I would like to purchase my first home soon. The new homes in my area are very nice but too expensive & sometimes smaller on the inside. The homes that I can afford are older homes (1930's). I truly like the older homes because it has a lot of character and space but normally it needs a lot of repair. My question is, if I am approved for a home loan for a certain amount say $150,000 and I would like to purchase a home for $25,000. Will the bank allow me to use the additional money that I was approved for for home improvements? How does that work? Thanks.
2006-11-02 12:52:33 · 6 answers · asked by Who me? 3 in Business & Finance ➔ Renting & Real Estate
schris...the funds lent to the purchaser (you) is really predicated on the appraisal value of the home, not you. you get apx 80% of the value of the appraisal unless you have better than 700 score and than dependant upon your personal situation, you could get 100% of the appraisal.
funds other than the purchase money would be secondary lending or home improvement funds and you would have to qualify for that in addition. I hope this sheds some light on the situation...but in short, you can't go to the hip with the other 125k unless the home is valued at that and more.
happy home buying.
2006-11-02 13:10:00 · answer #1 · answered by ticketoride04 5 · 0⤊ 0⤋
I work alot in the rehab market. There are several programs out there. Try a 203K loan that is federally insured. A local loan officer should be able to get you information.
The most popular with my clients is a program where you can borrow up to 80% of the after repaired value of the home. You have to have a contractor complete a bid to do the work, and in some instances, this can be you. This will all need to be part of the loan process and also depends on your credit score, I believe you need a 680 for his program, although there is another program that works similarly and I think you need a 650 for that one.
With these loans you will be able to obtain the money to fix up the home in 3 draws. A representative of the bank will come to the house and verify the work that has been completed with the money from the first draw before they will allow you the next draw. Usually the draws are divided into similar amounts and you will need to identify the work that will be completed with each draw. These loans have a maximum time frame of 9 months, so the home will need to be completed and refinanced within that time frame. See if the lender will cut you a deal on the refi costs since they will basically be doing 2 loans for you within a year.
If you end up not using all the money you have allocated or the rehab, you have a choice to either take that last draw anyway, or lessen the amount of money on the refinance.
This is similar to the construction loan that the other person who answered was talking about. If you have any further questions, feel free to drop me a line!
2006-11-02 22:45:25 · answer #2 · answered by julsells 2 · 1⤊ 0⤋
It is going to depend on the type of loan and the lender you deal with. I bought a house once, had needed repair estimates in writting before the close and got that rolled into the loan.
Not everyone will do it. Mine was a bank.
As a real estate investor, I regullary get construction loans on existing homes, pull out money to do the necessary repairs and then ultimately either sell or refinance after the work is done.
2006-11-02 20:59:28 · answer #3 · answered by ga_rei_guy 3 · 0⤊ 0⤋
Probably not the $125. You might could get some - depending on the repairs & their related costs. Some lenders will do 100% of LTV (loan to value) on real estate. Some will do 80%. Shop around - for LTV and also for rates.
A suggestion for you .... if you want more home for your money - you might want to check with real estate lenders in the area you want to live in - for any homes in foreclosure. Many times you can get those homes for less that their appraised value & often you can refinance with the lender for no points or closing cost!
Good luck.
2006-11-02 22:16:08 · answer #4 · answered by chey_one 3 · 0⤊ 0⤋
Maybe some money they would let you use, but more likely they would want to see a few payments on time before they get into an improvement loan with you unless you have a track record with them.
2006-11-02 20:58:08 · answer #5 · answered by The Advocate 4 · 0⤊ 0⤋
You might can get a separate loan for improvements, but generally a mortgage is just for the purchase of the house.
2006-11-02 20:55:08 · answer #6 · answered by Phil S 5 · 0⤊ 0⤋