Mortgage Question, need financing.?

Question

There's a property in my area that I would like to buy. It is in a very up and coming rehab area, a lot of homes in the area are being remodeled. The home needs new plumbing and drywall, so I know I can't get an FHA loan because of their requirements. For conventional, am I going to have a problem getting a loan on a home that needs extensive work done? I have enough for 5% down. What mortgage companies offer programs for homes that need work? Thanks.

This would be my first and only mortgage, would it still be considered an investment property? Also, the price tag definitely reflects the work needed, so I'm sure the appraisal would come in ok.

Answer 1

Your financing option on this would be done using a Purchase-Rehab Construction to Permanent Loan.
You may require more than 5% downpayment, and anywhere from 6-18 months worth of reserves to qualify outside of having a strong fico score and providing full documentation.

However, the loan will work as follows:
The minimum construction period is 12 months. The value used will be that of the appraised end-value of your construction. The amount you qualify for will then be calculated from that future appraised value.
Your loan will consist of the purchase price of the property, the amount required to do the remodelling, an interest reserve and a contingency reserve.
The interest reserve is used to make all the payments during the construction period, so that you do not have to make any payments during construction. Once the construction period is complete, you are responsible for making your payments from then onwards.
The contingency reserve is there in case your construction project goes beyond budget.
There is also a one time qualification off credit for your loan, which determines the rate. If your credit score is higher when you initially apply - then the likelihood of it going down post construction is valid, since more debt is taken on in terms of acquiring credit to furnish the home. The bank will show you two rates at the time you are ready to roll the loan to a permanent loan. One will be the rate when you started, and the other will be the current. You get to choose the lower.

Answer 2

You have found the way to riches, peace of mind and a good retirement when the time comes. Now you only have to do this about 2-3 more times for a good net worth and a possible good level income. Depending on what you owe on your present home, the loan to value as well as the current interest rate those are the factors you should consider when deciding to refinance or get a 2nd mortgage. A second mortgage, though smaller in amount with the interest rate when added to your first might be a bit more, so seek out a mortgage broker and compare getting a 2nd mortgage as oppose to a complete refinance. You should also take in consideration all cost of getting the loans and when the cost will be paid off. The 4.75% fixed for the five year period appears good though if you can handle it and refinance at the proper time then go for the 4.5% followed by the 40% below prime for the next 4 years. Since you are now a land lord you might want to join the Apartment House Association in your city for rental forms, a way to run credit checks and other things you need to know to become a successful landlord. I hope this has been of some use to you, good luck. "FIGHT ON"

Answer 3

Hello sir I am in the industry and a loan exists that could help you out it is called Fannie Mae Homestyle Renovation. It requires 5% down. The loan is interesting basically you need to get a contractor to make you up a billing statement, listing what you need to have down. An example would be this. You are buying the house for $60,000 dollars and you want to do $40,000 dollars worth of work. You put 5% down of the total amount which is $100,000, the down payment is $5,000. An appraiser looks at the property based on an After Repair Value, he has the list of improvements that you are making with him. You do not get the $40,000 dollars at closing, it is put in an interest bearing account until the work is done. You can draw money on it up to 5 times. Interesting loan a few lenders have it. Feel free to email me and I can direct you to the right place.

Answer 4

You're going to need to talk with a local banker for your situation. Your appraisal will ALSO reflect the work which needs to be done (lowered appraisal). I think your best bet is to work with a local bank. They may provide you the mortgage in house for a shorter term, and then extend you a collateralized line of credit which you could use to make the needed repairs. Then convert to a conventional mortgage when all is completed.

Answer 5

Some states have what you call a rehab financing check it out. In calif. you can not buy the home without a cash out. No lender will touch it. In todays market you are required to have a 20% down. Best of luck with your 5%.

Answer 6

TALK WITH A LENDER. If they don't know about rehab loans, TALK WITH ANOTHER.

There are rehab loans out there. FHA 203k loans for rehab. www.fhainfo.com/fha203k.htm

Also check with your local city or county gvpt. They should have rehab type loans. HUD also is a good place to look.

Answer 7

It would not be considered an investment property; but you need a construction to permanent owner occupied loan.