FOR BUYERS: You find a house you like – good bones, great location and good price because the seller doesn’t have the money to renovate it - or won't take the time. Works for most any price range! You make an offer on the house and negotiate a final price with the seller and enter into a contract subject to obtaining quotes from lender approved licensed contractors on the cost of repairs and/or renovations and, of course, subject to loan approval. You make loan application based on the “acquisition price” which equals the purchase price + renovation costs. Depending on the cost of renovations (above or below $35K), there are different types of loans and differing requirements. This renovation loan can be conventional or FHA. And works for any priced house.
Appraisals are required and they consider the current value of the property and the cost of the renovations in what should be the “final” appraised value upon completion of the work. Like any other appraisal without this renovation feature, the appraisals may come in at, below or above what is hoped for (the acquisition price). And, like any other loan, your loan to value will be based on the appraised value.
Once you obtain loan approval, you close on the house, the work is then done by your contractors and the bills are sent to your lender for payment and, voila! You have an updated house at a good price!
Good for primary residence homeowners, secondary homeowners or investors!
Need more information?
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And FIRST TIME BUYERS! Don’t forget the $8000 TAX CREDIT to add to your cash for even more room to renovate! Close and occupy your first home (see earlier blog) by November 30th (2009), file your IRS form to collect your money and get your $8000!