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I am looking into purchasing a home that has been in my family for years. It has been vacant for over 10 years and will need, what I assume, a complete rehab. The purchase price will be around $40,000 and updated homes in the neighborhood sell in the $170,000 range, so there is plenty of wiggle room to get the house updated. I have looked into the FHA 203(k) loan, but I would like to do a lot of the work myself. Are there any other rehab loan options available with a credit score in the low 600’s? Other suggestions to financing renovations? Does such a thing exist as a Home Equity Loan based on potential value of the home? Thanks!
Unless you hold a Class A contractor's license, no bank will lend for Harry Homeowner to do the work on his own. Perhaps some painting here and there, but not for anything requiring a permit. Find a contractor you can work for (and willing to expose him/herself and their license and insurance). The percentage of homeowner fails is just too high to risk. Borrow against 401, get a gift, but I think you are going to have a hard time finding money.
Lending against future value is for the pro's, and even then, they still need to put their own skin in the game).
Unless you hold a Class A contractor's license, no bank will lend for Harry Homeowner to do the work on his own. Perhaps some painting here and there, but not for anything requiring a permit. Find a contractor you can work for (and willing to expose him/herself and their license and insurance). The percentage of homeowner fails is just too high to risk. Borrow against 401, get a gift, but I think you are going to have a hard time finding money.
Lending against future value is for the pro's, and even then, they still need to put their own skin in the game).
Thanks for the feedback. That makes sense regarding the banks hesitation. Would it be possible to get the house signed over to me then take out an initial home equity loan (say $40,000) and invest that into home to get the electrical/plumbing/hvac etc. updated. Once complete I would assume the value of the home would increase and as would my equity in the home. Then take out a second home equity loan to pay the family member for the house as well as finish renovations.
Thanks for the feedback. That makes sense regarding the banks hesitation. Would it be possible to get the house signed over to me then take out an initial home equity loan (say $40,000) and invest that into home to get the electrical/plumbing/hvac etc. updated. Once complete I would assume the value of the home would increase and as would my equity in the home. Then take out a second home equity loan to pay the family member for the house as well as finish renovations.
If the current value of the (abandoned, mind you) home is relatively low, meaning you need to put ~80-100K of work into it to make it worth 170K, I don't see how you would be able to get a HEL of 40K.
I would be interested in hearing how this might work.
Thanks for the feedback. That makes sense regarding the banks hesitation. Would it be possible to get the house signed over to me then take out an initial home equity loan (say $40,000) and invest that into home to get the electrical/plumbing/hvac etc. updated. Once complete I would assume the value of the home would increase and as would my equity in the home. Then take out a second home equity loan to pay the family member for the house as well as finish renovations.
Banks only offer mortgage or helocs for habitable properties (for the non construction loans). The home is the collateral. They would have 0 interest in that property should they have to foreclose.
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