If your home has been burned in a house fire, we hope you have insurance that will cover the bulk of the damage, if you choose to rebuild your home.
Unfortunately, many times, even with insurance, homeowners are forced to find additional ways to cover the costs of a home restoration after a house fire.
Adding to the pressure, many homeowners only receive 80 to 85 percent of the money owed to them on their fire damage insurance claim – We have a YouTube video about how you can get 100 percent or more from your insurance company. Be sure to check it out. You’ll need every bit of money you can secure if you plan to rebuild your fire-damaged property!
If you find yourself in a situation where it’s simply too challenging financially or emotionally to rebuild your home after a house fire, you may wish to consider selling your fire damaged home “as is” for cash.
However, if you do choose to rebuild your home after a house fire and need funds beyond what your insurance covers, here are some common loan options to explore:
Most homeowners are not aware of the availability of 203k loans for restoring their home after a house fire or for getting funds to purchase a new home. A 203k loan is a loan backed by the federal government and is available to homes that may be considered “uninhabitable” or just in need of significant repairs. To obtain a 203k loan, the homeowner or buyer must have a minimum 640-fico score. They typically only need to come in with 20 percent, and the bank will loan the borrower the remainder for the home purchase, repairs or both, if needed. For a 203k loan, a homeowner or buyer has to provide contractor bids and the lender must approve them.
A big benefit of 203k loans is that the borrower gets their acquisition and repairs cost financed at 5 percent for 20 years and only has to come up with 20 percent for these costs. This compared with other loans where 30 to 40 percent down is required with a hard moneylender at 18 percent interest only. This in addition to coming up with all the cash needed for the repairs.
A conventional loan is a loan that is not insured or guaranteed by the federal government. It is referred to as a non-government sponsored entity (non-GSE). A conventional, or conforming, mortgage loan adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate.
If it is “adjustable,” meaning the loan can fluctuate for a certain period of time, popular types include 3/1 ARM, 5/1 ARM and 7/1 ARM. The loan is set for the first 3, 5 or 7 years and then adjusts for the remainder of the years left on the loan.
FHA or VA Loans
As opposed to conventional loans, FHA loans are insured by the government and VA loans are backed by the government. Down payment requirements are different as well. The minimum down payment for an FHA loan is 3.5%. For a VA loan, the minimum down payment is zero.
Personal loans may come with lower interest rates than credit cards, so funding a big expense like a home restoration with a personal loan could save you thousands of dollars on interest payments.
A bridge loan is a type of short-term loan. It is typically taken out for a period of two weeks to three years pending the arrangement of larger or longer-term financing.
We hope you found this information on the different types of loans you could tap into helpful. It can be expensive to rebuild and restore a fire damaged home. We can put you in touch with reputable restoration companies should you decide to go this route.
If you decide that restoring your home from fire damage is more than you can take on emotionally or financially, please give us a call. We have helps hundreds of homeowners not only survive the tragedy of a house fire, but also thrive after it.
Resources & Support:Having access to the right resources after your home has been burned is very important. Learn more about these resources and access our list of vendors for discounted pricing.
Selling Your Home After the Fire:You may be surprised to learn that sometimes the best and most profitable option is to sell your home after it has been in a fire. Find out why.
Get the Most Money on Your Fire Damage Claim:Your insurance company will offer around 80% of your insurance claim. It's important to know that private claim adjusters working on your behalf can negotiate with your insurance company for much more. Learn how.
Restoring Your Home After the Fire:Restoring your home after a fire can be costly and stressful. But sometimes it is what is best for a homeowner. We have resources that can help you navigate the restoration process.
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