Rehab Financing..
Looking to purchase a house that has quite a bit of equity, but needs work. My lender offered up a program for purchase/rehab where you close once and there is a pool of funds for the rehab. Anyone ever deal with this or is it better for me to just buy it outright with a conventional and then get the equity out to fix it up?
Thanks
It all depends on the terms and costs of the purchase/rehab loan vs. finding a lender that will refinance a junker property and allow you to take money out for the work, plus pay off the lender who underwrote the purchase money mortgage. Seems to me if you could find a conventional lender or a hard money lender that would allow you to do ONE loan for purchase and fixup (and hold), that would be the way to go to keep the fees and points down, would also make it more simple.
When you go to retail fixed up property, there are great programs available to allow you to sell with 5% down or ZERO down with seller financing, structured in such a way that you sell/assign the new seller financed loan for cash at minimal discounts, thereby allowing you to bypass title seasoning problems, avoid seller seconds, and avoid having to reduce price to compete, because you compete with the financing, while selling at 100% of FMV, since you are seller financing and offering low down and no down options.
This way you control your exit, sell as fast as you want, and keep the process in house.
Hope this all helps, Dave
Is the lender talking about a FHA 203 (i believe thats the code) its a government backed rehab loan. Not all houses are eligible however
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Thank you both for the replies...it is non FHA...and I think because its only 1/2 point more than the standard 30yr fixed its a no brainer...only other costs to me is a "special" appraisal that costs 300$ more than a normal one to get the future value but then its all into one loan...one closing etc
Thanks guys.have a great holiday season.
MJ
you're welcome and you have a great holiday as well! Best, Dave
moonjaker
This sounds like a great program, can you please pass along the brokers name?
why does it cost $300 more to get a "special appraisal"? Isn't what you are talking about just a normal "subject to" or ARV appraisal on the purchase end?
How much is the "normal" Appraisal? I have severl appraisers I work with in indianapolis and the highest I ever pay is $300! And I only pay her that on the toughest ones to justify value (not lies but legitimate values). Something about this brokers offer doesn't smell right IMHO.
These "Rehab" loans are popping up everywhere now. Most brokers and some banks are doing them. The extra cost for the appraisal, as I understand it, is because they will actually do 2 appraisals. One on the value as the house is and one on the value as the house will be once the work is done.
I am interested in finding out more about these "rehab" loans. Can anyone share more info or direct me to a national lendor that handles these? Thank you.
There are some good lenders out there with construction loans and more than one way to put a deal together, check out my profile and see if I can help.
Good Luck,
Robert
Brookview finacnial. www.brookviewfinacial.com
i just bought a home through naca it is a non profit organization that will give u every thing u need with no money.
no down payment or closing cost. and a percent lower than the average percent at the time. they aprove you for an amount based on your income and the amount increases when it is a multi family dwelling, I purchased a 4 unit building for 178000 and used the remaining money I qualified for to do the rehab. my mortgage is 248000 and I have paid nothing but the tax and for homeowners insurance. great program for anyone any race and any where. www.naca.com my interest rate is 4.9 for a 30 year fixed.
You need a money partner if you have the knowledge to find fix and flip good deals. Alternatively you could wholesale the p roperties you find to other investors that have money and make a nice return by assigning them the contract.
Hard money is that way that most start out borrowing until you have a proven track record. I am looking for <75% ARV and for the few people that I know personally and loan to to have the funds to make the repairs. There are many programs out there that will loan on the fixup as well as the purchase but you will pay a lot. This is ok, not important if you have to share your profit with someone else as long as you are making a profit
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Check local banks they will usually lend based on arv.
Are you going to owner-occ the property??