Home Renovation Loans for Older Homes in Grand Rapids
Reviving the Charm of Older Grand Rapids Homes
If you’re a homebuyer looking for Grand Rapids homes for sale, you might come across plenty of older homes — don’t overlook them! Instead, think of older homes as hidden gems that you can only see through a certain lens. That is, you have to be able to walk in and see the potential for home renovation, rather than seeing the space merely as it is. Enter home renovation loans.
What could that dated kitchen look like with a set of new cabinets? How much more open would the living room appear if you knocked down that unnecessary wall? Old home renovation provides you with the opportunity to take solid bones and customize them into the home of your dreams, and you don’t necessarily have to take the cost directly out of your wallet to do so.
What is a Home Renovation Loan?
Home renovation loans are specifically designed to help homeowners or buyers finance improvements to their property. These loans provide funds to repair, upgrade, or modernize a home, making them ideal for older homes in need of updating. You might use a home renovation loan when purchasing a fixer-upper that requires major work, such as structural repairs, replacing outdated systems, or adding square footage. They’re also useful if you’re already a homeowner and want to tackle large-scale projects like kitchen remodels, roof replacements, or energy-efficient upgrades.
Situations where renovation loans make sense include:
- Buying an older home that needs extensive home restoration or home renovation to meet modern standards
- Making energy-efficient improvements that reduce long-term costs
- Expanding the home to accommodate a growing family
- Enhancing property value through major upgrades before selling
For minor cosmetic updates like painting or new fixtures, a renovation loan may not be necessary. In these cases, personal savings or smaller financing options could be more appropriate.
Home Renovation Loan Options in Grand Rapids, Michigan
For homeowners and buyers looking for homes for sale in Grand Rapids interested in restoring or updating their homes, several renovation loan options can provide the financial assistance needed to make those improvements a reality. Whether you’re addressing major repairs or upgrading the aesthetics, here are some key programs to explore:
FHA Home Improvement Loans
For those seeking more flexibility, FHA Loans, like the 203(k) Rehabilitation Mortgage, allow buyers or current homeowners to borrow funds for home renovations as part of their mortgage or through a separate loan. This program is ideal for major home renovation projects, whether you’re updating an older home or making improvements to a property you already own.
HomeStyle Renovation Loan
The HomeStyle Renovation Loan is a versatile Conventional Loan that allows homebuyers and homeowners to finance both the purchase or refinance of a home and the cost of renovations, all in a single mortgage. Offered through Fannie Mae, this loan provides the flexibility to make a wide range of improvements, from structural repairs to putting in a swimming pool, making it ideal for those looking to personalize or modernize a property. Unlike government-backed options like the FHA 203(k), the HomeStyle loan typically offers more favorable terms for borrowers with higher credit scores.
Other Options to Explore
The City of Grand Rapids offers the Housing Rehabilitation Program to help low- to moderate-income homeowners (note: this is for owners who already own their home, not for buyers purchasing a new home) make critical repairs to their homes. This program focuses on essential updates, such as improving health and safety standards, upgrading electrical systems, repairing roofs, and addressing lead paint hazards.
Can Home Renovation Costs be Included in a Mortgage?
While it’s not as simple as calculating what you’ll need for renovations and requesting an elevated dollar amount on your mortgage, home renovation costs can be included in a mortgage through specific loan programs, namely the FHA 203(k) Loan. This type of mortgage is particularly helpful for buyers purchasing a property that needs home renovations or homeowners looking to make major improvements without taking out separate financing.
FHA 203(k) Loans
An FHA 203(k) Loan is a government-backed mortgage that allows borrowers to finance both the purchase price of a home and the cost of its renovations in a single loan. This makes it an attractive option for buyers interested in fixer-uppers or older homes that need substantial repairs. The loan is insured by the Federal Housing Administration (FHA), which helps lower the risk for lenders and makes it easier for borrowers to qualify, even with a lower credit score or smaller down payment.
There are two main types of FHA 203(k) Loans:
Standard 203(k) Loan
This option is intended for more extensive home renovations, such as structural repairs, room additions, or significant upgrades to plumbing or electrical systems. It’s ideal for properties requiring major work to make the home livable or bring it up to code. Borrowers must work with licensed contractors, and all repairs need to be approved by the lender.
Limited 203(k) Loan
The Limited 203(k), also known as a Streamline 203(k) Loan, is designed for smaller, non-structural improvements. This loan can be used for cosmetic updates like new flooring, replacing windows, upgrading appliances, or painting. The maximum amount that can be borrowed for repairs is $75,000.
The Benefits of Making Home Improvements
First and foremost, who doesn’t love making their home their own? Home renovations are inherently exciting (aside from the financial aspect, of course), because it’s incredible to see your home transform with a few impactful changes. Making updates to your home comes with plenty of other advantages too, including:
Making Your Dream Home More Affordable
In the current Grand Rapids housing market, the median listing price is $320,000 and inventory isn’t abundant either. Going the home renovation route allows you to transform your existing home into your dream home — without taking on the substantial cost of buying a newly built home.
Increase Equity
Home improvements add value to your property, building equity over time. And as your home’s market value rises and your mortgage balance decreases, your equity grows.
Boost Resale Value
Upgrades like kitchen remodels, bathroom renovations, or energy-efficient features can raise your home’s resale value. Homes with modern updates tend to attract more buyers and can sell for a higher price.
Enhance Quality of Life
Improvements tailored to your needs, such as expanding living spaces or upgrading key areas, make your home more enjoyable. Energy-efficient upgrades not only improve comfort but also reduce monthly utility bills.
Preserve Historical Character
In cities like Grand Rapids, renovating older homes allows you to modernize while maintaining their unique charm and architectural details.
Next Steps for Securing a Home Renovation Loan in Grand Rapids
If you’re feeling inspired to restore the charm of an older home, the first step toward making that dream a reality is securing the right home renovation loan. This means understanding the different loan options available and choosing the one that perfectly aligns with your vision. At Treadstone, our expert mortgage professionals are here to simplify the process, helping you navigate your choices and find the ideal financing solution tailored to your property’s unique needs and your renovation goals. With our guidance, turning that fixer-upper into your dream home will feel seamless.
FAQs
What are the requirements for the property improvement program in Michigan?
The Property Improvement Program in Michigan requires that applicants own and occupy a single-family home or duplex, and the property must be located in Michigan. Eligible improvements include projects that enhance the property’s livability or energy efficiency. Applicants must also have a credit score of at least 620 and meet income requirements based on household size and county. Loans are typically available for up to $25,000 for a term of 10 to 20 years.
Are renovation loans a good idea?
Home renovation loans can be a good idea if you’re buying a home that needs significant repairs or want to finance major improvements on your current property. They allow you to combine the cost of renovations with your mortgage, simplifying financing and often offering better interest rates than a personal loan for home renovation or credit cards. However, they may not be necessary for smaller, cosmetic updates.
What is the longest term for a home improvement loan?
The longest term for a home improvement loan typically ranges from 15-30 years, depending on the type of loan. For example, FHA 203(k) Renovation Loans and Home Equity Loans can have terms up to 30 years, while personal loans or unsecured home improvement loans usually have shorter terms, ranging from 5-15 years.
Does renovation increase house value?
Yes, renovations can increase a home’s value, especially when they focus on high-impact areas like kitchens, bathrooms, or energy efficiency. Well-executed upgrades can enhance your home’s market appeal, potentially leading to a higher resale price. However, not all renovations offer the same return on investment, so it’s important to prioritize projects that add the most value.
Don't rule out that fixer upper just yet!