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 improve your credit score to 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 types available to determine which loans can be used for renovation costs or whether you’ll need another loan.
Finding Home Loans
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 device 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 buyers’ 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 choices suit your needs.
One of the primary choices you may face is selecting a fixed-rate or an adjustable mortgage. Fixed-rate mortgages have a consistent monthly payment amount, enabling buyers to budget for their mortgage costs. The interest rate for a flexible mortgage is usually lower, but flexible rates fluctuate. This means your monthly payments can increase and decrease over the life of your loan.
Other Home Loan Options
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 buying homes in rural areas. USDA loans do not include renovation costs. People in the U.S. who want to include remodeling costs in their loans can apply for a Federal Housing Administration (FHA) loan. FHA loans offer options for buyers with low credit scores and low-interest loans for buyers with decent credit scores.
Other Financing
Once you own a home, you can apply to refinance your mortgage or take 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 interest is only charged when a person opts 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 start small funds when needed, reducing your interest costs.
Remodeling Options
Whether you’re remodeling your first or new home, you can use funds for reconditioning to cover any renovation costs. Freshen up an old bathroom by repainting, replacing tiles, and installing a new bathtub. You can choose from several replacement tubs, including low-maintenance 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 apply for a home improvement loan or a HELOC to cover your remodeling costs.
