Are you dreaming of a home that fits your style perfectly but can’t find one on the market? The good news is, you don’t have to settle for “almost perfect.” As a mortgage broker, I’m excited to share how you can transform a home that needs a little TLC into your dream house using the Purchase Plus Improvements Mortgage. This smart financing solution lets you roll renovation costs right into your mortgage, eliminating the need for separate loans. If you’re ready to maximize your home’s potential, keep reading to discover how this mortgage works and how it can benefit you!
What is a Purchase Plus Improvements Mortgage?
A Purchase Plus Improvements Mortgage allows homebuyers to finance the cost of renovations or repairs and add them to their mortgage. Instead of taking out a separate loan to cover renovation costs, this program allows you to consolidate everything into one convenient mortgage. This can save you time, money, and the hassle of juggling multiple financial products.
Even better, if you’re thinking about adding a rental suite to your property, some lenders allow you to use the projected rental income from that suite to qualify for a higher mortgage amount. Want to learn more about using future rental income? I’ve covered that in another blog post here: “Exciting New Mortgage Product: Use Future Rental Income to Qualify for More!”
Step-by-Step Guide: How to Use the Purchase Plus Improvements Mortgage
1. Get Pre-Approved
The first step is getting pre-approved for your mortgage. This ensures you know your budget for both the purchase price and the renovation. By knowing exactly how much you can borrow, you can make more informed decisions while house hunting. Not sure where to start? Contact me today to discuss your mortgage options.
2. Find Your Home
Now that you’re pre-approved, the fun begins—house hunting! Look for a home in a great location that fits your needs but might need some upgrades. Whether it’s an outdated kitchen, unfinished basement, or old bathrooms, the Purchase Plus Improvements mortgage helps you cover those renovation costs.
3. Get Your Offer Accepted
Once you’ve found your home, work with your realtor to get your offer accepted.
- Get a Quote for your Renovation
Immediately after your offer is accepted, you’ll need to bring in a contractor to provide an estimate for the renovations you want to complete. This quote will be essential for your lender to approve the loan. If you are planning to do the renovation yourself, you will need to get quotes for the materials you plan to use.
5. Get Approved
Once your lender reviews the documents and renovation estimates, they will approve your mortgage. Congratulations—you’re officially on your way to owning and renovating your dream home!
How Does the Funding Work?
On possession day, the lender will release the funds for the property purchase, but the renovation funds are held until the work is completed. You’ll need to cover the renovation costs upfront, which can be done through your contractor or personal funds. After the renovation is done and an appraiser has confirmed the completion, the lender will release the funds to reimburse you.
6. Renovation Inspection
After the renovation is finished, the appraiser will perform an inspection to ensure all work has been completed according to the plan. There is typically a small fee for the inspection, so keep that in mind as part of your budget.
7. Release of Funds
Once the inspection is approved, the bank will release the renovation funds, replenishing your bank account. This is the moment where your renovation costs are reimbursed, and you can fully enjoy the upgrades to your new home!
Key Details You Need to Know
While the Purchase Plus Improvements Mortgage is an excellent option, there are a few important details to keep in mind:
- Down Payment: Your down payment is based on the entire project cost (home price + renovations). For example, if your home costs $350,000 and renovations cost $30,000, your down payment will be calculated based on the $380,000 total.
- Timeline for Completion: Most lenders expect the renovations to be completed within 120 days. It’s important to have a clear renovation plan and schedule to meet this deadline.
- Borrowing Limits: Most lenders allow you to borrow up to 10-20% of the home’s purchase price for renovations, with a maximum of $100,000. Be sure to factor this into your renovation plans.
- Eligible Improvements: Renovation funds can only be used for projects that improve the home’s structure, such as kitchens, bathrooms, HVAC or finishing basements. Items like appliances or landscaping are not eligible under this program.
- Lender Flexibility: Some lenders offer flexibility by allowing up to three partial payments (draws) during the renovation process. This can be helpful if your contractor needs payments at various stages of the project.
- Doing the work yourself: You can do the work yourself but you will only be reimbursed for the cost of the materials, not your labor. The lender may have some questions about your qualifications to do the renovation during the approval process as well.
Is a Purchase Plus Improvement Mortgage Right for You?
This mortgage is an incredible tool if you’re looking to buy a home that needs updates. It allows you to make improvements and build equity right from the start, without the need for separate financing. Whether you’re upgrading outdated fixtures, modernizing your kitchen, or finishing a basement, this mortgage provides the flexibility and financial backing you need to make your dream home a reality.
Let’s Build Your Dream Home Together
If you’ve found a house that’s almost perfect or if you’re still on the hunt, a Purchase Plus Improvements Mortgage could be the solution. Reach out to me today to discuss how this option can help you turn any home into your dream home. I’ll guide you through the process, from pre-approval to renovation completion, making sure everything is smooth and stress-free.
Ready to explore your options? Contact me now at https://jillholland.youcanbook.me/ and let’s get started!
Hi, I’m Jill, your mortgage pro. I am here to make the world of mortgages less confusing so you can feel confident in your financial decisions. Through my blog, I aim to provide you with the knowledge and guidance you need to make informed decisions. Your financial peace of mind is my top priority.
