Sunday afternoon during the springtime. You’ve found the right house. It’s the house you want: the price is right, the location is right, the amenities are all…right. But there’s a problem with this house that is otherwise so right: it needs a new kitchen with appliances. Oh, and the windows are ancient, ugly, drafty and in serious need of replacement.
You want this house. And you’re rather move in to your new “right” house with that a new kitchen, appliances, and windows.
But how to purchase the home and find the money to renovate?
Maybe Uncle Harold can lend you the money after the closing. But, do you really want to ask Uncle Harold for such a favor? Then you know you have to invite him for every Thanksgiving and every Christmas and every Fourth of July barbecue. You LOVE Uncle Harold, but EVERY holiday? Umm….
And what if the house won’t pass muster with your Lender’s appraisal? Maybe those windows and broken kitchen cabinet doors will catch the Appraiser’s attention and she’ll call for them to be repaired prior to closing. (We call that a “Subject To” appraisal: the appraisal is subject to completion of required work before the Lender will close your mortgage loan) The Seller is willing to do only minimal work to help you pass an appraisal, but do you really want to rely on the Seller’s handywork to repair the kitchen cabinets and/or windows?
All of a sudden Uncle Harold spending all his holiday time with you is looking like your only option…
But there are several programs where your Lender can provide you the mortgage money for your home purchase and for the renovations. The beauty of it? A Purchase and Renovation Loan! ONE LOAN and thus ONE MONTHLY MORTGAGE PAYMENT.
The first, and most commonly used, is the FHA 203k Rehab Mortgage . With this program you can actually do a full house gut-renovation if you wanted to. It all depends on how much mortgage money your Income, Assets, and Credit allow you to qualify for, AND how much the home will be worth AFTER your proposed improvements. That’s right, that same appraiser who might have “subjected-to” your “right” home will now tell you how much the home will be worth with the new kitchen, appliances and windows. Yup, definitely improves value and the “After-Improved” appraisal will reflect that. Better still, the Lender’s approval decision is based on that “after-improved” value.
The FHA also offers the FHA 203k Streamline program. You need a minimum of $5,000.00 in improvements to qualify (can you say “Appliances?”) and the maximum is $35,000 for improvements. This program offers a faster, more efficient process of approving a purchase/renovation loan. And meets your “right house” scenario of new kitchen, new appliances and new windows, unless you’re selecting crazy expensive product/services.
FannieMae has a similar program for your renovation needs, too. FannieMae HomeStyle. This program is similar to the FHA 203k for purchasing and renovating that “right” home you found.
So, don’t lose hope. You can buy that house that’s so right for you. Ask me for more details by clicking “Ask Trevor.” I’m happy to give free advice all day long; it’s what I do.
Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.
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