Home Renovation Loan Programs
The opportunity to move into a "fixer-upper" in South Carolina often depends on getting a mortgage approved, but banks aren't always enthusiastic about approving a mortgage for a home that requires extensive work. Fortunately, future Columbia homeowners can take advantage of an FHA 203K Rehabilitation loan, which helps ensure loan approval and even adds money to the loan amount to cover repairs, updates, and refurbishment. There is even an option to get additional money if it turns out repairs cost above the original estimate.
There are a few requirements for qualification under the South Carolina FHA 203K loan program, so a future homeowner should take a look at the program before deciding that a home that needs a little work is out of reach.
- Loan to Value (LTV) is capped at 110%, including the cost of improvements
- Credit score must be at least 640
- Debt to Income (DTI) ratio of the mortgage cannot exceed 31%
- Total DTI cannot exceed 43%
In addition to the qualifications above, a borrower must confirm that the property is allowed under the program's rules. Eligible properties include single family homes as well as multi-unit properties that have no more than 4 residences.
It's essential to note that an investor in a property cannot qualify for an FHA 203K Rehab loan, but a direct owner or occupant of an eligible property may qualify. Additionally, these loans may be used for a vacation property or a second home, but the property has to be approved before work on the loan application may begin.
Like the FHA series of loans, a Fannie Mae HomePath Loan creates a loan that covers the cost of the home plus repairs that might be required. The loans are capped at $35,000 in repairs or 35% of the future value of the residence.
Many first-time homeowners consider a HomePath loan because of the extraordinarily low down payment requirement of 3%; however, current homeowners who want a second home may also qualify.
Requirements for this flexible loan option include:
- LTV cap of 97% with mortgage insurance and credit score of 660
- LTV cap of 80% without mortgage insurance and credit score of 620
- DTI must be less than 45%
Fannie Mae HomeStyle Loans
The HomeStyle mortgage from Fannie Mae is another option beyond the HomePath loan and helps homeowners to afford the renovations required of a new purchase or existing property.
Benefits of a HomeStyle loan include:
- Mortgage insurance not required for LTV below 80%
- Underwater homeowners can start building equity again
Additionally, the requirements of a HomeStyle Loan include:
- DTI cannot be more than 45%
- Down payment of 3% required with mortgage insurance
- Down payment of 20% required without mortgage insurance
Energy Efficiency Mortgages (EEM)
Installing energy efficient devices in the home often leads to tax breaks, and the installation can also qualify a Columbia homeowner for an Energy Efficient Mortgage. The initial cost of many energy-efficient appliances, machines, and systems is often a little steep. A loan helps a family to afford those solar panels or the new efficient, metal roof.
Other benefits of this eco-friendly loan include:
- Adds value to the home
- Opportunity to refinance with a fixed-rate
Borrowers who choose an EEM also benefit from very low down payment requirements of just 3% and certain homeowners may not even need equity to qualify for a Streamline Refinance version of the loan.