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We presently have in the works an FHA 203k Streamline loan to buy a house we want that has a detached garage/workshop that needs interior finish work. In part, this type of loan is attractive to us because we would just pay 3.5% down, which we can handle.
However, a friend mentioned that regular FHA mortgage loans (not the 203k) ALSO take just 3.5% down.
Since it is possible that we won't get approval on the 203k Streamline we are currently working on, I'm wondering, could we go about things THIS way:
1. Get a regular FHA mortgage loan and pay 3.5% down, then
2. Get a separate home improvement/renovation loan to finance the finish work on the garage/workshop as well as anything else we may want to have fixed or repaired?
If this would be a reasonable way to do it, and would be faster and more certain of success than an FHA 203k Streamline, is there any reason we couldn't also pursue this while waiting on the 203k Streamline process?
And, how difficult might it be to get a separate home improvement loan? We'd have no equity in the house as we would have just bought it. The loan would be in the range of $25,000 to $35,000.
The "house" must approve to go FHA for that to start to be possible. If the garage is not finished and possibly has exposed wires and thing like that, FHA won't approve it as a regular loan. If there are other things they consider needing work, they will deny the loan. They want a house in structural and functional condition. If there is peeling paint, handrails not in place, roof issues, etc... this is where the 203k comes into play.
As for the home improvement loan, I believe you need to show equity. Why would a bank lend money on a house just mortgage for what is probably the appraised value to now put a lien on it that is more than what it's worth... they will look at foreclosure risks... but it might be possible if you get a small local bank to do it.
The house is fine -- it's a manufactured home, fixed to a foundation and in excellent condition and on a nice large lot. The garage/workshop is a separate stick-built building on its own foundation, it needs interior finish work such as insulation and drywall, plus garage doors and complete the bathroom. Nothing fancy, it's just a sizeable building.
We'd have to get an appraisal, but we think the property would appraise for more than we'd be paying on just the mortgage. If the mortgage and then a home improvement loan together came to $160,000, and if an appraisal would likely value the property as at least $160,000 after the finish work on the garage/workshop, would that higher appraisal value count in a way similar to equity? In other words, if the overall amount borrowed between mortgage and home improvement loan is equal to an appraised value, would we be more likely to get the financing done this way?
I hear you about local banks probably being more willing to do the home improvement loan. That's a good point.
You found a lender willing to do a 203K loan on a manufactured home? If you can get it, like Chet said, much better than a seperate home improvement loan.
You found a lender willing to do a 203K loan on a manufactured home?
Yes, after sending out email to something like 85 FHA lenders in the state, while our realtor called another 15 or 20. Out of all of these, *one* responded favorably. Of course, all we needed was one. Apparently this lender will not service the mortgage themselves, they will sell it after closing. We're assuming that won't pose any problems ....
Yes, after sending out email to something like 85 FHA lenders in the state, while our realtor called another 15 or 20. Out of all of these, *one* responded favorably. Of course, all we needed was one. Apparently this lender will not service the mortgage themselves, they will sell it after closing. We're assuming that won't pose any problems ....
What lender is doing this as i dont know of any?
Most lenders sell the loan after closing but continue to service the mortgage. Meaning, they send the payment voucher, collect the money, harass you if you dont pay... and they forward the money to the end investor but keep a small piece for servicing the loan.
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Tradional home improvement loans have some downsides...
