mortgage loan question about using (insurance, mortgage broker, appliances)

[willc86]

Hey guys not sure if it varies by state, but I had a question that just popped up in my head.
Say we get approved for a 230,000 loan and we are aiming for a 150k house that we would like for it to be remodeled and the cost is 20k to remodel most of the house.

Is it possible to use that loan for that? Like is it cash they give us?

I am asking this because i've been looking at 230k home, and noticed most were super nice and remodeled, but if we start searching anything lower, they need to be remodeled. To add on, we saw homes that has huge potential and in good condition for about 170k; however, it needed newer appliances, floors/tiles, maybe some bathroom and kitchen doing. And I figured I can add 20k towards renovating and will come out cheaper than a 230k home fully remodeled.

so:

230k home remodeled
or
170k home + 20k in renovations (maybe add a car port in back yard $6,000) = 190k - 196k. which might come out much cheaper! Then again, I do not know the process when it comes to mortgage loans. Are you able to use it on anything for the home, or its strictly for just the house price. That would be great if I can do that

thanks a bunch guys!

[SkyDog77]

Short answer is no. They do not just write a check to you regardless of purchase price amount. If you are taking cash out, that changes things. Especially if you are trying to get cash in excess of the value of the home.

The reason for this is that the collateral for the loan is the house. Even if you are qualified for more, the loan amount is tied to the home value. They won't simply write you a check for the higher amount because there is no collateral.

You should discuss this with a mortgage broker, but likely they will advise you to do a first in the amount of the purchase, then a second line of credit to get you through the remodel. This will likely involve remodel plans and a post remodel appraisal to ensure that the amount they loan you will make the house worth enough money to provide collateral for the additional loan.

[willc86]

understood. thank you! I am just researching. I have about 4 - 5 months before I go to the bank and apply for a mortgage loan. So, I just do not want to waste their time.

Anyhow, that second loan, since it will be like a normal standard loan, would it be possible to get it the same length as a mortgage loan? 10 - 25 years? Or is there some kind of special remodel "loan" that can extend the life of the loan. My total budget for a mortgage (including all costs such as escrow, HOA, extra loans) a month is about 1300 - 1400 a month. I could afford more, but I like treating myself a lot, ha ha :S

I'd figure a $20,000 loan in the course of 20 - 30 years would not be so bad, and I can incorporate that as my "mortgage loan" all together. so lets say I end up paying $1100 a month for the mortgage, tax, etc and maybe an extra $200 for a 20k loan for the remodel side would be a total of 1300. (just throwing some examples. I know its best to talk to a broker/bank but just getting some ideas)

so it will be broken up to
30 yr mortgage (including everything) = $1100
20 - 30 yr remodel loan = $200
total = $1300

Would you guys agree that this seems like a better alternative in comparison to getting a more expensive mortgage, just to have it remodeled?

I'd figured 190k in loans with added remodeled plans, would definitely beat a 230k loan that is already remodeled, but I could be wrong. Opinions?

thanks for you help!

[beezle1]

20k to remodel most of the house...... Hmm that sounds really low to me. Are you doing it yourself? Even then, I would count on more than that.

[jwiley]

You can ask your mortgage broker about qualifying for an FHA 203 (K) loan, under that program you can borrow up to 110% of the after repaired value or the amount that your income will qualify your for whichever is lower. You will have to pay mortgage insurance for the life of the loan though. You can PM me for more details.

[joe2016]

Yes. You can do a rehabilitation loan, either a Fannie Mae Homestyle, or an FHA 203K home loan, depending on which one you qualify for. It will include the purchase price of the house, and the cost of the upgrades. Keep in mind, once the home has been upgraded, the finished home value must appraise for at least the cost of the upgrades plus the purchase price, for the home loan to be approved. But if so, one of those loan programs should work for you, as long as you qualify for the loan. Good Luck.

[SmartMoney]

There are several different home acquisition/improvement loans, but the lenders would be looking over your shoulder, watching every move on their collateral. You would be better served by purchasing as-is and then arrange for a home equity line to do your 20K improvements.