If you're looking to finance your home renovation, you might have come across the terms "FHA 203k" and "Conventional Homestyle" loans. Both of these loan programs offer a way for you to finance the cost of your home renovation, but there are some key differences between them. In this post, we'll break down the differences between an FHA 203k loan and a Conventional Homestyle renovation loan, so you can make an informed decision about which one is right for you.
FHA 203k Loan
An FHA 203k loan is a type of government-backed loan that is designed to help homeowners finance their home renovation. It is insured by the Federal Housing Administration (FHA), which means that lenders are more willing to offer this loan to borrowers with lower credit scores or who don't have a lot of cash reserves.
The FHA 203k loan comes in two different versions: the "streamline" and the "standard" 203k. The streamlined 203k is designed for smaller renovation projects that don't require structural changes, while the standard 203k is for larger projects that involve structural changes.
One of the biggest advantages of an FHA 203k loan is that it allows you to borrow money for both the purchase of the home and the cost of the renovation. This means that you can finance your renovation without having to take out a separate loan or dip into your savings.
Conventional Homestyle Renovation Loan
A Conventional Homestyle renovation loan is a type of conventional loan that is designed to help homeowners finance their home renovation. It is offered by Fannie Mae, which is a government-sponsored enterprise that buys mortgages from lenders.
The Homestyle loan is more flexible than the FHA 203k loan, as it allows you to borrow up to 75% of the "as-completed" appraised value of the home. This means that you can finance larger renovation projects without having to worry about the home's current value.
One of the biggest advantages of the Homestyle loan is that it allows you to choose your own contractor, whereas the FHA 203k loan requires you to use a contractor that is approved by the lender. This gives you more control over the renovation process and allows you to work with a contractor that you trust.
Which One is Right for You?
Ultimately, the choice between an FHA 203k loan and a Conventional Homestyle renovation loan will depend on your individual needs and circumstances. If you have a lower credit score or don't have a lot of cash reserves, an FHA 203k loan might be the better choice. However, if you want more flexibility and control over the renovation process, a Homestyle loan might be the way to go.
Before you make a decision, be sure to talk to your lender and do your research to make sure you understand the pros and cons of each loan program. With the right loan, you can finance your home renovation and turn your dream home into a reality. If you need help finding a lender, please visit makeover-homes.com or call 463.252.0028