mae HomeStyle Loan
This loan is very similar to the 203(k) loan but it requires a 5% down payment. Also, there is no limit to the kinds of renovations you can do, as long as everything is permanently affixed to the home and adds value. Once you get approved for this loan you can borrow up to 50% of the home’s value in order to do the renovation.
Sector 504 Home Repair Program
This home loan is more for improving the safety of the home rather than getting the new floors you have been dying for. So if you are looking to replace dangerous electrical components, make it more energy efficient, or make it more accessible for the elderly or people with disabilities, this may be the loan for you. In order to qualify for this loan your household income must be below 50% of the area;s median, and be unable to obtain affordable credit elsewhere. There’s also a grant program for people over the age of 62 to add accessibility features, which is ideal for homeowners aging in place. However, the maximum loan amount is $20,000, which can be repaid over 20 years with the interest rate fixed at 1%.
