Home Buying in Cedarhurst>Question Details

Alvy, Home Buyer in Wantagh, NY

If I buy a shortsale home for $450k but it needs about $50k in repairs will I find a lender who will give me a mortgage of $500k for this short sale?

Asked by Alvy, Wantagh, NY Wed Oct 10, 2012

If I buy a short sale home for $350k but it needs about $50k in repairs will I find a lender who will give me a mortgage of $400k for this short sale? Excellent credit and if that's not enough have a family member who will co-sign.

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Good morning Alvy,

The mortgage loan you'll need is insured by the Federal Government under the FHA (Federal Housing Administration) and provides for purchasing a home and borrowing the repair/renovation money all rolled into one loan.

The Miracle Rehabilitation Loan Known as the FHA 203k Loan

So many Buyers today are eager to purchase homes at below market prices. Often these homes are in need of serious repairs or improvements to update the property. The 203k Program handily meets the needs of Buyers today.

This miracle program allows a Buyer to purchase a home and obtain the monies for repairs or home improvements all rolled into a single loan with a SINGLE monthly FIXED RATE payment. The repairs can cost as little as $5,000 or can run as high as necessary to fully gut-renovate a home.

The limit on the repair monies included in the loan is the Loan-To-Value (LTV) Limit based on statutory FHA Loan Limits in your area (see below). And this LTV percentage is calculated based on the value of the house AFTER improvements.

The 203k program even has a provision allowing the Buyer to request that up to 6 months worth of mortgage payments be included in the loan so they don’t have to pay two monthly housing
expenses—rent and mortgage—while the house is under construction.

203k Interest rates run higher than market, but this is still an ideal program to help Buyers achieve their goals of homeownership while simultaneously updating or renovating a home for the lowest possible cost.

Highlights of the 203k Program:

•Buyer can obtain the cash needed to conduct improvements on a home
•purchase folded into the same mortgage loan needed to purchase the house.
•Borrower must qualify according to regular FHA Underwriting criteria with regards to Income, Assets and Credit.
•The Program is only open to Owner-Occupants; no investors permitted. BUT you do NOT have to be a First-Time Homebuyer.
•No Income Limits; no minimum income requirements. No geographic limitations, with the exception that the property is here in the good ol’ USA!
•Purchase + Improvements = ONE Mortgage and ONE Monthly Payment

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528
0 votes Thank Flag Link Mon Oct 15, 2012
You may qualify for a rehab loan; therefore if you haven't done so yet visit with any licensed loan officer; be aware that a mortgage pre-approval letter is required in order to determine your price range and for any offers to be taken seriously.
2 votes Thank Flag Link Wed Oct 10, 2012
Yes. It's called a FHA 203(k) loan. This loan will allow you to borrow the actual purchase price and the amount needed to rehab the property. It's almost identical to a FHA loan, but with a 203(k) you're required to hire a licensed & insured contractor, and depending on the type work and/or the cost of the rehab, you might even need a 203(k) HUD consultant. This HUD consultant overlooks the contractor's estimate and also inspects the property. This can easily cost you several hundred dollars in additional fees.

Generally in a short sale, I work on getting a commitment so that by the time the short sale is approved, you're ready to close and avoid having to request extensions, which most times kills your deal. When doing a 203(k) it's even more critical to work on obtaining a commitment while the short sale is being negotiated, just because so many more time consuming issues can arise with a 203(k) loan.

Right after closing, funds for the rehab are disbursed to you and your contractor, who can begin the work. There are so many details involved that your best move is to meet face-to-face with a loan officer who has this loan program available, go over everything step by step, and go from there.

Feel free to contact me with any questions. Good luck!

Javier Meneses
NMLS #23130
Senior Loan Officer
Sterling National Bank
jmeneses@snb.com
2 votes Thank Flag Link Wed Oct 10, 2012
203k streamline loans are starting to become more popular. Inventory is aging. Many Long Island homes were built in the 1940s and 1950s and need renovating along wiwth short sales and foreclosures. This is a wonderful product if you qualify. Note it's not offered by all lenders.
1 vote Thank Flag Link Mon Oct 15, 2012
It is possible, there are a couple of differenbt types of loans with one being a fha 203k program. you should first meet with a local and trusted loan officer that can prequailify you and let you know what is available. With these types of loans you have a lot of work to do becuase when teh short sal eis approved, they usually only give 30 days to close.
1 vote Thank Flag Link Wed Oct 10, 2012
There are certain types of mortgages that will allow you to borrow enough to do the renovation. Ask your mortgage specialist about it. Not all mortgage companies carry them.
0 votes Thank Flag Link Sun Oct 5, 2014
Thanks everyone - I think the 203k loan is fantastic but we decided we will save ourselves the heartache and work and will go with a house than needs a lot less.

thanks for the awesome advice!
0 votes Thank Flag Link Mon Oct 15, 2012
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