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This weekend my agent showed me a foreclosed house in Michigan, which was listed in homepath.com and is also eligible for homepath renovation mortgage loan. The house needs a complete remodel of the kitchen, new floorings, light fixtures, new furnace and new AC. I am estimating around 30K for the renovation.
My question is very basic,
1. If the house is listed as renovation mortgage loan can I get Conventional / FHA 203k loan instead? my understanding is I cant get conventional because the house cannot be appraised as it's uninhabitable, I guess I (may / may not) get the 203k for the repairs.
2. If I have to go with homepath loan can the lender just provide me the loan for (purchase price - 5% down) ? I can put cash for repair. I don't want renovation loan which involves more process
3. All I am looking for, is there any type of loan that I can get for purchase price - 5% down and I can pay cash for repair, I don't want renovation loan which involves more process
You may have trouble separating the two. See, Fannie only lends on residential mortgages that are habitable, turn-key, ready to move in. Ditto on the 203K w/ FHA. The way both get around this is to offer a repair period (repair funds held in escrow), knowing at the end of the escrow, there is a habitable home. If you use your own assets, there's no guarantee you will finish it on the time schedule needed to deliver that loan into the proper security.
I know for FHA (203K) there are Minimum Property Standards, meaning, there are repairs that would be required, whether you want them or not. Homepath, may not have specific minimums and you may be able to add a minimal amount ($1000) to the mortgage and pay for the rest out of pocket. But, I'm willing to bet, there's a required timeline for the repairs to be done - you couldn't stretch it out over the years. The reason a lender would not allow you to do this (add a minimal amount) is the idea is for the lender to be able to step in mid-construction if the borrower defaults and to make sure you don't blow all the rehab funds on chandeliers or at the track. If finishing the property involved your own money, stepping in and completing the repairs would be an issue in case of a default. (Maybe, you can put your funds into escrow for the repairs - that would be the most logical).
The above is just thinking things through out loud, you would have to talk to a lender for both programs. But one thing I am fairly certain of - if you just want a loan for the property, as it currently is, and then do the repairs on your own time and expense, it won't be allowed.
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