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Can anyone advise where to get a mortgage loan for the house that is missing all bath fixtures, some flooring (carpet) and kitchen appliances?
We got refused by bank 2 weeks into approval because the house is new but 'unlivable'?
Thanks.
Try for an FHA 203K renovation loan?
Were you trying for a construction loan or a conventional mortgage?
Generally, you have a very hard time getting conventional money for a home that is not habitable.
A construction type loan is the only type I'm aware of that will work for a property that is not habitable. If you go forward, be sure you have the correct insurance in place.
FHA 203K loan. God help you if you decide to go that route though - we were told we would have an easier process than most, and we still haven't closed... 70 days into the loan approval process (not including the negotiating time). I think the current issue is they are bickering over the energy rating of windows - a matter of $400 over the life of the loan.
203K = way, way more trouble than it's worth, and it kills any joy that a first time home buyer should feel when buying their home.
I've got the same question. We found a new Southerby home that is complete except for carpet, kitchen appliances, a few light fixtures, and touch up. Of course, someone stole the two outside A/C units (probably the contractor that installed them...) from an otherwise working system. The problem is that Southerby is no longer in business and the bank owns the house. And because it doesn't have a Certificate of Occupancy, it doesn't qualify for an FHA 203K. Because there is no builder, how could this home fit under a "New Construction" category? And one bank told us they required 25% down for new construction. We are using a FHA loan for a reason... We don't have tons of cash to put up at the moment. Trying to figure out a way to make this geat opportunity work...Randy (Dallas, TX)
My credit union told me that they will withhold the portion of the loan that would be used to make the home "liveable". Apparently this is required if the loan is Fannie/Freddie backed (govt insured mortgage.) In my case, it was missing the kitchen so the house would close in escrow and they would treat it like a construction loan where they pay the contractor as the work progresses. Didn't really sound too complicated but I ended up going another route.
The key is to find a lender that understands what you want to accomplish...
Quote:
Originally Posted by tryin2buy
My credit union told me that they will withhold the portion of the loan that would be used to make the home "liveable". Apparently this is required if the loan is Fannie/Freddie backed (govt insured mortgage.) In my case, it was missing the kitchen so the house would close in escrow and they would treat it like a construction loan where they pay the contractor as the work progresses. Didn't really sound too complicated but I ended up going another route.
Standard FHA loans are not going to work in this situation, and I suspect even a 203K is not going to fly.
The solution outlined by tryin2buy is your best bet. It does not really matter about trying to get the loan up to Fannie/Freddie guidelines as much as getting a lender that wants to work with you. It is more costly for them to do construction type loans and they are taking on greater risk. Expect to pay a premium on the rate to do this. Most lenders will not want to touch this kind of deal in the current climate, but if you do the leg work...
The price of such a home has to be a HUGE bargain to offset the higher lending costs. If you were an 'investor' you would MIGHT be able to structure this so that you have a very large down payment that the lender is going to essentially lend back to you as you need to pay contractors to do the work to get it ready to market while keeping your end state debt::equity above 20%, but if you do not have cash to do that I cannot imagine any lender would touch this...
Check with the bank that owns the property. Some of them will do these loans (including the money to complete the house) just to get the non-performing asset off their books.
If that doesn't work, an investor would actually get what's known as a 'hard money' loan, complete the work, and then refinance if holding. You could do the same if the other options don't work out. A few things you need to know to make it work:
1) Purchase price plus money for finish work should be available, but the ARV (after repair value) must be at least 30% more than you are looking to borrow, more than that if you want to roll points and interest into the loan. These loans are VERY different from conventional. Very high points and interest rate, and designed to be no more than six months in duration in most cases.
2) To go FHA after you purchase with hard money, you may have to wait six months to refinance even if the work is complete sooner. Check with your lender.
3) Some hard money lenders won't work with you if you don't appear to be experienced, or will charge more. You may want to locate a mortgage broker that has a working relationship with hard money lenders as well as conventional. That could ease the way both on the original loan and the refi.
Good luck! Let us know how it works out...
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The key is to find a lender that understands what you want to accomplish...
