• In the United States, there are several loan options — in addition to personal loans — that can be used for home renovation or repair projects, even those that involve large expenses.

Whether to renovate, remodel or repair a home, in the United States there are several loan options that can be adjusted to the needs and possibilities of each applicant, providing a series of advantages in addition to financing your project. Some of these options may be related to a mortgage or require the use of the same house that is intended to be remodeled or repaired as collateral. On the other hand, some of these loans can even be used to purchase a low-cost home, as long as the applicants meet the associated requirements. However, in general terms, they are all very useful for reforms or repairs in properties already acquired.

Although many people do not consider it, home improvements and repairs are usually a good investment in the United States because they increase the value of the property, generating long-term benefits, in case the applicant decides to move in the future and sell it. In that sense, loans for this purpose represent the most valuable tool, especially if you do not have enough capital or do not want to use the funds saved for the future.

What are the home renovation loan options that I can apply for in the United States?
In the country there are several loan options that can be used for the renovation or repair of a home. Some of them are granted by the government of the country and others can be requested from private financial institutions or banks. Of all of them, personal loans are usually the option that does not require a guarantee, the others involve the use of the property to meet this requirement:

1. Fannie Mae HomeStyle Loan

Granted by the government, this option allows the beneficiary to refinance existing mortgage loans by obtaining money for improvements or repairs. It can also be requested for the purchase of a house that needs improvements or repairs. Its main advantage is that it reduces closing costs and makes the beneficiary also reduce the time in which the debt will be covered, especially in those cases with pre-existing mortgages. This is because the loan covers two needs at the same time: the mortgage and the repairs or improvements.

The Fannie Mae HomeStyle loan is also convenient because the applicant will not have access to the funds as they go directly into an account that is used to pay workers for repairs. However, it only covers 75% of the total cost and 50% in the case of manufactured homes. This loan requires a good credit score (at least 620).

2. FHA 203(k) loans

FHA 203(k) loans — also granted by the government — come in two types: those capped at $35,000 and those used for major repairs and therefore tend to be more generous. Although the application process can be difficult, it is important to keep in mind that there are specialized advisors to guide people through the process with the intention of obtaining the best results.

To obtain this type of loan, the applicant must have a credit score of at least 580 and meet certain conditions:

a.) Do not make repairs on your own.
b.) Do not use the funds for luxury improvements.
c.) Spend the loan on the main home.
d.) Have a mortgage insurance premium (MIP).

3. Home Equity Loan and HELOC Loan

To apply for these types of loans, people must use their home as collateral. They are often particularly helpful for people with other home improvement debt, especially home equity loans, because they require a fixed-rate monthly payment for the life of the loan. HELOC loans, although similar, have variable rates, therefore, the amounts can increase, a characteristic that makes them riskier, especially if you add the fact that they allow you to renew the credit limit.

According to experts, it is important to consider this type of credit when the repair or remodeling that is planned to be done really increases the value of the home. When people do not make the corresponding payments, they can lose their home.

4. Refinancing with cash out

This type of loan is designed to refinance a previous mortgage for a larger amount, allowing the beneficiary to withdraw the difference in cash. It is usually beneficial when the applicant has a high interest rate on their previous mortgage and the refinancing offers a lower one, allowing them to meet the payments more comfortably while carrying out home repairs or alterations.

Refinances are used for other purposes as well. In that sense, they are not exclusive to home improvements or repairs. They also require the house as collateral and the money granted can be used for other purposes that do not have to do precisely with housing.

5. Personal loan

Personal loans, like the previous ones, can also be used for multiple purposes, including paying for home improvements or repairs. They can be obtained through credit unions, banks or even online lenders, therefore they are easier to process in the short term. To obtain them, the credit score is usually important, being easier for those with scores greater than 700, but it is not an exclusive requirement because some providers grant them to people with low scores.

Their advantage lies in the fact that they have low interest rates and do not imply the use of the house as collateral, but they are usually counterproductive because they generate additional fees.

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