I'm renting to own a home in VA from family member. $30,000 ballance. I got approved for loan but cannot close due to home not having a black water septic. Currently using composting toilet. House appraised at $137,000 and I need only $65,000 to close and finish renovations. Need non-conventional mortgage broker that will put money in escrow until septic is complete. Please help
Lender · NJ · Member since 2025 · 50 posts · 23 votes
3w
I’d probably check with the closing attorney and the lender to see whether the septic issue can be resolved through an escrow holdback or another approved arrangement. Since you already have the loan approval, it may be worth asking what specifically they would need to be comfortable closing.
Hopefully you can get it resolved without having to restart the whole loan process.
Attorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 300 posts · 112 votes
1w
Quote from @Thomas Polyson:
I'm renting to own a home in VA from family member. $30,000 ballance. I got approved for loan but cannot close due to home not having a black water septic. Currently using composting toilet. House appraised at $137,000 and I need only $65,000 to close and finish renovations. Need non-conventional mortgage broker that will put money in escrow until septic is complete. Please help
@Thomas Polyson, one thing I’ve learned from working with buyers and real estate transactions is that I would first separate the financing problem from the property problem. Before spending time looking for another lender, I would want to know exactly why the current lender will not close. Is the septic issue simply one of their loan requirements, or is there also a permit, health, occupancy, or property condition issue that has to be fixed before any lender can move forward? I’ve seen buyers change lenders only to run into the same problem again because the real issue was with the property.
I would also make sure the rent-to-own agreement with your family member, title, renovation plans, and septic work are all clearly documented. If an escrow holdback is possible, I would want the agreement to be very clear about how much is being held, who completes the work, what has to be finished before the money is released, and what happens if the work costs more or takes longer than expected.
I’d be glad to stay connected and see how you work through this. Since the property is in Virginia, I would have Virginia counsel review anything specific to the agreement, title, or septic requirements.
Lender · MD · Member since 2025 · 133 posts · 51 votes
1w
It sounds like the septic system is the main issue, not your equity or the appraisal. If a lender considers the property uninhabitable in its current condition, a standard mortgage may not be the right fit. I'd look into renovation loan options or lenders that can structure the repair funds in escrow and release them as the septic work is completed, since those programs are designed for situations like this.
I'd also make sure you explain upfront that this is a family transaction, the property has already appraised, and the septic is the only major issue holding up the closing. That can help the right lender determine the best path much faster. If you'd like to walk through your financing options or compare renovation loan scenarios, I'd be happy to help point you in the right direction.