There are two main loan programs that specifically finance the purchase and renovation costs in one loan. They are the FHA 203(k) Rehabilitation loan and the HomePath Renovation loan. There are huge differences between the two. FHA 203(k) is specifically owner-occupied dwellings only and allow for cosmetic as well as full renovation. The HomePath Renovation loan allows for Investors to purchase and renovate a property but the property must be an Fannie Mae REO eligible property..i.e., it must be designated as HomePath Renovation Eligible at http://www.homepath.com.
HomePath is a super loan program as it does not require mortgage insurance and the Investor Down Payment requirement is just 15%. The only downside is that it must be a Fannie Mae REO. Unfortunately, I do not offer this product and only a handful of lucky lenders do so. Locally, I believe just Umquah and HomeStreet Bank offer it. A Lender must have already been approved by Fannie Mae with a two-year history of Originating AND Servicing mortgage construction and home improvement loans. The Servicing requirement eliminates most Lenders from being eligible to offer the HomePath Renovation loan. Most Lenders offer HomePath purchase program financing but not HomePath Renovation. I hope that helps and good luck!
Traditional lenders often want at least 20-30% down for an investment property, and then you've got to use your own money for the remodel. Even 203k and HomePath expect you to be an "owner occupier" I believe. This is why most investors use hard money or private money lenders for buying investment properties. You can buy the house with a hard money loan, fix it up, and then refinance it with a traditional mortgage at lower interest rates, if you have decent credit and income, at least!
Some hard money lenders will roll the costs of the remodel in with the purchase, if you've found a great deal (less than 70% of after repair value, including rehab cost), but even then you will have to put at least 10% down (I do know of one lender who will do it with 5% down). The days when lenders were willing to take all the risks themselves are long gone, however!
I do know of at least one lender who will do a rehab loan (as a 2nd) under the right circumstances, and under the supervision of a licensed contractor. Part of this depends on your "exit strategy"... is this going to be a "flip" or a "buy and hold" property? If you're going to hold and rent it, you can use the hard money for 6-9 months while the property is being rehabbed, and then refinance with a traditional loan; for flips, you could use my specialty lender... their strategy works great for that! Call me for some references in the Portland area in either case...
Sharon Wenger, Avalar West Realty
Sound Mortgage is a great resource for a wide variety of investment lending. Reno Warren is a great contact at Sound 360.513.2999
FairPlay Funding is also another excellent resource.
ERIC P. NEWMAN | P: 503.698.5801 | F: 503.716.4604
Senior Mortgage Banker
SKYLINE HOME LOANS
Apply Online 24/7 http://www.GoNorthwestLoans.com/applyNow.html
MLO-97776 ~ NMLS-12072
10121 SE Sunnyside Rd, Suite 230, Clackamas OR 97015 - Corporate
Broker/Owner Portland Principal Realty, LLC