Wholesaler · Fort Worth, TX · Member since 2016 · 42 posts · 5 votes
Happy Memorial Day BP community,
I hope everyone is enjoying this beautiful day, Thank you to all military and veterans for serving.
In regards to this forum I would like to get feedback from anyone and everyone who might have some advice for me. My husband and I have been debating on selling our primary residence, we purchased the property in 2013 with a FHA loan with a 4% interest rate. We owe 79k on our mortgage and comparables are at 130-160k within a 2 mile radius. We've been contemplating on doing a Cash refinance or Heloc to use the equity in our home for a rehab. My questions are, Do we get the home appraised before using any of these strategies? Is there any other way to use OPM to rehab our home?(We know the home needs repairs plumbing, electrical and interior updates.) Should we do a Heloc, Home equity loan, or cash refinance? We have read blogs and searched the internet for advice and would like to ask our fellow investors. Thank you to all!
Josephine
@Josephine S. lots of good questions here and this is really specific here in Texas so let me answer these questions one at a time:
Do we get the home appraised before any of these strategies? - Yes, if you are doing a cash out loan on your primary home you will be required to have an appraisal 95% of the time. The cash out loan will be limited to 80% of the home value. So if you owe $79k then you would receive cash out around $20k. If your home was worth $160k then your cash out amount would be $42k (or so). There are certainly different reasons to use a HELOC vs. a Cash Out loan....it would depend on what you were using the money for and how long you were planning on keeping the home.
Is there any other way to use OPM to rehab our home? - Sorry, not too familiar with the "OPM" term but yes, there are both FHA and Conventional Rehab loans available for you to use. You don't have to use a cash out loan to renovate your home. If you were to keep your home for a long period of time this might be the right strategy in Texas since a cash out loan would carry certain penalties (as in you could not get a HELOC after getting a cash out loan)
I would certainly recommend to speak with a local Texas lender on this. Lenders who do not have a physical branch in Texas do not have the ability to write cash out loans here and they can be a little tricky if someone is not accustom to writing them. Feel free to ask more questions if you need. Thanks!
@Josephine S. lots of good questions here and this is really specific here in Texas so let me answer these questions one at a time:
Do we get the home appraised before any of these strategies? - Yes, if you are doing a cash out loan on your primary home you will be required to have an appraisal 95% of the time. The cash out loan will be limited to 80% of the home value. So if you owe $79k then you would receive cash out around $20k. If your home was worth $160k then your cash out amount would be $42k (or so). There are certainly different reasons to use a HELOC vs. a Cash Out loan....it would depend on what you were using the money for and how long you were planning on keeping the home.
Is there any other way to use OPM to rehab our home? - Sorry, not too familiar with the "OPM" term but yes, there are both FHA and Conventional Rehab loans available for you to use. You don't have to use a cash out loan to renovate your home. If you were to keep your home for a long period of time this might be the right strategy in Texas since a cash out loan would carry certain penalties (as in you could not get a HELOC after getting a cash out loan)
I would certainly recommend to speak with a local Texas lender on this. Lenders who do not have a physical branch in Texas do not have the ability to write cash out loans here and they can be a little tricky if someone is not accustom to writing them. Feel free to ask more questions if you need. Thanks!
@Andrew Postell Thank you very much for answering our questions. We know now to definitely get the home appraised, our main concerns were of our home not appraising at the highest value. With your suggestions we have several routes to take. Thanks again for your time.
@Josephine S. just in case, you can certainly get the home appraised on your own if you want but the bank will not be able to use that appraisal. If you think it is worth the expense then go for it but know that if you need another appraisal for the loan you will have to pay for it again. Just in case.
@Andrew Postell Okay, yeah were leaning towards getting it appraised through the bank. We would like to avoid any extra charges and stay sharp on what we are taking on. Thank you Andrew
@Josephine S. absolutely. You are not bound to the loan until you get to the closing table. So if the appraisal value doesn't come in where you need it to be then you can back out of the loan at no additional cost. You will have to pay for the appraisal upfront, so do examine a "fee worksheet" from the lender before you order the appraisal, so you can examine all the costs associated with the loan. Even a small percentage can really add up on a mortgage. Also not every bank offers those renovation loans. My point is to absolutely shop and compare. I'm a little biased about who you should use here locally but if you find a bank you like but they are a little higher most places will match competitor's offers. So do shop around. Hope this helps!
@Andrew Postell Perfect! We'll shop around and compare offers. Thank you for the heads up on the "fee worksheet" thanks again for your knowledgeable time and advice!