Crappy house / Great location. Can I still get a loan?

[Ben O.]

Let's say the lot value is 450k (idyllic neighborhood) but the structure is worth only 45k. Will I have trouble getting conventional lending for this property?

Any pointers on offer / appraisal process?

Thanks!

[Charlie MacPherson]

Not enough information to say for sure.  Mostly, it depends on why the value is low. 

FHA / VA / USDA all have very strict requirements for the condition of the property.  They will reject a loan for a little bit of peeling paint, a cracked window, uneven sidewalks, wobbly hand rails - and that list goes on and on.

In a conventional loan they typically only want to be sure that the major systems are functional.  HVAC, plumbing, electrical, sewer/septic.

If your house is just outdated, there shouldn't be a problem. If there are structural issues or if it's beyond repair, you might consider a construction loan to demo and rebuild.

[Kenneth Mooney]

@Ben O. What kind of loan? Traditional financing I would imagine it would be extremely difficult. 

[Michael Plante]

Go for a land loan

Google farm credit or farm credit union 

[Eliott Elias]

Conventional financing has its own criteria to make the home loan worthy. If it’s not livable they won’t do it 

[Eliott Elias]

Depends on the condition of the house and what kind of loan you're looking for 

[Chris Seveney]

you most likely will not get conventional financing (depending on the home condition) - but if the house itself is only worth $45k, what your saying is the house is worth the basement and utilities to it, so its not livable. 

You can speak to credit unions and other financing companies who may be able to do a construction to permanent or look at getting a construction loan. 

[Ben O.]

Thanks for the replies. 

The property is in an excellent location -- heart of historic neighborhood, large lot, out of flood plain, city water, sewer, gas, electric. 

The home is 100+yrs old has been vacant for 6mo, termites, foundation issues, overgrown with vines, etc. It does have a new roof and functioning AC and plumbing. Not sure what defines "Livable".. 

My plan is to try to get conventional financing for the property (15-yr fixed, 20% down), then pay for renovations out-of-pocket. Any obvious snags with this plan?

My understanding is that after going under contract, an appraiser will go out on behalf of the lender, but no inspection is required. If the appraised value is less than offer, I'm prepared to make up the difference in cash. Provided the appraisal accounts for the desirable lot, I don't expect this will be an issue. Should I be concerned about insurability of the structure? Anything else I am missing that will kill this plan/deal?