Financing for Fixer-Uppers

For many homebuyers, the perfect home is one that can be created by making certain repairs and rehabilitations to an existing home in need of some TLC. In this week’s blog, the professionals at Nickel City Funding will look closer at two of the most popular types of financing for fixer-uppers: HomeStyle loans by Fannie Mae and FHA 203(k) loans from the Federal Housing Administration. If you’re interested in these or other financing solutions for homes in need of rehab, contact our team for help. We have local expertise and national lending power for purchase in North Tonawanda, Hamburg, Amherst, West Seneca, and Lancaster, NY, and we’d love to speak with you.

HomeStyle by Fannie Mae

Fannie Mae is one of two major government-sponsored entities (GSEs) that play in the real estate market; the other of which is Freddie Mac. Fannie Mae purchases mortgages in bulk from private lenders and regulates certain programs like the HomeStyle loan program. HomeStyle loans provide funding for the purchase of a home and for the cost to rehabilitate it.

When it comes to HomeStyle loans, the funding for purchase and for rehabilitation are kept separate. In fact, rehabilitation funds are kept in escrow and distributed over time as contracted renovations are completed. The portion of the loan used toward renovation may cost up to 50% of the total value of the loan. The maximum value for the entire loan is the lesser of: the purchase price of the home before improvements plus the appraised value of renovations or an appraised estimate of the home after renovations are completed. You’ll need to provide at least 5% down for a HomeStyle loan.

FHA 203(k) Loans

FHA 203(k) loans are a type of fixer-upper financing backed through the Federal Housing Administration. They are fully funded through private lenders, however. There are two divisions of FHA 203(k) loans: limited and standard. If you already own a home that needs certain minor repairs, such as new flooring for a few rooms or a bathroom renovation, you may want the FHA 203(k) limited loan. These loans are limited to repairs that don’t exceed $35,000.

To purchase a home with repair costs exceeding $35,000, you’ll need a standard FHA 203(k) loan. FHA 203(k) standard loans require a 3.5% down payment. Their value must not exceed 110% of the estimated appraised value of the home after renovations or complete and must not exceed the local FHA loan limit (which is $294,515 for a single-unit home in Niagara County).

Funding for the Home of Your Dreams

If you’ve got the patience and desire to renovate a fixer-upper, Nickel City Funding has the financing you need. We have been helping clients in North Tonawanda, Hamburg, Amherst, West Seneca, and Lancaster, NY, find and renovate homes for many years, and we can help you, too. Contact our certified lenders for more on financing for fixer-uppers and to ask any other financing questions you have.