Renovation Money Smarts
You’ve been dreaming of that charming house that backs up to a park and you could have totally pictured yourself living until you saw the wood paneling and shag carpet throughout. Or maybe your existing home is perfect except the laminate flooring in the kitchen and that ancient deck out back.
When considering a renovation project, financing and budget are going to be at the forefront of your mind. But not to worry, where there is the dream of a beautiful home, beneath layers of old wallpaper, there is a loan product- FHA 203 K Streamline. It is designed to allow buyers and refinancers the option to renovate without blowing all their savings on home improvements. Essentially, this loan allows you to roll in the costs of home improvements* and the purchase price of your home into one loan and closing.
It is important to note that not all home improvements are covered by the FHA 203 K Streamline loan, for example, adding a garage or making structural changes would not be covered by this loan. However, there is the option of the FHA 203 K Standard loan, which does not limit the scope of repairs.
Once the financing is in line, figuring out the best use of that money is your next step! But how much should you invest in different projects? Bredemeyer’s rule of thumb is to spend no more on each room than the value of that room as a percentage of your overall house value.
Here’s how the percentages break down for each room:
Kitchen: 10% to 15% of house's value
For example, a kitchen renovation budget for a $300,000 house is $30,000 to $45,000
Master Bathroom Suite: 10% of house's value
For example, a master bathroom suite renovation budget for a $300,000 house is $30,000
Powder Room/Bathroom: 5% of house's value
For example, a powder room/bathroom renovation budget for a $300,000 house is $15,000
Finished Attic or Basement: 10% to 15% of house's value
For example, an attic or basement finishing budget for a $300,000 house is $30,000 to $45,000
Other Rooms: 1% to 3% of house's value
For example, a living room, dining room, or bedroom renovation budget for a is $300,000 house is $3,000 to $9,000
Patio, Deck, Paths, and Plantings: 2% to 5% of house's value
For example on a $300,000 house, the outdoor upgrades budget is $6,000 to $15,000
*Not all home improvements may be covered, please see your loan officer for details.