It’s easy to get sucked into the Rehab Addict and Fixer Upper fantasy and dream of a future project of your own. Especially in New Orleans, where there are plenty of historic charmers on that market that are just waiting for some tender love and care. Some of you might even be saving up for a down payment on one. But renovation costs add up and where does that cash come from?
Well, the answer is construction loans. Construction loans provide funds for both the purchase and the renovation of the home. It’s basically a two-for-one deal: two loans within one closing.
I tell all my buyers to get pre-approved before even searching for a home. (Here’s why.) This is still important when you are considering a construction loan. Instead of telling you how much house you can afford, the pre-approval amount will tell you how much you can spend in total price and renovation.
Once you find your perfect (or imperfect, in this case) property and make an offer AND that offer gets accepted – there are some extra steps to a construction loan. The buyer has to find a licensed contractor who will estimate the cost as well as complete the work. This cost will get wrapped up into the total loan amount. The renovation must be completed within 6 months of the closing.
Construction loans come in FHA and conventional forms. The FHA 230(k) loan is for your primary residence only and covers necessary and more basic repairs. The conventional Homestyle loan has more leeway in terms of the type of property and the extent of the renovation. Questions? You know where to find me.