Let’s face it, buyers and homeowners either love or hate pools. There’s usually no in between. Pool lovers often find out that mortgage loan programs have guidelines and opinions on pool financing as well. Within these mortgage guidelines, there are pitfalls as well as great opportunity for homeowners desiring a pool. Fortunately, you have come to the right place for the answers to swimming pool financing questions involving topics like:
- Renovation loans for pool repairs
- Renovation loans for pool installation
- Buying a home with inoperable pool
- FHA, VA, and USDA loan pool guidelines
- Does a pool add value to a home
Buying a Home With a Swimming Pool in Need of Repairs
When it comes to swimming pools, there are three facts: Pools are a lot of fun, require regular maintenance, and there will be repairs. Making the decision for or against a pool comes down to an owner weighing out these key areas. For buyers who love pools and are fortunate enough to find a home with an existing swimming pool, it could save the large expense of pool installation.
Some homes come with inoperable pools, pools in need of repair, or pools that look like a swamp. Luckily for buyers, an ugly or empty pool may lower the sales price and deter other buyers. Buyers who desire to purchase a listed property with an ugly pool could see one or more of the following pool repairs.
Common Swimming Pool Repairs
- Replacing a pool pump
- Securing the liner
- Replacing a sand filter
- Removing or fixing a slide or diving board
- Fixing cracks in concrete swimming pools
- Stop pool plumbing leaks
- Filling in a pool
How Renovation Loans Fund Pool Repairs
Even though these listed pool repairs may cause an eyesore, often the remedy may only cost $2,000 or less. Although, it could be much more. Like mentioned before, a pool in disrepair may lower the home’s price and/or value. Therefore, a home buyer armed with a renovation loan could buy a home below market price, finance the pool repairs, remove a pool, and potentially gain equity. Whether a small or larger pool repair could make a huge, positive difference! But, renovation loans don’t stop with pool repairs. Renovation loans such as FHA 203k Limited, FHA 203k Standard, VA Renovation, and Fannie Mae HomeStyle allow many other home renovations. We encourage you to click on the links for these programs to learn about the other renovation product advantages.
Renovation Loans – Pool Repair Limits
When it comes to swimming pools and renovation loans, it is important to remember that all, except the HomeStyle Renovation, are limited to pool repair or removal. Plus, prior pool renovation limits have been removed when it comes to pool repairs or removal. Believe it or not, many ugly swimming pools full of algae just need a little TLC. Often, it is getting the pump running and getting the water in balance.
While dealing with a pool in need of repair, step one is to determine the problem. This means hiring a pool professional. If the seller will not fix the pool, it is time to discuss pool financing options that can fund a pool renovation.
Remember the buying below market line? Don’t forget this part – renovation loans use the “after improvements” value. By using the appraised value subject to the completion of all repairs, it should allow a buyer or existing homeowner to finance a higher level of home improvements.
Renovation Loans to Install a Pool
As shown, each renovation loan allows for pool repair or pool removal, but how about installing an in-ground pool plus getting new pool financing? Installing an in-ground swimming pool is not cheap and commonly costs $20,000 – $30,000. Even more for luxury pools. Standalone pool loans often carry high-interest rates. Plus, throwing down that much cash at once is tough for most, but that’s where a Fannie Mae HomeStyle Renovation loan helps.
For a primary residence, HomeStyle Renovation loans finance up to 97% of a purchase price plus total renovation costs. Did you catch that? It is not 3% of the purchase price, and then the buyer pays for the renovations. Add the purchase price and the renovation; then a buyer may put down as little as 3% of the total!
Renovate Second Homes and Rental Properties By Adding a Pool
Don’t forget this key feature as well. HomeStyle Renovation loans help buy second homes or investment properties as well. Installing a pool on a vacation home or beach rental property would really increase a home’s level of fun and relaxation. In the case of a rental, a swimming pool should increase the rental income. Additionally, vacation rentals with pools should be chosen more often than homes without a pool.
