If you’re buying a Chicago home that needs some work, or making upgrades on a Chicago home you wish to sell, there are several ways to finance the improvements. Here’s a look at your options!
Chicago area home buyers, let’s start with you! If you are buying a home that needs some work, consider a mortgage that will finance your home purchase and provide money for home repairs. Some choices include:
- Fannie Mae’s HomeStyle Renovation Mortgage. Your loan amount can be based on the home purchase price and the cost of renovations, or the expected value of the home after renovations are completed.
- Freddie Mac’s CHOICEReno eXPress Mortgage. Don’t let the odd name put you off. This loan gives you renovation funds at a low financing cost with no extra fees. The loan is closed with your purchase mortgage and combined into one monthly payment.
- FHA 203(k) Mortgage. The repair costs must be at least $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area. The property value is calculated by either the value of the property before rehabilitation plus the cost of rehabilitation, OR: 110% of the appraised value of the property after rehabilitation, whichever is less.
- Post-closing finance options. You can seek a personal loan through your bank after closing on your mortgage. Keep in mind that unsecured loans have higher interest rates.
- Loan against your 401k. This is best reserved for an emergency situation, but it may be a more affordable option than other types of unsecured loans.
The best way to find the right solution is to talk to a reputable Chicago lender!
Chicago homeowners and home sellers, here are some options to consider:
- Home equity loan. This is basically a second mortgage that gives you a lump sum loan against the free-and-clear value of your property. As long as you have good credit and sufficient equity value in your home, this is a relatively painless way to finance big-ticket repairs and upgrades.
- Home equity line of credit (HELOC.) This is a flexible equity loan that has a maximum limit, but allows you to draw funds as needed. The downside to these loans is that the interest rates tend to be variable, meaning your payment amount could change.
- Cash-out refinance. When you would like to refinance your current mortgage into a lower rate, and borrow against your equity, this loan does it all.
If you will be selling your home in the near future, and the funds you need for your projects are relatively modest, a short-term personal loan could work. Be careful with credit offers you find through home improvement stores; the 0% or low-interest offers advertised usually have short repayment timelines.
StartingPoint Realty – your Chicago and Suburban real estate experts!
StartingPoint Realty serves first-time home buyers and sellers throughout Chicago and the suburbs! Let us refer you to excellent local lenders for your home financing needs.
Always feel welcome to contact us for help with your Chicago real estate questions!
Ryan Gable Broker/CEO Starting Point Realty
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