When we began the actual loan process, there was much turmoil over which loan to use.
We, of course, would have loved to pay with cash but really, it just wasn't possible. We did however run across a few programs that seems very helpful for our situation.
Since my husband just graduated with his Master's degree, that also meant we graduated with a pile of student loan debts and no savings accept an emergency fund. Searching for a job was difficult but he did land a job in our home town, and a job is a job right? We are happy to have it, we will be happy for the experience he's getting and happy to be able to move up in the company eventually(hopefully... hint hint) :)
With that said, we still had to figure out how to get from under the pile of debt, and fast. Our solution was to move closer to work and save a lot in gas money then roll that into the debt snowball or to find a less expensive rental/mortgage payment within the same area to gain more traction with our debt snowball. We weren't really finding either. BUT we did end up finding BOTH! And we were so happy to be able to meet both ends of our goal equaling lots more saved money to go into the debt snowball.
Now back to the loans, for anyone new to the real estate market, there are homes qualified for "Home Path" and "Home Path Renovations" loans. These loans offer no PMI(Private Mortgage Insurance-you normally have to pay if you don't have 20% down), seller paid closing costs, and as little as 3% down. With the renovations loan, you can get up to 35% of the finished value of the home to put towards renovations, repairs, and remodeling. That was the loan we thought was perfect for us. After much searching and comparing different lenders and fees... we went with one lender who was not in our home town... not a HUGE mistake... but big enough that we did switch to a new lender.
When all was said and done, we went from Home Path Renovations, to just Home Path, to FHA, and finally to straight conventional.
We did this for many reasons:
1)Home Path Renovations comes with a little higher interest rate
2)Home Path Renovations side makes it a pain... you have to get bids and submit bids for EVERYTHING you plan to do, even if you are doing it yourself... and you have to take out drafts each time.
3)With Home Path and Home Path Renovations, sure, you don't have to pay PMI but that's just because they build that right into the loan with the higher fee.
4)One lender told me that there was about $2500 in fees for doing the proposed $7500 in renovations(hmmm... that is half of the $5000 left, no thanks!)
5) FHA... this was seeming like a great idea and we still had the necessary funds because it was a low interest rate and low down. The snag, you HAVE TO PAY PMI FOR 5 YEARS! Normally when you reach 20% of your loan being paid off you no longer have to pay PMI. I guess that was changed recently with FHA. We have plans to pay off the entire amount in 5-6 years so we'd be WAY over paying in PMI.
So... back to straight Conventional for us. The down side is that now the remodel had to either come out of pocket or be financed some other way. We have done as much as we can out of pocket but remember we were graduating from college and broke(not to mention we just had our third child). So here we are financing our remodel with Home Depot's Project loan plan. They lure you in with 6 months no payments and no interest. We like it too... because we will have it paid off by then! LOL! Thank you Home Depot for letting us borrow money for free. We have it completely budgeted out to be paid off BEFORE THE 6 MONTHS ARE UP! Otherwise we'd be paying 13.99% on what we borrowed. That's just not going to happen!
Anyhow, we are doing all new floors, appliances, cabinets, doors, light fixtures, and painting. We struck a deal at Home Depot. They allow you to submit your proposed order to what they call the bid room. It has to be over $2500 to be able to submit it. Well, I bet you guessed it, ours sure is! We have a hefty list.
We have cut out things here and there to be a little tighter but all in all we were guessing that appliances, cabinets, and carpet would be about $4000. I'm getting so off track.... ok so Home Depot had a sale on appliances. 10% off $299 or more for each appliance. Also they ad match and beat it by 10% too. Sweet. so our estimated order for appliances was $1900. That included a $699 fridge, a $499 electric coil range, a $199 over the range microwave, a $399 dishwasher, and a $349 dryer- Then 10% off all that so about $1900. We ended up switching out the microwave for just a hood for $40. We didn't get a dryer(we'll buy one on craigslist)... so minus $493 making it about $1400. Well, we price matched a range from Sears which happens to be a WAY better range, electric flat top self cleaning one and got it for $348 instead of the lower class range for $385. YEAH! That was awesome!
Then when we went threw the checkout, they stacked another 10% off appliances-by mistake but they said they would leave it because the register allowed it! Sweet... another $132 in savings! so we ended up paying about $1250 for all the appliances. Wish I would have had the dryer added to it! LOL!
The cabinets were already 20% off so we only paid $514 for those, we are just doing new bottom cabinets and I'll be painting and finishing them myself!
All in all, we are UNDER budget by about $750 for what we thought we would spend! YAY!
So my thoughts after this big purchase today is that if I had been paying attention to the cues, I probably could have bartered a bit better on prices with Home Depot because they were so relaxed about it all. Seriously they were great to work with.(We just have to make sure that loan is paid off before the 6 month mark!) Just a tip for anyone else out there possibly going through a remodel.
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