In these scenarios, make sure homeowners are weighing preference vs. resale value. Of course, they want to make a good return on their investment, but they also need to pick what they will like and what will work best for their specific needs. It’s their home, not just an investment.
Research from the National Association of Realtors (NAR) found that refinishing hardwood floors, installing new wood floors, insulation upgrades, basement conversions, and closet renovations had some of the best return on investment. Weigh that against the fact that NAR also found that different projects like painting the interior of the home, or adding an office brought homeowners the most joy. Ultimately, those looking to renovate need to decide what’s most important to them.
Frank Lloyd Wright, the American architect, designer, writer, and educator, stated this perfectly, “If you invest wisely in beauty, it will remain with you all the days of your life.”
Fannie, Freddie, and the FHA all have products for renovations, but these programs are sometimes forgotten about. It’s important that loan officers know the details so they can help borrowers looking to renovate. These products can help cover:
- Labor and materials
- Soft costs (architect fees, permits, licenses)
- Required contingency reserve funds (which may come from the mortgage proceeds or directly from the borrower)
- An amount up to, but no more than, six monthly payments of principal, interest, taxes and insurance (PITI)
- 50% of the cost of materials, which may be advanced to the contractor at closing
To qualify for these products, the project doesn’t have to be a full tear-down. The word renovation, to many people, sounds like it must be a huge overhaul, but these projects also can be updates or enhancements like installing energy efficient heating and cooling systems, improvements to kitchens and bathrooms or even additions.
If you can’t buy the house you love, love the house you’re with. There are plenty of products out there that help homeowners do just that. Being educated about the options can help lenders keep business moving along, even without inventory.