Loan to Enhance Your Home on Long Island
If you’re a home owner, you’ve probably heard people tell you that your home is your most important investment. But in order to get a return on this investment, you need to make sure your home is well maintained. Home improvement projects when done right can boost the value of your property.
But taking care of your home costs money and if you have a mortgage and other debts, you may not have the cash on hand to be able to do the home improvements you need. But there are still ways to get the job done. There are loans available on the market that allow you to use your financing or the equity in your home to pay for your improvements. At Cliffco Mortgage Bankers, we’re in the business of helping home buyers and homeowners get loans. So we want to give you the information you need to know about taking out home improvement loans.
Understanding 203(k) Rehabilitation Loans
One way to pay for home improvement projects is to include the costs of your repairs in your home financing. You can do that with a 203 (k) rehabilitation loan. This is a loan that is convenient for buyers of homes that have been foreclosed or for older houses in need of repairs. They’re also ideal for those who don’t want to tap into their home’s equity.
There are two types of 203 (k) loans. One is a streamlined 203 (k) which is limited to repairs and improvements to homes that cost $35,000 or less. Proceeds from the loan can be used for smaller improvement projects like electrical, plumbing, air conditioning or heating repairs as well as painting, carpeting, floor, roof, siding or window installation.
The other type is the full 203 (k) loan. There are much larger limits on these loans that are mandated by the Federal Housing Administration (FHA). The limits vary depending on where you live but range from $271,050 to $729,750. There’s a minimum requirement that $5,000 be spent on the rehabilitation of your home as well.
Home Improvement Loans Involving Equity
According to the Atlanta Journal-Constitution, a recent survey shows that 60 percent of those planning home renovations say they intend to use a credit card to pay for the project. But paying with a credit card can be risky, particularly, if you have a balance on your card because the interest you’ll have to pay will likely be higher than what you’d have to pay if you take out a loan such as a Home Equity Line of Credit (HELOC).
When you qualify, an HELOC allows you to get a lump sum equal to the amount of equity you have in your home, according to the San Francisco Chronicle. In order to qualify, you have to have equity in your home, and lenders look at a number called the combined loan-to-value ratio (CLTV). According to Investopedia, CLTV ratio is determined by adding the balances of all outstanding loans and dividing by the current market value of the property. Lenders will also take a look at your credit history. Because this is a second mortgage, they will have higher expectations, usually looking for a score higher than 680 although they can accept a score as low as 620.
Cliffco Can Help You Find Home Improvement Loans
If you have equity in your home or if you have the ability to work financing for home improvements into the financing of your home purchase, you may want to consider taking out home improvement loans. You can increase the value of your property and could pay off down the road. To learn about your options, contact Cliffco Mortgage Bankers today.