Finding the best home improvement loan requires a little thought and some investigation on your part. In addition to a low interest rate, you should look closely at the other terms offered by different lenders. You should get some borrower feedback or other information about the way home improvement lenders interface with borrowers and handle these loans. Here are some tips to make the process go smoothly.
Decide exactly what you want to accomplish, adding as many details as you are able to conceive. For example, deciding you'd like a new kitchen is insufficient to describe the project, its finished look or any cost elements. For instance, if you'd like solid granite counter tops or you're happy with basic vinyl, your cost factors will be very different. Add as much detail as possible.
Unless you are performing all of the work yourself (usually not recommended), speak with at least three home improvement contractors. Getting some cost estimates will be much more simple and accurate if you've completed Step 1 properly. Even the best home improvement contractors cannot read your mind. Be as specific as possible to receive valid cost estimates.
Use the Internet to evaluate home improvement lenders. Interest rate and the frequency of rate adjustments, if any, are very important. Carefully evaluate additional costs, like appraisals for "as is" and "as complete" fair market values (FMVs), points (one point represents one percent of the loan amount) and inspection fees, if any. The total cost of the loan is just as important as the interest rate it carries.
Along with your favorite banks and credit unions, examine the features and rates offered by other home improvement loan sources. For example, the U.S. Department of Housing and Urban Development (HUD) offers the very popular rehabilitation loan program often referred to as the 203(k) loan. If you don't mind a little extra paperwork at the beginning, you may enjoy the competitive interest rate and other terms of this loan. Also, depending on your circumstances, you may be able to combine this loan with HUD, HOPE, HOME and/or community block grant programs to locate more funds.
Determine which lenders make it easiest to get loan funds when you need them. Of particular importance if you're living in the home being improved, you want access to your loan funds quickly and with a minimum of effort. For example, you may find a lender that has great terms, but requires a signed disbursement request to release home improvement funds. Another lender might simply set up a temporary checking account, allowing you to write checks for amounts you need for products and contractors as you need money. This may save you money and/or sub-contractor delays.
After evaluating different lenders and loan programs, select two or three you particularly like. Then get verification from trusted web sites or directly from former borrowers that your favorite lenders and loans worked the way they claim and you prefer. The nature of home improvement loans usually creates a brief partnership between you and your lender. The best home improvement loan is the one that accomplishes more goals than just a wonderful interest rate.
HUD also offers home improvement loan guarantees to lenders under Title I programs. This may help you get cost effective financing.
If you have an historic home, you may also be eligible for other special home improvement loan and grant programs.
Have all of your financial information ready for your application when you decide on a home improvement loan and lender to receive fast approval and closing.
Don't neglect to thoroughly investigate all potential home improvement contractors. Get references and other 3rd party information to verify their honesty and quality of work. Because product and material prices can escalate quickly, try to get your improvements started rapidly after getting valid cost estimates and the loan you want.