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I can purchase this house that Zillow estimates at the 299-340k range (no data for this house so who knows) for 60k because it is in need of some work. Specifically it needs extensive foundation repair, a new roof, and I was told it probably needs some electrical. I haven't yet gotten anyone out yet to geat even more specific, but it's someone I know selling the house and this is just what was relayed to me. It's in need of some other things that I'd definitely just do myself.
60k sounds good to me, considering I could spend as much as 180k in repairs and still be okay. What I'm confused about is the process I'll have to take in order to purchase a house that is in this sort of shape. I'm pretty sure a bank won't loan any money on a house that they think has a chance of not being worth what I want to pay for it, but 60k might sound good to them too. And I'm pretty sure that I'd kind of want to (but really need to because of the bank) wrap in the cost of things like foundation repair, roof, whatever else comes up serious in inspection into a loan. Just so the house doesn't go south as soon as me and the bank buy it right?
I have 20k for a down-payment. Is it possible to get a 40k loan on this house and live in it, probably pay it off in a small amount of time, and then apply for some kind of construction loan?
I could really use some advice because I'm not sure how people even buy fixer uppers if they can't do a cash sale! I am a first time home buyer and I have 20k for a down payment. Has anyone ever gotten a loan on a "distressed" property and can you please impart your experience and the various hoops I may have to go through I would really appreciate it or any thoughts and suggestions all are welcome.
Get some estimates & then double that figure to get a realistic price on how much a renovation would cost. It might even be cheaper to tear it down & build a new home. If you are not a contractor, yourself, then I would steer clear.
I could really use some advice because I'm not sure how people even buy fixer uppers if they can't do a cash sale! I am a first time home buyer and I have 20k for a down payment. Has anyone ever gotten a loan on a "distressed" property and can you please impart your experience and the various hoops I may have to go through I would really appreciate it or any thoughts and suggestions all are welcome.
The most useless question anybody can ask is "Has anyone ever?"
If you want to know whether you can get a loan to fix up a dilapidated old house, the place to ask is a bank, credit union, or mortgage company. What happens then has nothing to do with what anybody else has ever done.
OP you are a first time homebuyer. You don't know what you don't know, which is a lot. You don't know whether you can get a loan from any lender for that particular house, so you need to start asking them. Have you ever done major renovations before? Are you a contractor who can evaluate, estimate, and then do the work yourself? If not, why you would voluntarily put yourself in such a position is beyond me. Would you need to live there while the work is done? It might not be habitable. Sounds like a nightmare.
I’m not going to discourage you because I have gotten some very good deals on buying fixer-uppers. But do be aware that when extensive foundation repairs are done it often causes serious plumbing issues. The foundation repair companies typically hide warning language regarding impact on plumbing in their contracts but when the work is done, you can pretty much double the quote given to you for foundation repair. A $30K foundation repair job can easily turn into a $60K job with all the plumbing, windows, sheetrock and exterior surface repairs needed.
So, your $60K house is now a $120K house with the costs of the foundation repair.
*Add in $10K for new flooring and cabinet repairs
*Add in $20K for a new roof
*Add in $8K for electrical work
Now your $60K house is about a $160K house, and this is a conservative guess.
Yes, you can probably get a loan for the cost of the house plus repairs (you’ll need to submit quotes). But the loan rate may be higher than the wonderful 3% rates available right now. Call a mortgage officer and ask about a rehab loan for a house you want to buy and find out the details.
So, before you move forward first go look at houses between $150K-$190K and compare them to this house you are interested in as far as how nice they are, the location, and the cost of financing.
I'd approach with serious caution if it's marked down that much. And like someone else said, renovation costs always run more than anticipated so you should be very thorough in pricing that sort of thing out. I don't think I'd do it if I were in your position and needed to make arrangements for a loan and repayment. It could definitely become a big financial burden with a lot of sunk cost.
Thank you sir for that tip! Your experience with fixer upper homes is definitely appreciated.
And thanks everyone so far for their thoughts as well. The land is worth upwards of 100k I have no doubts that this is a good deal for the property just that I'd like to be able to do the necessary costly repairs as one.
So I suppose the next big thing would be to start calling up banks and contractors, thanks!!
You can also see if your city or county has a program for buying fixers.
Just something to think about: have similar lots near this house sold for $100,000? I see several lots around here for sale at prices a few times what they went for at auction, but nothing that has actually sold for what they're asking.
There is a federal program for just such activities but I have seen little about it in a couple of years. It appeared to require the use of a licensed contractor to at least oversee the project.
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