Home Improvement Loans are also known Rehabilitation Loans. You may have heard of 203K loans. This a an FHA loan that has the ability to obtain a home and get money for improvements. Things like new siding, new roof, or even cosmetic stuff like paint and carpet.
Most often used when a home will not finance because there are problems with the home that a traditional loan may call to be fixed and the buyer and seller on a purchase can not fix before closing. This is normally a problem and in many cases the deal dies because the lender requires the repairs to be fixed. In a Rehabilitation loan the repairs can remain untouched until "after" the loan closes.
Here is an example. Lets say you find a home that costs $90,000. There is a roof that needs to be repaired that will cost $10,000. You would put down 3.5% ($3,500) of the sales price and the repairs ($100,000). The appraiser will complete the appraisal as if the repairs were done even before you close the loan. By doing this the lender will accept the appraisal and the loan will close. The seller gets paid and you can now move into the home. You then have the roof repaired and the contractor will get paid by proceeds that have been held in an account by the lender.
For more information on how this process works please contact us for a free consultation.