Odessa Home Renovation Loans

Have you researched the Odessa real estate market and found that a fixer-upper is your most cost-effective choice? You might be worried about the cost of home repairs and improvements and how to pay for them. The good news is that help is always available in conventional rehab loans and government-backed rehab loans. 

What is a Conventional Rehab Loan?

You can finance the cost of buying and fixing the property with a conventional rehab loan. This eliminates the need to obtain a second mortgage or pay out of pocket for expensive home improvement projects. Banks and private lenders fund conventional rehab loans. You can use the loan’s proceeds for both aesthetic and structural improvements. 

You may qualify for one of the conventional rehab loans below if you meet these criteria: 

• Good or excellent credit 
• Have a 5% down payment
• Acceptable debt-to-income ratio

     1. Fannie Mae Homestyle

With the Fannie Mae HomeStyle® Renovation loan, qualified borrowers can buy or refinance a home and use the money from the loan to pay for repairs or improvements. HomeStyle® loans are available to first-time buyers with a 3% down payment.

      PROS

• Fixed-rate and variable-rate options are available.
• You can combine this loan with other Fannie Mae products, such as HomePath or RefiNow.  

      CONS

• This loan won’t pay for a complete teardown or a new foundation.
• You must submit additional documentation, such as a work proposal, standard renovation loan agreement, and consumer renovation information. 
• All work must be completed within one year of the closing date. 

     2. Freddie Mac CHOICERenovation 

Freddie Mac’s CHOICERenovation® loan is a low-down-payment conventional loan program that allows you to finance both the purchase of a home and the cost of improvements. You can use the loan to finance single-family and multi-unit dwellings, second homes, and investment properties.

     PROS

• It’s possible to get a loan with a 3.5% down payment and a credit score as low as 620. 
• The loan is not limited to single-family dwellings. It is suitable for rental properties, second homes, and multi-unit properties.

     CONS

• Properties that banks own might need more approvals.
• You cannot be related to or in business with anyone involved in the loan transaction, whether the builder, developer or seller. 

What is a Government-Backed Rehab Loan?

These loans are different from conventional rehab loans because they are backed by the government, specifically the Federal Housing Administration (FHA). With 203(k) renovation loans, you can access funds to buy a home and fix it up. While the FHA doesn’t provide buyers with the funds, it does insure the loan through approved lenders, such as Capital Home Mortgage. 

The FHA 203(k) has two subtypes: 

     1. Limited 203(k)

This is ideal for non-structural repairs, such as flooring, appliances, plumbing, and electrical work, as well as kitchen and bathroom renovations. The maximum amount for a limited 203(k) loan is capped at $35,000 for most areas in the country.

     2. Standard 203(k)

This loan is designed for more extensive repairs to the property, including structural and cosmetic improvements. It has higher loan limits than the Limited 203(k) loan.

      PROS

• Fixer-uppers have a high return on investment (ROI) due to increased value from upgrades and repairs, which means you could profit in the long run.
• You have the freedom to renovate/improve the home as you see fit.
• FHA 203(k) loans have less stringent requirements regarding credit histories and scores, loan limits, and debt-to-income ratios (DTI). 
• 203(k) loans have significantly smaller down payments than conventional loans, with just 3.5 percent of the selling price down at closing.

     CONS

• There’s a limit on the number of units in the home you purchase.
• 203(k) mortgages allow the purchase of multi-family properties with a maximum of four units.
• All necessary work and upgrades must be specified in detail before approval.
• It is not suitable for borrowers looking for a turnkey home. 

Qualify for an Odessa Rehab Loan Today!

Working with a trusted lender like Capital Home Mortgage is essential when looking for the best rehab loan. We offer a wide range of mortgage products, including conventional and government-backed renovation loans. 

Since we are a Texas-based direct mortgage lender, we handle everything ourselves, from the initial application to the closing. Rehab loans can be complicated, but our experts are here to help you figure out your options and choose the best option. 

Contact one of our home renovation professionals at (800) 850-4255 to learn more about our rehab loans in Odessa.