How do you choose between all of the construction financing & loan lenders, options, and terms? Start with the basics. How much money do you need and how much can you get.
Kitchen Remodeling Financing
Once upon a time, homeowners looking to borrow money for a remodel would have to head to the bank to see a loan officer. There are plenty of more options these days. For instance, a mortgage broker has over 200 loan programs to offer, even if you don’t have the greatest credit history. You may find you can borrow more money than you initially thought. Narrow down the options by ruling out the ones that don’t match your finances and needs. Concentrate on those lenders that offer the type of loan you are looking for.
It’s important to determine how much your remodeling job is going to cost. Start with an accurate estimate, as lenders will expect a particular figure before working with you. Break down the bid into labor and materials and then tack a further 10% on for unwelcomed surprises. You know how much you need, but will you get it? Lenders love to make promises in promotional materials, but your lending amount will depend on your income, credit rating, and loan-to-value ratio. These factors will determine the length of the loan, and the interest rate. You’ll get the best terms and rates if you have an A rating, which means you haven’t had any late payments in the previous 12 months, and you don’t have any maxed-out credit cards.
Loan-to-Value Ratio Information
The LTV is used to determine the loan amount. It is a percentage of your home’s appraised value. The limit is 80%, to put this into monetary terms- for a home valued at $125,000 it will be $100,000. Lenders will subtract the balance of the mortgage from that amount. So, assume the balance is $60k, the largest loan you will be able to obtain is $40,000. If you have an excellent credit rating, you may be able to base it on more than the typical 80% of the LTV. If you have a poor credit rating, you may be looking at just 65% of the LTV.
A high income may not mean a larger loan, because you may also have high expenses. Your debt repayments and house payments should be less than 36% of your total gross income. Additionally, your house payment (which includes insurance, interest, taxes, and principal) should amount to no more than 28% of your total gross income.
Interest Rates Information
Mostly, the less attention you need to pay the higher loan you can afford to pay. One way to get a lower rate is through an adjustable-rate mortgage. ARM’s start with lower interest rates because lenders aren’t locked into long-term fixed rates. Though, this means the prices can change- so every 6, 12, 24 months and so on there can be interest changes. There are usually year increase caps, but if the rates are climbing quickly, your payments will, too.
When you work with Remodel STL, you collaborate with experts in construction, a company that is popular in St Louis for the stunning designs we create, as well as top class craftsmanship. We offer free quotes and an extremely convenient quoting system to make the process as simple as possible for you. Make an appointment today so that we can begin discussing your remodeling project.
It’s important to determine how much your remodeling job is going to cost. Start with an accurate estimate, as lenders will expect a specific figure before.
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