Home loans are financial arrangements enabling potential homebuyers to purchase a property. The path to homeownership begins with saving a down payment. You may also need to take steps to improve your credit score to ensure you’ll qualify for a loan. After completing these steps, you’ll meet with lenders to discuss your loan eligibility and determine how much you can borrow, the interest rate you’ll be charged, your monthly payment costs, and the type of loan.
If you’re interested in purchasing a foreclosure or a fixer-upper, you may want to borrow funds to remodel the property. Learn about home loans and the different types of loans available to determine which loans can be used for renovation costs or whether you’ll need a different type of loan.
Your home loan options will be determined by the location you’re buying in, your down payment amount, and whether you need to finance renovations.
Use a home loan comparison tool to evaluate loan options. The tool prompts you to clarify if you’re refinancing your home loan or buying a new home. You provide information about your target purchase price, down payment amount, and whether you qualify for first-time home buyer’s grants. The tool compiles the data provided and presents a list of potential loan options you can pursue. You can review potential lenders, loan interest rates, and loan terms to determine which options suit your needs.
One of the primary choices you may face is whether to select a fixed-rate or an adjustable mortgage. The interest rate for an adjustable mortgage is usually lower, but adjustable rates fluctuate. This means your monthly payments can increase and decrease over the life of your loan. Fixed-rate mortgages have a consistent monthly payment amount, enabling buyers to budget for their mortgage costs.
You may qualify for different types of loans based on the nature or location of the property you’re purchasing. The U.S. Department of Agriculture (USDA) provides loans for people purchasing homes in rural areas. USDA loans do not include renovation costs. People in the U.S. who want to include remodeling costs in their loan can apply for a Federal Housing Administration (FHA) loan. FHA loans offer options for buyers with low credit scores, as well as low-interest loans for buyers with decent credit scores.
Once you own a home, you can apply to refinance your mortgage or apply for another loan to cover remodeling costs. A home equity line of credit (HELOC) offers access to funds. Homeowners use their property as collateral. A credit line differs from a standard loan because the borrower is only charged interest when they opt to withdraw funds. With a traditional home improvement loan, you receive a lump sum of funds and immediately accrue interest charges. With a HELOC, you can withdraw small amounts of funds when you need to, which reduces your interest costs.
Whether you’re planning to remodel your first home or a new home, you can use funds for remodeling for any renovation costs you choose. Freshen up an old bathroom by repainting, replacing tiles, and installing a new bathtub. There are several replacement tubs you can choose from, including low-maintenance tubs and customized tubs that will fit your bathroom design. You can also supplement your new bathtub with a walk-in shower.
You can use remodeling funds to install a hardwood floor in your living or dining room and update your kitchen with a new backsplash, energy-efficient appliances, and marble countertops. Remodeling funds can also cover critical repairs, such as leaking pipes that can cause mildew growth and damage floors, walls, and cabinets.
There are several types of home loans. Each loan has restrictions that determine whether you can use it to finance remodeling costs. If you don’t qualify for a home loan that includes renovation funds, you may opt to apply for a home improvement loan or a HELOC to cover your remodeling costs.