Mar
19
Is there a loan to buy a house AND repair it?
By
I am looking at a house that I absolutely love. But it needs a lot of work. The seller understands this and is willing to sell the house at below market value, but is not willing to make the repairs themselves.
Is there a loan I could get that would cover the cost of the house and lend extra for the repairs?
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3 Comments
March 22nd, 2010 at 4:06 pm
FHA used to have a program that helped you finance your home and give extra for repairs. I don’t remember the name of the program or if it still exsist. But that’s where I’d start.
March 25th, 2010 at 4:35 am
Its called a construction loan.
You can also look at your local HUD web site to see if there are any reconstruction zones in your city. Many cities have them which offers free loans (that don’t have to be paid back) to do the rehab work.
Do your research and I’m sure you’ll find what you need.
March 25th, 2010 at 10:53 pm
I guess I’d be the perfect person to answer this question since this is what I do for a living.
Im not sure what state you live in but hopefully I can guide you to the right place. Wells Fargo has an excellent rehab program here in Minnesota that allows you to lend up to 95% of the price of the home after repairs if you plan on occupying the property, or 90% of it if its for investment purposes. An example may help you understand it a bit easier. Lets say you are buying the home for $100,000. You’ve sat down with several general contractors and you’ve concluded that its going to cost you $20,000 to renovate and repair this home. The bank will lend you 95% of the $120,000 which is $114,000. They lend it to you as a line of credit with “draws” that allow you to make scheduled payments to your contractor. Here’s the best part, you have 6 months to complete the project, but once completed, you can automatically switch the line of credit loan over to a fixed interest rate loan at no additional cost. Which basically means you dont have to refinance a construction loan into a permanent loan.
Now if you dont have Wells Fargo in your area, most Federal Credit Unions or smaller local banks that are familiar with your neighborhood will also offer similar programs.
Good Luck!