Question: I am thinking about remodeling my home. I have collected a lot of ideas but don’t know where to start when it comes to funding them. What do you suggest?
Answer: Before you start any remodeling project, be sure you have secured the funding. Will you be paying cash? If not, financing will be part of the process. Starting early can be very beneficial. Tamara and Ryne Jakubos of Team TRY at Fairway IMC, a Rosie on the House certified partner, say the process starts with an application. Next comes a full review of your application and credit qualifications that help to assess your strengths and weaknesses.
The development of an action plan is next. Mortgage planning is a great place to start whether your credit needs improvement, you need guidance on savings, or you need direction on the next steps.
Tamara Jakubos tells us the ultimate goal is to get into the right loan for your needs with the best terms possible. There are several types of loans, including but not limited to:
Traditional purchase loans: buying a new or existing home and borrowing/obtaining a loan for a certain amount against what the home is worth (with options as low as 3% down for first-time homebuyers).
Rate/term and cash-out refinances: refinancing your existing mortgage to change the rate and/or terms or to pull cash-out.
Renovation loans (including purchase and refinance options): buying or refinancing an existing home and wrapping the cost of renovations right into your first mortgage.
Down payment assistance: programs that provide a certain percentage of assistance to use towards the down payment and/or closing costs; additional eligibility criteria apply.
Specialty products (jumbo loans, debt-service coverage ratio loans, bridge loans, etc.): higher loan amounts, investment loans using only income from the subject property to offset the mortgage for qualifying, small, temporary loans that provide funds between home sales, etc.
There are a multitude of options, and what makes sense for each person varies greatly depending on individual credit qualifications. Homeowners need to assess the goals for their homes. The market is constantly changing, and it is of the utmost importance to work with a seasoned professional you know, like, and trust to guide you through your home loan options and what that process looks like.
Q: What do I need to take into consideration when financing a remodeling project?
A: The process takes time and starts with important questions. Ask yourself these questions:
How long do I plan to live in this home?
What is my credit score? If it is low, what do I need to do to improve it?
What is my budget? Do I have a realistic idea of what I want to do and what it will cost? Be sure to have some idea of what your project will cost and what you can afford before you go shopping.
How much do I have available for a down payment?
What will my monthly payment be, and what am I most comfortable with? Is there other debt to consider for consolidation?
Just as it takes time to develop a design you are happy with, it is just as important that you are prepared for the monthly expense tied to it. Don’t delay exploring your options or getting the loan process started, as it is extremely important to know your budget upfront and what your options might look like to finance your project.
The timing of your project, or even the purchasing of a home, is a topic often discussed. How many times have we heard, “Oh, I should have bought back then,” or, “I think I should wait for the market to cool down.”
In Ryne and Tamara Jakubos’ professional opinions, “Now is always the best time.”
If you are renting and paying your landlord, consider the amount of rent money you will be paying out while you wait to invest that money in your home.
In the face of a recession and economic turmoil, how can you tackle home improvements? Financial planner Eric Maldonado told MarketWatch to start with an emergency fund. Veuer’s Maria Mercedes Galuppo has the story.
