Renovation loans allow more people to buy homes

by Scot Kersgaard17 May 2016
According to Anthony Bird, owner of Riverbank Finance in Grand Rapids, MI, most of his renovation lending clients did not come to him looking for a renovation loan. Most of his retail clients are just looking to buy a home.

In Grand Rapids, as in much of the country, the supply of houses can barely keep up with demand, which pushes many buyers into looking at houses that need work.

“Renovation lending is growing to be an important part of our mortgage business. As housing inventory continues to decline, there are less houses on the market that meet our clients’ needs,” Bird said.

 “Our clients are having to think outside of the box and look for homes that might be in the area they want, and then look for creative ways to turn them into their dream home,” he said.

Bird works through American Financial Resources (AFR) in order to provide clients with renovation and other loans. “Renovation loans allow homebuyers to purchase the house and finance in the repair costs. It is the perfect solution to the housing shortage,” Bird said.

He said renovation loans are popular with younger buyers, who are happy to trade sweat for equity and like creating the house they want.

“While we see a wide variety in renovation client demographics, an important client group is Millennials. With myself falling into the tail end of this subset, I can speak first hand that we appreciate the value of what buying a fixer upper and transforming it into a dream house can offer,” Bird said.

He said a lot of times, clients seek traditional mortgages and then find problems with the house during the inspection and pivot into a renovation loan.

 “AFR’s renovation financing options have saved many of our transactions by allowing us to change programs from a standard purchase mortgage to a renovation loan,” Bird said. “This gives homebuyers the option to finance repairs and upgrades rather than going on the search for a new home.

“Banks and lenders that do not offer this wide variety of renovation financing options would simply leave the buyer and seller in the lurch,” Bird said.

He said most big banks and mortgage lenders do not offer renovation loan options.  “Our partnership with AFR and their renovation loan programs gives us a competitive advantage to better serve our clients. By allowing homebuyers to finance in home repairs, they can look at a much wider selection of homes,” Bird said.

He said offering renovation loans—and promoting them to real estate agents—gives those agents a valuable tool they can use to broaden the market of potential home buyers.

“Our Realtor partners love that they are able to find buyers homes more quickly rather than waiting for ‘the one’ to come on the market and compete against 20 other bids over the asking price. In this competitive market, renovation lending has added a huge value to our mortgage offerings,” Bird said.

He said he has worked with AFR for many years and appreciates not just the wide range of mortgage products but also the people.

“The internal lending team at AFR provides a hands-on problem solving approach that is hard to find in lending. From our direct account manager and account executive to the top with the COO, if we run into a unique situation, they work with us as a team to find solutions to get the file to closing.  This gives us the confidence to take on deals that other lenders will quickly pass up because it doesn’t fit into their small box of mortgage programs,” Bird said.