Best way to finance remodel upon property purchase?
I have found a home I would like to purchase, but some remodeling would need to place in order for it to work for me. This would include finishing the basement area and some work on the kitchen. Would it be possible to do a second mortgage at signing? What other financing options would be available? Thank you. I look forward to your responses.
Public Comments
- yeah yeah yeah
- Not necessarily a 2nd mortgage, but, with good credit, you can often finance for 110% of the cost of the house or even more...for things just like what you described. Ask your realtor.
- Are you using a real estate agent or buying directly from the seller? If you are purchasing directly from the seller - you may want to ask that person to help you roll the costs into your mortgage. The way that works is if the house is $200k and you need to do 20k in renovations, you have the seller raise the price to $220k. You two engage in a separate agreement where the seller pays $20k to you after closing as a concession for repairs which you uncovered after closing. That makes it a write off for the seller so they do not have to pay capital gains and it saves you from being denied a 2nd mortgage at closing. You have to remember that the bank won't allow this so you can not put the concession on the HUD1.
- If you are offering below asking price you may be able to get the basement finished as a contigency on your offer. You should indicate that the work will be done by licensed contractors and proper permits obtained. The kitchen work will likely need to wait until you have built up some equity and/or saved other funds.
- I am not sure whether this applies to your situation or not, but FHA offers a 203K program that lets you roll your repairs into the mortgage. http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm If not, don't be afraid to ask a mortgage broker. They need the work and should be able to offer you some good alternatives. Good luck.
- Zx and Bobcat are both right. The 203k loan will carry a slightly higher interest rate, but both are good options.
