You may be able to save a little money on labor by doing some of the renovation work yourself, depending on the terms of the renovation loan program. That’s one area where the national renovation programs I covered above differ.
With a Fannie Mae HomeStyle Renovation loan for a one-unit property, DIY improvements can make up to 10% of the post-renovation value, as long as you have your lender’s approval. This allows you to save money on labor and finance just the cost of the materials, along with contingency funds in case you need to hire someone to finish the work. You can’t include funds to “pay yourself” for your labor. If you have money left in your financed amount after completing the work, you can apply it to the balance of your loan or make more improvements.
The Freddie Mac CHOICERenovation program allows you to do some work yourself as long as your loan is also part of the Freddie Mac Home Possible affordability program. In this case, the work you do – also known as “sweat equity” – will count toward your down payment and closing costs. The value of your sweat equity must be estimated by an appraiser before you begin renovations, and your DIY work must be inspected and certified by an appraiser when complete.
Any renovation loan program that allows DIY work may include restrictions on exactly what types of DIY work is allowed. Your program may allow you to paint the interior of the house, for example, but require all electrical work to be done by a licensed electrician.
The upshot? If you’re handy and/or willing to put in the time and effort involved with working with a contractor and managing the paperwork, a renovation loan might just make the difference for you in terms of finding and affording a home!
HomeStyle® and HomeReady® are registered trademarks of Fannie Mae. CHOICERenovation® and Home Possible® are registered trademarks of Freddie Mac.