If you are buying a "fixer upper" you probably have a laundry list of projects you want to tackle. Even if the house you are buying just needs a modest amount of work, you might be wondering how you will pay for it all.

The answer is a remodeling loan designed for just this scenario. Many mortgage companies have loan programs that combine a remodeling loan and home purchase loan in one. These types of home loans can provide much needed funding, plus a little extra. The FHA also offers this through their 203(k) program.

These home improvement loans are a benefit for remodelers because the mortgage loan amount is based on the value of the house after the improvements. For example, if you are buying a $200,000 home and you plan to spend another $50,000 redoing the kitchen, bathrooms and electrical wiring, then the loan would be based on the increased value of $250,000.

Another benefit to this type of financing is that the remodeling costs are spread over the entire loan term. This will result in lower monthly payments, which can help lessen the financial blow of buying a house that needs improvement. Be aware, however, that by spreading out the costs, you likely will pay more in interest over the loan term.

These types of loans also help people buy homes that are in good neighborhoods, but need improvement. Otherwise, many buyers would walk past such a house, considering only the perceived hassle of trying to buy and house and remodel it at the same time.

Another benefit to this type of financing is that it allows you to get your dream house in shape more quickly. Instead of waiting five years to remodel the worn kitchen, replace the leaking roof or redo the plumbing, you can do it right away.

Mortgage rates on home improvement loans are competitive. Look for web sites with mortgage calculators to help determine your monthly payment.

And, there is an added bonus. The interest you pay on the cost of the improvements might be tax deductible. Consult with your accountant for further details.