Renovation Loans???

[Tim Sughrue]

I am currently seriously considering purchasing my first house. I basically found exactly what I was looking for (worst house in best neighborhood). This house is not a "gut job" by any means but it definitely needs a ton of work. (roof, electric, heat ext.) My ideal purchase was either something cheap enough where I would have a low mortgage and have weekly cash to dump into it or if it was closer to my max price it would need minimal work. Of course, I stumble across something that needs a lot of work but is higher than my ideal price range for something like this. I then learned about renovation loans which will give me enough or close to enough money to get what needs to be done to the house. My Realtor suggested a company to go through when the time comes. He also suggested a 203B which I am told is up to $35,000 and is a lot less headache and processes to go through (not really sure what he means by this). I am afraid $35,000 isn't enough, though it may be, I simply don't know. $50,000 I feel would be a sufficient amount because I can cover the basics and may have enough to remodel a kitchen/bathroom. Has anyone done these or is familiar with them? Also, should I seek out a few different mortgage companies and have them bid against each-other for the best interest rates or does it not work like this? Also I am a first time buyer so do I get any beneficial rates like I would with a conventional mortgage?

Thanks in Advance!

[Bill Gulley]

Unless you have rehab and construction experience, you'll need a contractor and a bid. The 203B will require that. No lender is going to let a newbie take on a major rehab on thier collateral.

Next, you might be ablst to use a HML as a second after the project gets toward the end. :)

[Ahmed Porter]

Bill is right you are going to need a lic contractor , I am a lic contractor and do a ton of there things to keep your cost down please get your material and get it back once the check comes in we mark up everything . The amount you have for the job they should give 1/3 to start and 1/3 after half is done and the balance after inspection from the bank or any county inspection if needed.Get a estimate for the repairs so you can have a real cost and make sure they have a lic, work with a contractor that will let you do a task or two to save on cost good luck to you.I think the 203B is stream line and the 203K is over the 35K amount but there a lot of loans you can allways read the guid lines for the loan you are getting to find out the does and don't wish you the best of luck on your project.

[Ben Stoodley]

Hi @Tim Sughrue , I am a Private Money Lender and we give construction loans out all the time. There are two main constraints with private money; non-owner occupied and 1st position loans. If you don't live in the house and you'd be willing to REFI, we (or other private lenders) could possibly do the deal. However, you'll end up paying a lot more in interest and costs of the refi loan, in comparison to the conventional loan that I assume you currently have.

In general, if the house isn't owner occupied, this could be an option from the beginning. Use hard/private money to acquire the home and fix it up, then refi out of the more expensive hard/private loan into a conventional loan. Hope that helps!