When buying a home, can you remodel it before you move in?

Question

My husband and I are looking for our first house. We'd like to buy one that is less than we were approved for and put about $20k into remodeling it before we move in. Is there a way to roll the cost of the renovations into your mortgage? What's the best way to start the process? What should we look for? How long before we move in should the remodeling start? I want to be right because my husband thinks I am way off by thinking that we can do this. Help!

Answer 1

You can absolutely do this, investors do it all the time, you just roll the cost of the renovations into the loan along with the purchase price. Its called a rehab loan. It means that it will take more than 3000.00 cost to cure the house. I am a loan officer and have been doing for them for awhile. If you want any add'l information email me, I'd be more than happy to send you info on rehab loans, I use 4 lenders consistently. Good for you for knowing that there is definitely a way to improve and remodel your house to your liking without it all coming directly out of your pocket.

Answer 2

yes, as shanstew said a rehab loan would be a good idea. They are a little detailed, as the lender requires you to get very detailed estimates of the work to be done, as well as an appraisal that will verify the needed work would increase the value to cover the mortgage amount.

You most likely won't find a seller willing to let you do any work until after the closing and you actually own it though. Your move in date would be structured around how much work is being done and the contractor you hire.

Another thought is cash back from the seller. Not all lenders will allow this, but some will. Lets say a home was on the market for 100,000 and needed a lot of work, but would be worth more with the work done...or maybe the house isn't in good enough condition for bank financing. You could word the offer 120,000 and the seller to give back 20,000 at closing for a new roof, heating system, and bathroom, as an example. The lender might want to hold this money and release it as the work is completed, but it would be a lot less hassle than the rehab loan...and might enable you to negotiate on a house that is otherwise non mortgageable, and you can negotiate and get a better deal perhaps.

Best of luck, and a GOOD Realtor can guide you through this process...it is very doable. I have also seen more than one couple divorce during a big remodeling project, so be sure you are both up to the challenge.

Answer 3

check out www.renovatefirst.com ... my brother just used their loan to buy this fixer upper in Michigan and said that their program determines a value for your home after the renovations have been done and goes up to 90% of that value. I'm planning on buying a fixer upper myself, just waiting for the right place. There are so many foreclosures in the state right now, and from what I hear, that's a great way to find a home that's undervalued that has equity built in to finance renovations.

you need to figure out what the value of your place is after the work has been done. get your realtor to find some comps, comparable homes that have sold in the neighborhood that would support the value you need. i downloaded the guide they've got on their site ... it explains the whole process ...

Answer 4

talk to your mortgage broker about seller's concessions. Say for instance you were buying a house for $300,000, the contracts can say the purchase price is $320,000 with a $20,000 sellers concession (an amount you get back at closing) people do this all the time when they don't have the money for closing costs.

Answer 5

You can, you'd have to work out a deal with the seller of the house. You're actually not allowed to recieve money for more that the price of purchasing the home, but there are ways to structure the deal to allow it.