So, we have discussed options to fund pool renovations or installation, but each of these renovation loans and even traditional non-renovation loans have requirements when it comes to pool condition. Each lending agency treats pools a little differently. Now, let’s explain the differences.
FHA Loan Pool Requirements
We are definitely asked how inoperable, unusable, or ugly pools affect FHA loans more than any other loan type. Reason being, many realtors, know FHA property requirements are more stringent than conventional appraisals. Although a lot is left to the FHA appraiser’s opinion, the guidelines are fairly detailed. At least specific enough for buyers and realtors to have a good idea if a pool should pass FHA standards.
Swimming Pool Requirements for FHA Loan
First of all, if the appraiser determines an uncovered pool to be inoperable or unusable, reasons must be stated. For a pool to contribute value, it must be operational. When a pool has algae or looks unappealing, but there is no proof of contamination, cleaning is not required.
Although, if an appraiser discovers the pool has unstable sides or structural issues, the appraiser must require repairs or permanently filling it in. When a pool fill-in is done, it must be filled in accordance with local guidelines including land re-grade when necessary.
In cases of the pool being winterized or if the appraiser cannot determine if the pool is in working order, the appraisal assumes the pool and equipment can be restored to full operating condition at normal costs. Therefore, it would be highly recommended that a buyer have the pool inspected by a pool company or home inspector with pool experience.
Finally, lenders must confirm any swimming pool meets local ordinances.
If the pool has appraiser required repairs, one of our renovation programs mentioned above could finance the repairs along with other home improvements.
USDA Loan Swimming Pool Requirements
USDA loan swimming pool requirements mirror FHA guidelines. Although the wording is a little different and more generic. Typically, lenders require an FHA appraiser to complete USDA appraisals (OVM does this). USDA states, “A property which an FHA roster appraiser indicates is in average or good condition may be considered in good repair.” However, a lender could still require repairs. Any deficiencies must be noted by the appraiser. Additionally, USDA cares about safety issues, anything jeopardizing the integrity of the property, or anything negatively impacting a low to moderate income borrower from becoming a homeowner.
So, if the USDA appraisal requires pool repairs, there are a few options. Of course, the seller could make the repairs before closing. Even the buyer could do so. If these are not available, an option could include a small escrow repair held by the lender until repaired after closing. Although, if these are not options, changing programs to a renovation loan may be required.
VA Loan Swimming Pool Financing Requirements
The Department of Veteran Affairs does not directly state any swimming pool requirements. Thus, it is tough for buyers and realtors to predict an appraisal result. Although, it is a good idea to go by FHA guidelines. Knowing how VA is big on requiring appraisers to note safety issues, it would be key to focus on pool safety issues. Symptoms like algae, being inoperable, or just an empty pool could require a VA appraiser to require additional inspection or repairs.
Additionally, expect VA appraisers to review local pool code for possibly requiring a fence or other safety type regulations. Once the appraisal is turned into the VA lender, the VA underwriter prepares the Notice of Valuation. The VA borrower will then be told if pool repairs are required in this report.
Does a Pool Increase Appraised Value?
This is a tough question which heavily depends on the local market. Any loan providing home and pool financing requires an appraisal. The appraised value of a property is based on what similar homes have sold for in the neighborhood or surrounding area. Next, those sold properties are compared line by line with the characteristics of the home being appraised. Thus, the outcome is the appraised value.
Assuming there are several supporting sales with pools, the specific value may be given for an in-ground swimming pool during a purchase or refinance. Basically, sales with pools prove there is a market for a swimming pool and thus, should be given value.
Conversely, if there are not any recent home sales with pools, appraisers usually give little to no value to a pool. In these cases, if an appraiser does give value to a pool and there are no comparable sales with a pool, the lender may have an issue with the value. If buying or selling a home with a pool, consult with your realtor. Local market data is available for the real estate agent to pull recent sales of similar homes to determine the market level for homes with a swimming pool.
Following the points in this article will help greatly when it comes to swimming pool financing.