Loan options for non livable condition

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I'm looking to purchase a multi-unit investment property.  Back story is female purchased with expectations that her bf would renovate it and they'd live in one unit and rent out the other.  Well they made it through one unit before the break up.  So the finished one is rented through June 2018 and the other is basically 30% complete (non livable condition).  This won't be my primary residence so homestyle won't work.  Escrow holdback still requires it to be in a livable condition.  Anyone know of any loan options that would work?  I have the funds to complete the renovations.  Just not enough to pay cash for the house.  

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Originally posted by @Paul Jozwiak :

I'm looking to purchase a multi-unit investment property.  Back story is female purchased with expectations that her bf would renovate it and they'd live in one unit and rent out the other.  Well they made it through one unit before the break up.  So the finished one is rented through June 2018 and the other is basically 30% complete (non livable condition).  This won't be my primary residence so homestyle won't work.  Escrow holdback still requires it to be in a livable condition.  Anyone know of any loan options that would work?  I have the funds to complete the renovations.  Just not enough to pay cash for the house.  

 Hi Paul,

I agree with @Andrew Postell , this is a HML scenario.

@Paul Jozwiak

Welcome to BP and congrats on your first post!

From my experience, HomeStyle Renovation loans ARE for investment properties. It's the FHA 203k loan that has to be used with primary residences.

In any case, HML will definitely work here, but it's not going to be cheaper than HomeStyle.

You could also try to convince the seller to do Seller Financing / Subject-To or a Lease-Option.

@Paul Jozwiak as everyone has indicated this would be a HML scenario. @Nghi Le the HomeStyle is for both owner occupied, vacation and investment properties.  The issue here is that the HomeStyle only allows for SFRs when its an investment property.  You can do a 1-4 unit owner occupied HomeStyle mortgage, FYI. 

Originally posted by @Paul Jozwiak :

I'm looking to purchase a multi-unit investment property.  Back story is female purchased with expectations that her bf would renovate it and they'd live in one unit and rent out the other.  Well they made it through one unit before the break up.  So the finished one is rented through June 2018 and the other is basically 30% complete (non livable condition).  This won't be my primary residence so homestyle won't work.  Escrow holdback still requires it to be in a livable condition.  Anyone know of any loan options that would work?  I have the funds to complete the renovations.  Just not enough to pay cash for the house.  

This is not just a HML scenario you could use portfolio rehab/construction money at local portfolio banks as well. I cant speak to VA however in seattle I know probably 5-6 community banks who could do something like this:

- 75% of ARV - after repair value, they will only lend up to a max of this on what they percieve your project will ultimately be worth

- 90% LTC - loan to cost (acquisition + rehab cost) as they want you to have min 10% skin in the game so to speak some banks are more conservative and they might say " we're a 75/80 lender," this means they are 75% ARV and 80% LTC or in order words they want you to have 20 cents skin in the game for every 80 cents they distribute to you during the construction or during the loan process

- usually 1.5 to 2.0 points

- usually 4.5 - 6.5% rate interest only for 12 months with extensions at cost - much cheaper than HML as HML can range from 12-15% + 3-6 pts probably

- they usually reimburse after satisfactory inspection (usually $125-175 bucks per inspection paid by you) - this is important since you have to have the cash to front the initial first phase of rehab and you will get "reimbursed," after its completed then on to the next phase. HML costs more but some HML's will "advance," money to you for first phase which greatly helps your cash management during the project but pros/con's with HML's higher rate/points

Hope that helps, if a local portfolio/commercial lender doesnt lend you may have to use HML or PML.

Originally posted by @Nghi Le :

@Paul Jozwiak

Welcome to BP and congrats on your first post!

From my experience, HomeStyle Renovation loans ARE for investment properties. It's the FHA 203k loan that has to be used with primary residences.

In any case, HML will definitely work here, but it's not going to be cheaper than HomeStyle.

You could also try to convince the seller to do Seller Financing / Subject-To or a Lease-Option.

Not completely true @Nghi Le Home style financing works for as follows:

- 1-4 unit properties

- primary residence you can go up to 4 units

- second residence you can only do 1 unit SFR/condo/PUD (planned unit development)

- investment properties you can do 1 unit SFR/condo/PUD

max 4 financed properties as defined by fannie mae

203k FHA, yes this one is only primary residence but 1-4 unit properties with as low as 2.25% equity (when refinancing with 203k you can go up to 97.75% LTV) or 3.5% down payment on the purchase with 203k or 96.5% LTV

The nuance when refinancing with FHA 203k is that you need that 2.25% equity before the project starts or "in as is condition." So 203k refinance is not for those who are currently under water with regards to LTV ratio unless if the borrower has a huge sum of cash to buy down their LTV to 97.75%. This is not the same with Homestyle renovation loan where the borrower could technically be underwater and do a non owner renovation loan as long as their total loan outstanding is still within guidelines (75-80% LTV) with regards to the ARV.

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