I think one thing that’s missing from the market is a loan that gives buyers a chance to fall in love with a home and it’s location and make it their own. That’s why I’m pleased to be joined by Derek Lave from Wells Fargo who has a solution for this.
Wells Fargo has a specific product that allows for renovations to be done on a house that’s usually referred to as a 203K loan, backed by the FHA. The only downside to this loan is it only allows for safety and health issues in a home to be fixed. In the past, the big negative cloud around this loan has been due in part to the restrictions that the FHA places on the requirement to get the loan. There was also required involvement of an HUD inspector.
The product we offer, though, is not FHA-backed and allows for other renovations in the home to be done, outside of just health and safety concerns. This loan will allow you to install a pool, for example, or do things like kitchen upgrades.
Many times, these properties you’re going to buy are distressed and you know you’re going to get a good deal. Derek’s loan product is based off of end value, so it allows you to focus on putting things into the home that will increase its value. Say, for example, you buy a $300,000 house and plan a $80,000 to $100,000 renovation. Provided that the end value will be there, Wells Fargo will loan you the construction cost and the home loan purchase price.
Depending on the loan size, Derek says, he can loan up to 95% of the as-completed value. For larger loans, more restrictions may come into play, but for most homes on Long Island, 95% should do the trick.
These renovation loans come with a slightly higher interest rate, but not enough to turn you off to the idea, Derek says. Think of it this way: you pay a slightly higher interest rate, but you’re getting exactly the home you want, the way you want. It’s still a much better option than an equity line or putting these costs on your credit card because the loan will allow you a tax deduction and a smaller payment.
If you have any other questions about buying or selling a home on Long Island, don’t hesitate to give us a call or send us an email. We’d be happy to help!