If you're a homeowner with a fixer-upper, you might be wondering, "Does Rocket Mortgage offer rehab loans?" The short answer is yes, but it's not as straightforward as applying for a typical mortgage. Rocket Mortgage, also known as Quicken Loans, offers a few options for homeowners looking to finance home repairs and renovations.
Rocket Mortgage is known for its user-friendly online mortgage process, and while they don't offer a specific 'rehab loan' product, they do provide a couple of loan options that can be used for funding home repairs and renovations. Let's dive into these options and understand how they work.
FHA 203(k) Rehabilitation Loan
The Federal Housing Administration (FHA) 203(k) loan is a popular option for homebuyers and homeowners looking to finance home repairs and renovations. Rocket Mortgage offers this loan product, and it can help you fund both non-structural and structural repairs.
The 203(k) loan allows you to finance the purchase price of the home and the renovation costs into a single mortgage. To use this loan, you'll need to work with a 203(k)-approved contractor, and the repairs must be necessary to bring the home up to FHA property standards.
FHA 203(k) Loan Types
The FHA 203(k) loan comes in two types: the Standard 203(k) and the Limited 203(k).
Standard 203(k): This is the full-featured 203(k) loan, which allows you to finance home repairs that exceed $5,000. The minimum repair cost is $5,000, and there's no maximum limit.
Limited 203(k): This loan is designed for lighter renovations. You can finance repairs that range from $5,000 to $35,000, with a minimum repair cost of $5,000.
FHA 203(k) Loan Requirements
To qualify for an FHA 203(k) loan with Rocket Mortgage, you typically need a down payment of at least 3.5% of the home's purchase price or appraised value (depending on which is higher).
Additionally, the total debt-to-income (DTI) ratio must not exceed 43%, and the loan term will be up to 30 years. The maximum loan amount is based on the FHA loan limits for your area.
Home Equity Loan or Home Equity Line of Credit (HELOC)
If you're already a homeowner and need funds for home repairs, you can tap into your home's equity with a home equity loan or HELOC from Rocket Mortgage.
Both loan types allow you to borrow against the equity you've built in your home. The main difference between the two is that a home equity loan provides you with a lump sum, while a HELOC gives you access to a line of credit that you can draw upon as needed.
Home Equity Loan
With a home equity loan, you'll receive a lump sum, and you'll make fixed monthly payments over a set term, usually between 5 and 15 years. Rocket Mortgage offers terms ranging from 5 to 30 years.
You can borrow up to 85% to 90% of your home's value, minus your current mortgage balance and other liens. Closing costs, origination fees, and interest rates are typically lower than personal loans, but higher than primary mortgage rates.
Home Equity Line of Credit (HELOC)
A HELOC works like a credit card, giving you a line of credit that you can draw upon as needed. You'll make interest-only payments while you're drawing funds, and once the draw period ends, you'll switch to principal and interest payments.
Rocket Mortgage offers HELOCs with variable and fixed-rate options. You can usually borrow up to 85% to 90% of your home's value, minus your current mortgage balance and other liens. Keep in mind that HELOCs often have adjustable interest rates, and your payments may increase if rates rise.
In summary, while Rocket Mortgage doesn't offer a specific 'rehab loan', homeowners have options for financing home repairs and renovations. Consider the FHA 203(k) loan if you're buying a fixer-upper or need extensive repairs. If you're an existing homeowner, a home equity loan or HELOC can help you tap into your home's equity for repairs. Be sure to compare loan terms, interest rates, and closing costs before making a decision.
Ready to get started on your home repair or renovation project? Reach out to a Rocket Mortgage Home Loan Expert today to explore your financing options and make your home improvement dreams a reality.