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Old 07-06-2015, 09:05 AM
 
Location: Dallas, TX
2,828 posts, read 3,385,586 times
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Quote:
Originally Posted by Brookside View Post
Thanks for all the replies. The rules differ from state to state. In CA for example, they will loan the additional amount as long as the home appraises for total amount loaned.

I will check out 203k's - thanks!
And that's where I think you'll have a problem. Most homes in Dallas appraise below what they sell for.
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Old 07-06-2015, 09:28 AM
 
87 posts, read 85,588 times
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For cash buyers and sellers who have good home equity, this is not a issue. Also for homes in neighborhoods where most homes have been renovated, other homes appraise better than how they would appraise otherwise. I doubt that this approach would work for a house where you need $200k to fix up a $300k house but it works for Coppell, Plano, Soutlake and Richardson as most homes are from 90's so all you need to do is cosmetic or may be change A/C or redo kitchen/bath to meet your style. For a $500k and up buyer or seller with equity, $50k is not that big of an issue.
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Old 07-06-2015, 11:12 AM
 
Location: US
643 posts, read 564,786 times
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I have a friend who deals is Mortgage banker, i can check with him if you want.
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Old 07-06-2015, 02:07 PM
 
305 posts, read 1,110,206 times
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You are looking for a construction loan that is convertible upon occupancy. They exist, the rates are higher for the construction period and typically require a larger down-payment.
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Old 07-06-2015, 11:30 PM
 
988 posts, read 1,436,568 times
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Quote:
Originally Posted by Austrian2 View Post
I know someone who offered an allowance of $50,000 on his home instead of renovating it himself. He had plenty of offers next day because buyers prefer to make changes themselves to meet their needs and taste. It was appraised for $550,000 but listed for $600,000. He sold it for asking and wrote a check to his buyer.
Quote:
Originally Posted by GBCommenter View Post
Interesting concept that obviously worked in that situation.

Only concerns I would raise are:

Will a bank give a loan for $50,000 over appraised value?

Would you end up paying a higher interest rate if they do - making it not a great financial decision to get locked into a higher interest for potentially decades to get a quick loan upfront?

Finally, is it worth the higher loan payment?

Those are the questions I'd ask myself...
Quote:
Originally Posted by jdallas View Post
Cash buyers negate all of those concerns.
Agreed...a cash buyer would negate my concerns. However, the OP posited a question asking about loan qualification, which implied to me that a cash offer situation wasn't an option.

On the scenario Austrian2 put out there, if someone had $600,000 to buy a house for cash (and get a $50,000 check back for renovations), why go through the effort to overpay by $50,000 just to have the seller give you back $50,000? I suppose real estate agents might like it if their commission was based on selling price...
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Old 07-08-2015, 08:56 PM
 
1,261 posts, read 1,991,631 times
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Quote:
Originally Posted by derekv View Post
You are looking for a construction loan that is convertible upon occupancy. They exist, the rates are higher for the construction period and typically require a larger down-payment.
This is helpful info - thanks.

(Why don't realtors mention this? I've passed on several houses because they needed too much reno.)
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Old 07-09-2015, 10:49 AM
 
2 posts, read 819 times
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Yes -- you need a construction loan --

You get all of your plans together for the renovation -- with budgets, etc. (assuming you a hire a firm to do everything) -- and then an appraiser appraises the post-renovation value of the home taking into account your plans -- which is what the bank uses to determine your down payment required, etc.

Typically the bank will have an existing relationship with the construction firm you are using.

The bank then gives you a construction loan for $500k (for example) assuming the appraiser thinks the home will be worth $650k when you are finished with your renovation -- (or if less, require you to make up the difference with cash -- this would be your down payment). Then you make your first "draw" on the loan -- which is the initial purchase of the property for $350k. You continue to draw down funds until your project is complete, at which point the home is reappraised and the bank converts your construction loan into a conventional 20 or 30 year loan (at a lower interest rate). Typically 20% - 30% equity is required at the completion of the project (either built in, through your down payment, or some combination of the two).

Start with finding a construction firm -- they will have done this before and can probably tell you what banks they work with.

*Under this scenario -- you need to get your renovation plans in place as soon as the property is under contract --
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Old 07-10-2015, 09:23 AM
 
137 posts, read 115,567 times
Reputation: 71
Quote:
Originally Posted by Brookside View Post
I'm embarrassed by how limited my understanding of home finance rules in TX are! Here's the situation:

1). We are considering a move to another neighborhood. Sale of our existing house = not a problem.
2). All houses in our price range in our target nabe will need upgrading/rehab.

Here's the question:

If we are approved for, say, $500k, but purchase a home for $350k, can we use the "extra" $150k for repairs to the home we purchase?

Or is there some rule that the purchased home must be worth $500k after repairs?

Many thanks!

In your case i think you would need a rehab loan which i think is called a 203(K) or what i have done in the past is negotiate with a banks the loan amount for purchase and than improvements that are held in escrow and payed out and rolled into the mortgage once homes is renovated... they were smaller bank and i had built relationships with them from financing many properties...
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