If you are a first time buyer, home renovation may be something you are considering as a means of adding value and improving your home in terms of safety, comfort and appearance. While these steps will add value, you need to be very cautious in deciding what kind of renovations you are going to take on to ensure you do not end up with a nightmare.
As you read this, you may find that many things you thought were important, were not as important as you thought they would be. This is why it is important to understand the process by which you will qualify for the loan. In terms of loan to equity ratio, the number one thing that determines your loan-to-value ratio is your credit score. Regardless, of what you see in lending ads, whether you can get a loan based on your credit score or how much loan you can get, all depends on your FICO rating, loan-to-value ratio and how much income you earn.
Understanding Various Aspects Of The Loan
Now, let’s focus on another aspect of the loan to equity ratios: the amount of your down payment. Home renovation loans require more down payment for home owners who are financing their new homes, as opposed to loans for the purpose of rehabbing older houses. Remember that for a home renovation loan, a real estate appraiser will need to be called.
As you consider the home, and its future, it is important that you understand the way the property values in the area have changed over the years. Real estate values in certain areas are going up while others are going down. This means that you are in danger of losing your home if you choose a renovation project without doing your homework.
Know The Type Of Property And Its Value
Another important factor is the type of property that you are going to buy. If you’re looking at the market for a vacation home, you should understand the basics about the market for such homes, and the things that make a property desirable for a tourist.
Of course, before you begin the necessary steps to get a home renovation loan, you should ask some questions. First of all, ask for quotes from different lenders. You may be surprised to find out that there is a significant difference between quotes offered by different lenders, and you should choose the lender that offers you the lowest quote.
Be Crystal Clear With The Lenders
Next, be honest with yourself. When you ask the lenders, be as detailed as possible with the questions you ask them. You don’t want to hide any details about the project, because that would affect your credit score and your ability to get a loan from them later on. You’ll also need to be able to explain your reasons for the purchase and the costs involved in the renovation.
This is also something to discuss with your lender, because he will be able to provide you with suggestions about getting loans for people with similar credit histories to yours. As long as you pay on time, you can get the loan regardless of your credit.