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Looking to buy either a townhouse of condo end of this year/first of next year. I will be starting a food business from my home, and need my kitchen and storage space options to be very specific; I know that no home will already be the way I need it to, so I'm looking for a cosmetic fixer so I can reno it to exactly how I need it to run my business. A short sale or foreclosure would be great price wise.
I'm a Veteran, and thought about a VA loan, but I'm not sure they would give me reno costs included in my loan, which is what I'm seeking. I simply don't have the cash out of pocket to pay for all renovation costs on my own. Someone mention maybe an FHA loan does that, but I'm not sure; plus, I heard not that many lenders are doing VA loans like they used to. If this true, why?
Anywho, any help or suggestions would be great. Looking to buy in the Atlanta, Georgia area.
VA allows for Energy Efficiency Improvements only. Still my favorite loan. An FHA 203k loan allows for improvements that generally increase value or repair damage. There are also Conventional Loans that, while requiring 5% down, the Mortgage Insurance component is generally lesser, the process less stressful, and the rate is a bit higher than FHA. So you want to compare and contrast these.
The big question is the type of work you want to do to the place. It would be difficult to do work that essentially looks like you are turning a residence into a Commercial Property. What are you thinking of doing to make the place the way you want it?
VA allows for Energy Efficiency Improvements only. Still my favorite loan. An FHA 203k loan allows for improvements that generally increase value or repair damage. There are also Conventional Loans that, while requiring 5% down, the Mortgage Insurance component is generally lesser, the process less stressful, and the rate is a bit higher than FHA. So you want to compare and contrast these.
The big question is the type of work you want to do to the place. It would be difficult to do work that essentially looks like you are turning a residence into a Commercial Property. What are you thinking of doing to make the place the way you want it?
Oh no, no intentions to make it commercial; I think I would run into zoning problems if I tried to do that. I just want to start an at home baking business, which hopefully I can move to a commercial kitchen with the first year or two. It just cuts down on my overhead to start out small from home with business and living under the same roof.
I need double (possibly) three ovens, LOTS of work surface space, storage for flours and sugars, blah blah. My reno projects would basically include the kitchen, baths, and probably hardwoods, as I find carpet fitting to have with an at home food business; plus, I hate carpet! If I need to update the heating and air and make it more energy efficient, or maybe new windows for that purpose, I want to do that as well. Kitchens and baths are where the resale value is, so as for the FHA requirements, that plan would fit.
I know the VA loan doesn't require anything down, but does charge a 3% loan fee. I REALLY don't have more than maybe $3500 up front money to get into a place, so I probably could swing the loan fee if I got a place for the right price. I've been scouting out properties in Atlanta online, and I think I could into a condo for $60K-$80K (maybe a townhouse depending on the situation) and take like $30-$40K and redo it. I just need to be under $150K when all is said and done to be able to afford my mortgage payments comfortably.
VA rolls that fee in- - but that doesn't solve the renovation piece. FHA 203k might not be appropriate for that price vs. renovation amount ratio.
You need to look at post-renovation value.Top-end for this deal is 80k+40k = 120k, but you'd need a full 5% down, and then have the seller pay all closing fees and prepaids.
My company calls it a Homestyle Loan - different banks have different names for them.
If you went FHA203k, you top out at $28,500 in renovation with a Streamlined 203k. A larger amount in renovation is a 203k type that involves a General contractor. This may be doable as well. I just think the mortgage insurance component in the conventional loan is friendlier.
I can't help with the loan type, but I do have one comment.
Many counties do not allow food products for sale to be made in home based kitchens. The ONLY allow commercial kitchens to be used for any kind of food preparation.
You have, I hope, checked what licensing and requirements exist for the county, haven't you?
VA rolls that fee in- - but that doesn't solve the renovation piece. FHA 203k might not be appropriate for that price vs. renovation amount ratio.
You need to look at post-renovation value.Top-end for this deal is 80k+40k = 120k, but you'd need a full 5% down, and then have the seller pay all closing fees and prepaids.
My company calls it a Homestyle Loan - different banks have different names for them.
If you went FHA203k, you top out at $28,500 in renovation with a Streamlined 203k. A larger amount in renovation is a 203k type that involves a General contractor. This may be doable as well. I just think the mortgage insurance component in the conventional loan is friendlier.
You mean that the VA loan rolls the 3% loan fee into the mortgage so I don't have to pay that in cash up front? And with a Va loan, am I clear I don't have to pay PMI?? $28,500 for the reno might be okay for a top out, as the kitchen is the main thing; maybe the floors and windows could wait.
All the loan options you gave me are a little confusing....lol.
I can't help with the loan type, but I do have one comment.
Many counties do not allow food products for sale to be made in home based kitchens. The ONLY allow commercial kitchens to be used for any kind of food preparation.
You have, I hope, checked what licensing and requirements exist for the county, haven't you?
And thank you for your service.
Yes. The state of Georgia and Department of Agriculture passed what is known as a "cottage law" back in the fall of 2013, which allows certain food businesses to be run from your home. I think baby food and a few others are not allowed, but baking is a go. The state comes to your home to do an inspection before issuing you a license; like check that things are stored at certain temps, no animals, blah blah. I'm in North Carolina, but will move back home to purchase a place. That law is here in the Carolinas too, and has been for some time. Californians are currently running a petition to get it passed there. Everyone simply can't afford two rents/mortgages for home and business when first starting out.
Couple of things, hubby is retired Army and we have bought both up of our homes with VA loans. The funding fee is a percentage of the sales price of your home, and yes, it can be rolled into the loan amount, making your loan more than 100% financing. Think of the funding fee as upfront PMI. You can use your VA loan more than once, but the fee goes up each time you use it. (Side note, if you have a disability rating there is no funding fee.)
Pfhtex is correct on the energy-efficiency improvements. VA loans also offers other purchase benefits some folks are not aware of. VA loans allow SELLER funds (I.e. Closing costs) to be used to pay off debt, and they can also be used to pay the funding fee (in it's entirety - no partial payment). So when I write any offers, I put in "Seller to pay $(some amount) in closing costs, prepaids, points, funding fee and/or unpaid debt."
You mean that the VA loan rolls the 3% loan fee into the mortgage so I don't have to pay that in cash up front? And with a Va loan, am I clear I don't have to pay PMI?? $28,500 for the reno might be okay for a top out, as the kitchen is the main thing; maybe the floors and windows could wait.
All the loan options you gave me are a little confusing....lol.
VA does roll in the VA Funding Fee. Is this your second use of the VA Benefit?
You do NOT have Mortgage Insurance in a VA loan.
However VA loans do not allow for the type and amount of renovations that you want.
The $28,500 number is the Renovation Cap for an FHA Streamlined 203K loan. Those DO have monthly mortgage insurance in the amount of 140 basis points. If your total loan, post renovation, is, for instance, $100,000 even, the monthly MI would be $140. For the entire life of the loan
Have you discussed your needs with a local lender? They can usually help you decide which mortgage loan is most suitable for your unique situation. If you don't have a large down-payment (over 10%) then your best bet would be the FHA 203K. Fannie Mae also has a renovation loan called a Homepath Reno loan. Another idea would be to purchase with a USDA or VA loan, have the seller or lender pay all of your closing costs and take the cash that you have on-hand to do the improvements to your kitchen.
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