In this 2017, inventory challenged market, a renovation mortgage is becoming more and more of an option for you to turn an ordinary house into the home of your dreams.
Simply (as possible) put, a renovation mortgage is a transaction where you finance in the improvements. However, in order for the lender to take on the risk, the funds are held in escrow and disbursed in progress payments as the work is completed, phase by phase.
What is a Renovation Mortgage?
The name of the products are either a 203k (FHA) or Homestyle (Conventional)
So, how does a renovation mortgage work?In the case of a purchase, you can buy a beaten down home, usually a foreclosure or a home that is dated or otherwise in some state of disrepair.
Purchase Price $110,000
You can get a bid from a contractor for say $50,000 to improve the home to your specifications.
This means you’re financing $160,000.
After the home is complete, the home then becomes worth say $220,000.