Qualifying for a Renovation Loan
Renovation loans are refinance or purchase loans that allow the cost of repairs or renovations to be rolled into loan amounts. Renovation loans are available in several different loan programs, so please contact us with your needs.
In terms of qualifying for the loan, there are four areas to consider:
Credit
Credit history must be good. Prospective borrowers should review their credit report with scores from all three bureaus. This type of report can be obtained by contacting First Equity at 734-475-0270.
Income
Borrowers must have a stable source of income. 24 month employment and/or college history is needed. Some exceptions do apply. Although programs may vary, generally the total debt, including the new house payment, should not exceed 45% of gross (pre-tax) income. Income from part time jobs, bonuses or commissions can be counted if there is a 2 year history.
Reserves
Reserves are a liquid source of cash that a borrower can tap into in case of an emergency. Some programs may require cash reserves. Although reserves are not always required, sometimes having reserves can help a borrower qualify. The most common forms of reserves are IRA or 401K.
Collateral
The home being purchased will be appraised to determine fair market value. If the appraiser states in the report that there is a health and safety concern, then a contractor's inspection or repairs may be needed as well.
Contractor Estimate
A written estimate from a licensed contractor is required before proceeding with a renovation loan. This is a critical component and the most common cause of delay. If you are thinking of applying for a renovation, line your contractors up early.
We are here to help
Message us if you have additional questions, would like to get Pre-Qualified, or would like a quote. Let First Equity be your guide through the loan process.