Financing in Virginia Beach>Question Details

Phil Capron, Real Estate Pro in 23455

Does anyone know of a conventional rehab/construction loan?

Asked by Phil Capron, 23455 Wed Jan 9, 2013

I just lost a deal yesterday for one of my military clients trying to get into the world of investing. He had a contract on a 2/2.5 townhome for $100,000. Since he did not plan to occupy the property he had to put 20% down and alloted for $5,000 rehab since the property appeared to be in good shape. The home inspection showed that the roof needed to be replaced and there were many other smaller issues adding up to $12-15,000. So now instead of putting $25,000 cash into the deal he was looking at over $30k which was a pain threshold for him so he bailed.

I know New American has a really good FHA Streamline 203k that you can finance up to 35k, but that doesn't work for my military guys, or anyone not planning to occupy the property. Does anyone know of a product out there that might work for my current client?

Thanks,

Phil

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Answers

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If you are looking to buy a home, you may find that the best deals are on homes that need a little tender loving care. If the house in question is being sold via a foreclosure or short sale, it is likely that the last owner left it in less-than-perfect condition.

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/
1 vote Thank Flag Link Thu May 7, 2015
Phil, You are correct that the 203k is not for the non-owner occupied property investor. Monarch Mortgage has a construction rehab department I will see if we are doing non-owner occuiped on the product and let you know on Thursday. Beyond that what your cleint really needs is a commercial line of credit or dare I say alternative sources from private financing like trust funds or other investment trust.
1 vote Thank Flag Link Wed Jan 9, 2013
Phil,

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.
1 vote Thank Flag Link Wed Jan 9, 2013
That's crazy! I literally was on a search myself for the same thing. My morning has consisted of calling around to find out who offers something like that. Please keep me posted on what you hear in that regards.
1 vote Thank Flag Link Wed Jan 9, 2013
Thank you so much. Please feel free to email me directly at ng2261@gmail.com.
Flag Wed Jan 9, 2013
Niclole, I will let you know if Monarch has a non owner occuiped contruction rehabilitation product. Beyond that a commercial line of credit is really the way to go. . .
Flag Wed Jan 9, 2013
Val Parnell. 749-2181. TowneBank can do it.
1 vote Thank Flag Link Wed Jan 9, 2013
> Loan Guidelines - Conventional Rehab

* 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
Primary
Residence 1 unit 700 95% 95%

2nd Home 1-unit 680 80% N/A

> Minimum credit score:-

Loan-to-Value Credit Score
> 80% 700
0 votes Thank Flag Link Mon May 4, 2015
Claudine, I had a rehab close with Ellen years ago and you are right - she is great! thumbs up to Russell.
0 votes Thank Flag Link Tue May 28, 2013
I have several investor clients who have used different lenders to get those types of loans. One recently went through Wells Fargo for rehab/construction loans on two homes she purchased. I normally first put my clients in touch with the two local lenders I use the most. Nick Russo with Towne Mortgage, and Robert Ashburner with Monarch Mortgage because I believe they get better service with those guys. Wells Fargo was able to do the loan my client needed, but the process was very difficult, communication was not good, and the closing took what seemed like forever.
0 votes Thank Flag Link Sat Jan 19, 2013
Russell is correct. The only other way to acquire an investment property (with mainstream financing at least) and finance a rehab is if you're purchasing a Fannie Mae HomePath Renovation eligible property.

Thumbs up!
0 votes Thank Flag Link Fri Jan 18, 2013
If you work with Ellen Ailsworth at Wells, your 203k is a dream. I had no issues at all. She tells you exactly what to do. Deal done, client happy = Me happy.
0 votes Thank Flag Link Wed Jan 9, 2013
Hi Phil,
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!

Tyler Spruill
REALTOR
Rose and Womble Realty
757-739-9119
tspruill@roseandwomble.com
0 votes Thank Flag Link Wed Jan 9, 2013
Ed Deanes might be able to help. 5520131
0 votes Thank Flag Link Wed Jan 9, 2013
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