If the home was abandoned or vandalized, it may need to be practically rebuilt in order to bring it up to your standard for livability. This is a time to consider financing through a rehab loan.
> How a Rehab Loan Works:
The first step if you want to renovate your new house is to engage a contractor to draw up plans and specifications for the work that will be done. The lender wants to see every detail of where the money is going. Based on these plans, they will add a 10 or 15 percent contingency for cost overruns, and lend based on this final number.
The work does not start until the loan closes. Then the money for the repairs is put into an escrow fund and disbursed as the work is completed. For simpler projects there are only two disbursements. For larger renovation projects there may be many draws on the escrow fund. A typical time frame for completing the work is six months. Sometimes the lender will give you a year to complete the project.
Reference link:- http://fha203kloan.org/investors-eligibility-for-203k-loans/
Wells Fargo is the only lender I know of who does a conventional rehab loan. Google, Ellen Ailsworth, she's the renovation specialist for Wells Fargo. She was going to do a convention investor rehab for me but we lost out on our bid for the property.
* Conventional renovation or "rehab" programs allow you to combine the purchase or refinance of a home with the costs to renovate or extensively remodel the property. Soft costs such as architectural services, engineering and permit fees may be financed.
* Renovation must be completed by an approved, third-party contractor. You cannot use a renovation loan to do your own remodeling. You will make full, principal+interest payments both during and after the renovation. Renovation must be completed within 6 months of the closing date, and you cannot use the program for renovation already in progress.
* These are standard underwriting guidelines for conventional renovation mortgages. They are valid only for primary residences and 2nd homes. Please see the glossary for definitions of the terms used in the guidelines. Note these guidelines are subject to change.
> Maximum loan-to-value ratio :-
Occupancy Property Type Credit Score Loan-to-Value Combined Loan-to-Value
Residence 1 unit 700 95% 95%
2nd Home 1-unit 680 80% N/A
> Minimum credit score:-
Loan-to-Value Credit Score
> 80% 700
I am a REALTOR with Rose and Womble Realty. I have had numerous deal in which we used a 203k Rehab loan, this is what they are called. There are other ways to do it that do not limit the way you use the money such as just taking out a second loan for improvements. Typically 203 K rehab loans need receipts for what is done and only certain things are approved for the money to be used for. They are very difficult to get through in most cases. If you have any questions feel free to call me direct 757-739-9119 and I will go a little more in detail about it with you. If you are interested in getting one I have an OUTSTANDING LENDER, who is a veteran in the business, and the Lender that handles ALL MY VOLUME for me, I would not use anyone else, who would be happy to help you. Her name is Vickie Ashton 757-472-2678 and she is with Union Mortgage Group. OUTSTANDING LENDER! Give me a call Phil or email me. Thank you sir!
Rose and Womble Realty