Real Estate Q&A |

Real Estate Q&A

Doug Van Etten
Free Press Real Estate Columnist

Q. At an open house one recent weekend my husband and I were told by the Realtor that if we were to write a purchase offer on that house we could possibly roll home improvement costs into the loan? What can you tell us about that kind of loan?

A. The Realtor pointed you in a great direction. According to one of my lending resources, Sherry Smith at Cherry Creek Mortgage, while not a lot of buyers seem to be using these programs in today’s market there are both FHA and conventional loan programs that allow upgrade or remodel costs to be rolled into the loan for a qualified buyer and property.

I will tell a little about these programs and at the same time I suggest you talk with a local lender to get more details.

I say “local” lender for at least a couple of reasons — 1. The local mortgage loan originator will know how these programs are being used in our market; and, 2. Any chance I get, I urge using local resources to keep local business people employed.

The FHA (Federal Housing Administration) 203k streamline allows for adding improvement costs on top of the basic home loan. The purchase price and the improvement cost estimate must be able to be supported by an appraisal. In other words, if the purchase price is $205,000 and the improvement amount you seek to borrow is $25,000, the house — in its future improved state — must be worth $230,000 according to an appraiser.

Using the FHA 203k program, a borrower can add as much as $35,000 to the qualifying loan amount. According to Ms. Smith, her company, for example, will disburse as much as half the rehab money at the time of closing so the project can get started, then pay out the rest when repair cost receipts are turned in.

FHA loans are most likely to be used by first-time buyers. While the conventional loan program described below is also available to first timers, a conventional loan is more often used by repeat buyers.

“Home Style Renovation” (HSR) is the name of the conventional loan program.

Very similar to the FHA program in what is allowed, a property purchaser can borrow for such upgrades as kitchen and bath remodels, flooring change-outs or upgrades, window and/or door replacement or foundation repair. The money may even be borrowed for such seemingly non-essential expenses as solar panels, an in-ground swimming pool installation, or repair and outdoor landscaping.

The HSR program allows money to be applied to an owner occupied or non-owner occupied home and all the way up to a four-plex. Single family free-standing homes as well as attached homes and even condos may all qualify.

Speaking of qualifying for both of these loan programs, credit scores are one of the principle drivers of a borrower’s qualification.

I suggest if you have not already been pre-qualified for a mortgage loan, take that step now. While you are meeting with a lender for your basic qualification, most of them can provide you with more details on these loan enhancement programs. Then, if that house you looked at is well priced to qualify for this type of financing, I suggest you move quickly to make a purchase offer since well-priced properties in our current home sales market are selling fast.

GJ Free Press columnist Doug Van Etten is a local Realtor with Keller Williams Colorado West Realty. He has been helping buyers, sellers and investors with their real estate needs since the early 1990s— first in Anchorage, Alaska, and for the last three years in the Grand Valley. To submit a question for this column or for your personal real estate needs, contact Van Etten through his website,

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