If you have ever seen the movie Money Pit starring Tom Hanks, you can understand how a home of your dreams can easily turn into a money pit. Tom’s character and his wife are in need of a place of their own and find a distressed mansion and fall in love. As soon as they take possession of the home, it begins to fall apart. They spend months renovating the home, while spending a lot of money and ruining their relationship. Fortunately, for the couple the movie has a Hollywood ending and they live happily ever after – we can only hope! In reality, a project that may seem to be a small undertaking can easily turn into a discombobulated mess! Renovating a home can be very costly not just financially speaking, but in other areas of our lives too.
As the housing stock in the US gets older, homes are in more need of repair and updating. Also, with new housing starts at a low not seen since the 1970’s, people are forced to purchase resale homes in areas they want to live in. As Denver becomes more and more populated, many buyers will be purchasing homes that are older and in need of repair. A few weeks ago, Tom Yoswa a home mortgage consultant with Wells Fargo came to our office to speak about a renovation loan product that Wells offers. This product can be used for a new purchase as well as a refinance. Tom has done hundreds of renovation loans and is very knowledgeable about the process. The loan allows the borrower to get a loan for the cost of the property including the costs of renovation as a single loan. As with a normal loan, the lender requires an appraisal to understand the value of the property; however, they will appraise the property based on the values of the neighborhood and the future renovations the borrower is going to do to the home. For example, a borrower purchasing/refinancing a home that is valued at $200,000 and they plan on adding a $35,000 new kitchen and complete a $5,000 bathroom remodel. As long as the comps (comparable sales) in the neighborhood can support the $240,000 loan amount, they should be able to get the loan. I believe that this loan product is one that many borrowers could benefit from, whether you are purchasing a home or refinancing a home. If you would like to learn more about this loan product from Prospect Mortgage, feel free to contact Tom Yoswa at Tom.Yoswa@prospectmtg.com or 303-668-4499.
“Ideas are great arrows, but there has to be a bow” – Bill Moyers