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Home renovation loan hunting can be challenging because there are so many competing lenders, loan options, and loan terms. You can get ahead of all of the confusion and get the best loan that fits your needs by knowing the amount of money you will need and how much you may be able to get from the start, by narrowing down your loan options to the ones that best match your needs and financial requirements, and by placing your focus on lenders that are more likely to offer you the type of loan you desire.

Begin by providing your lender with an estimate of your project; if hiring a contractor, provide a firm bid to your lender plus 10% for unforeseen expenses and, if doing the work yourself, include permit and equipment rental fees, plus 20-30% percent. The home renovation amount is dependent on your credit score and the loan-to-value ratio of your home, and your income. These factors influence your interest rate, loan term, and whether you will pay points on your loan or not.

Homeowners with an A rating get the best loans; this simply means they have had no late payments in the last 12 months and no maxed-out credits cards. Although a couple of late loan payments or maxed out credit cards won’t fully eliminate the loan possibility, you may end up with a higher interest rate and a smaller loan.

What do home renovation lenders look for?

Your income. High income does not always mean a larger loan amount. Lenders, in addition to avoiding high income with high expenses, also look for the following to minimize their risk:

• House payment and existing debt below 36% of your gross monthly income.

• House payment should be no higher than 28% of your gross monthly income.

Loan borrower tips:

• Know your rights. Lenders are required to disclose loan interest rate, term length, costs, as well as variable rate in a total APR, which you can use to compare loan offers.

• Compare associated loan fees carefully. You may be able to reduce lending fees in a competitive market.

• Beware of nonrefundable application fees. Reputable lenders will do their best to keep upfront costs low.

• Learn how much you can afford with our Affordability Calculator.