Home Renovation Loan and Escrow

What Is An Escrow?

“Escrow” in home lending terms is an account set up and managed by a lender to pay for expenses related to your property. The most common escrow sets aside funds to pay for yearly property taxes and/or homeowner insurance premiums. By having these funds available, the owner and the lender are assured payments are being made and the home renovation loan remains in good standing.

Escrow accounts are maintained separately from your home loan balance. While not always required, individual lenders can choose to require it as a condition of the home renovation loan. Even when you are not required to have an escrow account, it may be smart to request one as it’s a good way to ensure your payments are current.

There are home renovation loan programs that allow money to be set aside for purposes other than insurance premiums and property taxes. One example is a repair escrow. These are typically made at the time of purchase or refinance. As the name suggests, funds are set aside to take care of repairs or renovations. Sometimes this is a necessary step before closing on a loan.

These escrows often are included as part of a home renovation loan. A lender can take the value of purchase or refinance, add the funds needed for repair or renovation, and roll them into a single loan, such as those detailed on this website. Such arrangements allow the borrower to avoid paying two sets of closing costs and escape the high interest rates of short-term lending.

Buyer / Seller Funded Repair Escrow

Use on an FHA or conventional loan. It can also be used on a VA loan, but only if the seller is funding the repairs. Repairs do not have to be appraiser-required but the appraisal must be subject to those repairs being completed.

EZ “C”onventional

Use on conventional loans for both appraiser-required repairs or repairs the borrower wants done to the property. The repairs must be non-structural in nature (no exceptions) and they must be attached to the property and add value.

HomeStyle® Renovation Loan

Use with conventional loans for both appraiser-required repairs and borrower-requested repairs. HomeStyle can also be used on second homes and investment properties. The repairs financed can be structural in nature or cosmetic, but they must be attached to the property and add value. The only time appliances (stove and dishwasher) may be included in the renovation is if there is a full kitchen remodel including cabinets and countertops and the appliances (stove and dishwasher) will need to be built in or attached to the property.
HomeStyle® is a registered trademark of Fannie Mae.

Jumbo Home Renovation Loan

Use a jumbo home renovation loan for either appraiser-required repairs or repairs the borrower wants done to the property. The repairs must be non-structural in nature (no exceptions) and they must be attached to the property and add value.

Pool Escrow

Use on a conventional loan (purchase or refinance) to include the cost of a new swimming pool.

Weather-Related Escrow

Use on an FHA or conventional loan. These loans can also be used on a VA loan by exception only if the seller is funding the repairs. Repairs do not have to be appraiser-required but the appraisal must be subject to those repairs being completed.

 

Looking for a home renovation loan? Contact Jeff Berman “The Mortgage Go To Guy”, at 214-239-8010 or complete the form below. As one of the best mortgage consultants in Dallas and the surrounding areas, he will work hard to find the loan program and solution for your dream home.

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