San Diego Renovation Home Loan

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Looking for a San Diego Renovation Home Loan? With banks owning more and more properties as foreclosures continue to grow, renovation loans have become a great option for buyers and are helping the banks lighten their books.  What, you may be asking, is a renovation loan? Well I’m glad you asked because I was about to tell you.

A lot of the bank owned properties on the market were left in shambles by their former owners. Fixer-uppers is usually the term used, and investors or prospectors are often the ones who buy them, put some money into “fixing them up” and then sell them, hopefully for a profit. Renovation loans enable non-investors to enter into the picture as prospective buyers who want to purchase a home for cheap but might not have the money to fix it up. John Sway, National Renovation Manager for Wells Fargo Home Mortgage told Diane Eastabrook on a PBS Nightly Reports that, “what we’re dong is we’re increasing the pool of buyers, so we’re getting more buyers to look at a property, so we may end up selling it for a couple percentage points higher than we would to an investor.”

With traditional loans, the lender typically requires improvements/renovations on a home to be finished before a long-term mortgage is made. After all, loan security generally comes from good condition and value of the property and lenders of course want to minimize risk. With renovation loans however, the loan is based on after-repair value and includes an escrow account to complete the repairs needed to bring the house to a condition that lenders prefer. This makes buying properties in need of repairs much more feasible and eliminates the need for people to run up their credit cards and/or take out additional lines of credit.

So for example, say there is a property in need of repair, and as a result you can get it at a great price of $285,000. After further inspection, you learn that the work to fix it up will cost you $45,000. A renovation loan will allow you to buy the place for say, $340,000, and then have a “Renovation” Escrow account of $55,000 with which you must repair your home. There are, of course, contingencies in the contracts that state that you must perform specific renovations with that money, so you can’t go all Bernie Madoff on the bank and run away with their money. Any money left over after the renovations are complete go directly towards paying down your mortgage balance.

Downside to this type of loan? Well, the rates, though very competitive and reasonable for the most part, are slightly higher than a conventional type of loan. And there are usually caps placed on the amount the banks are willing to lend for renovation. As a result, there are those like Jim Wheaton, Deputy Director of Neighborhood Housing Services of Chicago, also interviewed by Eastabrook, who don’t think this type of program does that much to help. “You know, $25,000 or $30,000 sounds like a lot of money, but when you start talking about home improvements and construction, it doesn’t go very far.” Valid point. But renovation loans have helped many get into a home and fix it up in one fell swoop. My advice? Never hurts to ask your bank or lender about this type of loan. Especially if you’re in the market to scoop up a foreclosed home for cheap.

Also if you’re looking for a commercial construction loan or development loan please visit our commercial financing section.

San Diego Renovation Home Loan

16 thoughts on “San Diego Renovation Home Loan”

  1. Is this program nationally? I don’t think that the Dallas area would be able to support this, but maybe I am wrong. We are already finding lenders squeezed so tight that the appraisal on some of the properties don’t come in now. Is this money given based on a quote of repairs form an outside source? I would also think that this money is not part of the appraisal? Sounds, good we are getting slammed with foreclosures, so this would definitly help people that are thinking about it…get off the fence.

  2. you’re right about home improvements and construction, it doesn’t go very far. we tired lending from a bank before

    itot54joni’s last blog post..Happy Mother’s Day To All!

  3. Impressive conversion snaps. Are they from your own repertoire? Would love to do this sort of thing for a living. Beats siting in front of a computer all day 😐

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  4. UK Pub Sales Agent

    Many of our recent sales have been disused and rundown bars and pubs that have been purchased for modernisation or redevelopment. Using someone elses money to add value to your property is what it is all about

    UK Pub Sales Agent’s last blog post..UK Pub Companies Business Model Biased and Uncompetitive

  5. Meg Zoller-Houston Realtor

    Renovating your home is a great way to make it stand out in the market as well, if you are in the place of needing to sell. I would suggest talking to a local realtor to see what home buyers in your area are expecting and wanting in their homes, then use the construction loan to make those improvements as needed. If you are trying to sell though, you need to be careful to make sure you can recoup what you spend though.

    Meg Zoller-Houston Realtor’s last blog post..Houston Real Estate Reaps Benefits of Statewide Population Growth

  6. Renovating your home is a great way to make it stand out in the market as well, if you are in the place of needing to sell. I would suggest talking to a local realtor to see what home buyers in your area are expecting and wanting in their homes, then use the construction loan to make those improvements as needed. If you are trying to sell though, you need to be careful to make sure you can recoup what you spend though.

  7. However, the rate of interest on a renovation loan is lower than that for a personal loan. Personal loans have high interest rates viz. renovation loans by around 500-700 basis points. Therefore, it makes more sense applying for a renovation loan for your house than applying for a personal loan.

    Cheers,Harry,Panama property

  8. Holliston Real Estate

    This is a great program. In fact I just listed a property this week that would be perfect for this type of program. The seller unfortunately had a burst pipe which caused extensive damage to her condo. The property is being sold as is and will need to be renovated.

    Holliston Real Estate’s last blog post..Milford Real Estate Market Report May 2009

  9. Loan Modification

    Take a look at FHA 203K renovation loans 😀

    Loan Modification’s last blog post..Mortgage Rates Increase, Ramifications for Needy Homeowners

  10. hurricane heroes

    renovating properties will make its value high on the market. how ever it is very wise to think if this is good or bad. and what benefit will it have. as we can see the economy is on crisis and if you are planning to sell then make sure there are sure buyers before doing so. just my 3 cents..

  11. That sounds quite similar to the HUD rehab loan. They too have requirements on some of the improvements that should take place, which are usually energy saving repairs and improvements. However, they also allow other updates, such as new flooring, paint, etc.

  12. Susan- you’re absolutely right, it does sound eerily similar to the HUD rehab loan. Although I wouldn’t be surprised if these types of loans experience changes with the upcoming presidential election.

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