Pros and cons of a rehab loan?

[Alison Rauch]

We’re looking at a single family bank owned property- cash or rehab loan only. We can pay cash, so we’re considering a rehab loan. How do these work?

[Eric Veronica]

@Alison Rauch if you are planning to buy and hold you may want to do some research on a Fannie Mae Homestyle Renovation loan. They offer investor financing up to 85%LTV. For example let's say you purchase a home for $130,000 and have a contractor quote of $70,000 in renovation resulting in a total acquisition price of $200,000. This mortgage scenario would allow you to finance up to $170,000 with only $30,000 down. (Primary residence will allow up to 95% LTV)

The loan will close and the contractor will have up to 6 months to complete renovations. The mortgage company will Pay the the contractor a few draws throughout the process. 

This loan is a one time close that offers rates comparable to normal conventional rates. Including 30 year fixed products. 

I would be happy to help you with this but unfotunately I can only offer renovation financing in Ohio, Michigan, Kentucky, Indiana, Pennsylvania and West Virginia. Looks like your property is in NY. 

Below is the Fannie Mae fact sheet which can provide more detail. Not all lenders will offer this product so you will need to do your research and make sure the lender you choose does not have overlays. 

Good Luck!

https://www.fanniemae.com/content/fact_sheet/homes...