On Property Brothers, the hosts are always working with home owners on older fixer-upper properties. For discussion sake, if I'm prequalified for $250K and I want to purchase a property that lists for $150K and want to put $100k into improvements. How do I go about financing so that the construction is under the prime (first) mortgage? Do I get a first mortgage on the house, then get a construction loan? But then won't I have to refinance to get the construction loan and the first loan combined. What is the easiest solution?
Posts: 1 | Location: United States | Registered: Oct 11, 2012
Talk to your bank or mortgage company directly. It all depends on what you need to have done and how much the bank says the house after remodeling will appraise.
Sometimes if you are purchasing a foreclosed property the bank who holds the note has special financing available - such as FNMA has Home Path loans. Also if doing an FHA loan for the purchase if the property will appraise you can do a purchase construction loan through them. If any of the renovations are considered "green" you get $ for $ on the amount you need up front.This message has been edited. Last edited by: Charming,
Thankd for the info. I often wondered how those mortgages were done. If the reno would be more than what the price of the house would appraise, then, what happens. I imagine that the reno would have to be to bring up the house to the levels of others in the area.
Is the FHA 203k loan the only way of doing this? What if my purchase is higher than FHA limits? So if I am approved for $500k and find a $400k that I want to do $50k in improvements, where do I get that money?
They make it seem easily doable on tv, but I haven't found any way of doing that in my searches.
Posts: 1 | Location: United States | Registered: Feb 23, 2013
First, OP and Vargil, welcome to the real estate boards and, yes, you have already discovered rule number one when it comes to watching real estate shows on television ~ IT IS A TELEVISION SHOW!
They have already jumped through the hoops re zoning, permits and financing so what you are seeing is the finished product of a lot of hard work and effort but it doesn't mean that it is fake ~ just that you will need to do the same if you choose to try to emulate their achievements.
You have made a good start by posting as there are many smart posters here who are willing to share their knowledge and expertise with others who have questions such as you posted. I can't help with financial/financing issues - just not my area but, hopefully, some have already posted above and, hopefully, others will come along with more suggestions to guide you in the right direction. Good Luck! This message has been edited. Last edited by: Idaho Resident,
Contact a lender who does FHA 203K. The improvements /estimates are taken into consideration in the appraisal is my understanding. You will learn more from your local lenders...availability of this program in your state..and the perimeters/regulation required in your locale.
Both my recent property purchases needed roof repairs. One property was a Fannie Mae Homepath property and we found a bank in the homeopath website that offered homepath reno loans. Our renovation costs were limited to 35% of the appraisal - as completed value - and no more than $35,000.
Our other property was bank-owned. They didn't require the repair costs to be escrowed. Two days before closing they pulled out, so we purchased with our securities backed line of credit.