Home Improvement Loans in Alabama

How do home improvement loans work in Alabama?

There are several factors that could impact which type of home improvement loan works best in Alabama. Each type of loan works differently and the requirements can vary.

If you already own your home, then you could consider a home equity loan, home equity line of credit, or a secured or unsecured personal home improvement loan. These loans are specifically designed to help borrowers obtain the funds they need to make renovations, upgrades, and repairs on their existing homes.

Here is a quick breakdown of how these popular loan types work.

• Home equity loan: If you have a minimum of 20% equity in your home, meaning that the mortgage balance on your home is equal to or less than 80% of the home's appraised value, you can borrow up to 85% of that equity in the form of a home equity loan.
• Home equity line of credit: If you have a minimum of 20% equity in your home, you may be eligible for a revolving line of credit called a home equity line of credit. A lender can grant you a credit line with a credit limit depending on the amount of equity you have in your home. Borrow as much or as little of that credit line as you need to make the purchases and hire the professionals you need to complete your home remodeling project. You only need to pay back what you borrow and interest is only charged on that amount. The more you pay back, the more you can borrow again at a future date. Similar to a credit card.
• Unsecured personal home improvement loan: Unsecured personal home improvement loans are extended based on a borrower's creditworthiness. With loan amounts up to $100,000 available, depending on credit score, and no collateral required - these are a popular option. Compare offers with no credit impact at Acorn Finance. Typically, loans are funded as a lump sum minus fees and repaid in fixed monthly installments with interest.
• Secured personal home improvement loans: Secured personal home improvement loans are similar to unsecured loans in terms of how they work, but they are secured by collateral. As a result, they may take longer to fund and involve more risk for the borrower.
• Section 504 Home Repair Program: A loan of up to $40,000 for very-low-income homeowners to repair, improve, or modernize their homes or a grant of up to $10,000 for elderly homeowners to remove health and safety hazards from their homes.

If you do not own a home but you are looking to purchase an older home and renovate it, then you have a number of other options available to you in the state of Alabama.

Here is a quick breakdown of commonly used home renovation loans.

• Fannie Mae Homestyle Renovation Mortgage: Borrowers can obtain up to 75% of the estimated post-renovation appraisal value with down payments as low as 3% for borrowers with a minimum credit score of 720 or higher. Borrowers with a credit score as low as 680, may be required to put in a downpayment of up to 25%. Loans come with terms of either 15 or 30 years. All home improvements must be completed within 12 months of the mortgage closing.
• Freddie Mac CHOICERenovation Mortgage: A loan program for individuals looking to purchase and rehabilitate, renovate, repair, or restore an existing home. Borrowers with credit scores of 720 or higher may qualify for the loan with only a required down payment of 5%. Borrowers with credit scores as low as 620 may need a down payment of up to 25%. Loan terms can be 15, 20, or 30 years.
• FHA 203(k) Mortgage: The FHA203(k) loan program may be a good option for borrowers with lower credit scores who are looking to purchase an older home and renovate it. FHA 203(k) loans require a 3.5% down payment for borrowers with a credit score of 580 or higher and a down payment of 10% for borrowers with a credit score somewhere between 500 and 579. These loans can be for up to 110% of the estimated home value after the renovations are completed. Loan terms can be for 15,20,25, or 30 years.

VA Renovation Loan: VA renovation loans are reserved for veterans, surviving spouses, or active duty service members who have a minimum credit score of 620 and who are in need of funds to renovate an older home. All work must be completed by VA-approved contractors since the funds are paid directly to the contractors by the federal government. Little to no down payment is required and closing costs are limited.

How do you apply for a home improvement loan in Alabama?

Before you apply for a home improvement loan in Alabama, the first thing you should do is determine what kind of home improvement loan works best for you. Once you know the type of loan, then you can narrow your search to lenders who specialize in the loan type you are seeking.

Whether you are looking for a home equity loan or a personal home improvement loan, the next step is to prequalify. Once you complete a prequalification application, you can start to receive personalized loan offers from lenders that will show you how much you can expect to pay in interest, monthly payments, and any other potential fees. You can compare the details of each loan offer side-by-side and go with the lender who offers you the best loan for your needs.

How do you find the right home improvement loan in Alabama?

Advertised rates are one thing - but real rates you qualify for are another. The best way to find the best home improvement loan in Alabama based on your actual credit score and history is to compare offers. Checking offers can sometimes impact your credit score so be aware of that when applying for loans. One of the best ways to choose the right home improvement loan is to start by exploring offers at Acorn Finance. Our network of top national lenders can extend personalized home improvement loan offers with no credit impact!