Home Buying in Deerfield>Question Details

chiame.ellie, Home Buyer in Deerfield, IL

Is this extra money?

Asked by chiame.ellie, Deerfield, IL Mon Dec 31, 2012

Hello - If my husband and I were pre-approved for $300k, and we end up buying a $250k house, can we use the extra $50k to renovate our newly purchased house? How does this work?

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BEST ANSWER
Your first step is to apply for a renovation loan. There are two main types of renovation loans. One is a conventional renovation loan. The other is a FHA 203K loan. You will have to decide which type of loan is better for you. The FHA 203K loan works best for those individuals who have only the minimum funds to buy the property. Consult with your loan officer to see which loan product is best for you and your situation.

Compile a list of contractors. You are going to need a licensed, reputable contractor to give you estimates and eventually to perform the work. If the property needs a lot of repairs, you may need to hire a general contractor who will then hire sub-contractors. Keep in mind that the bank is going to have to approve the contractor you select. It will check the contractor's credit and credentials. Ask the contractor if he has ever worked with a renovation loan. It is usually easier to get a contractor approved if he has already gone through the process once or twice before.

Identify a property. Contact a reputable Realtor to begin your home search. Tell your agent that you are already approved for a renovation loan and just need to identify a property.

Once you have identified a property you will need to get estimates; try to secure at least three estimates for the repairs. Keep in mind that depending on the type of loan, there may be a cap on the amount of repairs allowed. Also keep in mind that the property has to appraise for a repaired value that is equal or greater than the loan amount and the repair amount.

Select the contractor and estimate you will submit to the bank. The bank will work with the contractor to get him approved. If the bank does not approve the contractor, you will need to submit another contractor and another estimate.

The bank will send an appraiser to the property. If the property appraises at the right price, the process will continue.

Now you wait. The bank will ask you for all the required documents. It will verify your employment and funds to close. The process usually takes between 45 and 60 days.

Once the bank approves the loan and approves your contractor, you will be ready to go to settlement. You are ready to begin the repairs after closing. The bank will make a schedule of draws for the repair money. It may send someone to inspect the process. Once you have closed on the property, you have a specific period of time in which to finish the repairs.


Kathy Diegel
Coldwell Banker
The Peggy Cobrin Team
Call or Text 847-707-8907
kathy.diegel@cbexchange.com

Happy New Year!!!
0 votes Thank Flag Link Mon Dec 31, 2012
250k house in deerfield must be pretty tore up and needing a lot of work. like Kathy said, the 203k model could work but check with your preferred lender. Also realize that in 60015 that market is swarming with investor class buyers aquiring rental properties. You will lose out against an all cash buyer with a 203k. Best to consider Fannie Mae Freddie REO's that expect a buyer to need to improve to make it habitable and buyers get a "first look" preference for first 15 days of listing period.
best of luck!
0 votes Thank Flag Link Sat Jan 19, 2013
In most cases, the answer is no. Try working with a local bank for your loan. They would be most resonsive to what you want to accomplish.
0 votes Thank Flag Link Wed Jan 9, 2013
When you talked to the lender, you should have received detailed explanations about what it means
to be pre-approved for a loan, and are you really pre-approved or just pre-qualified.... Careful...
But no matter what you do not seem to have a lot of experience in buying properties, therefore you
should and must work with your own trusted Realtor, a Buyers Agent who will work in your interest and your interest only, remember that the listing agent has a contract with the seller and does work in the best interest of the seller.

Then once you connected with a Buyers Agent, all that really is required from you is your loyalty and
100 % commitment to this one Realtor, so that your Buyers Agent also can 100 % commit to you.

I wish you would get back to me so that I can e-mail you a list of all the services a Buyers Agent would
provide to you and all the advantages for your the buyer, do not do this on your own.

And no you cannot use any additional amount of a now really just a pre-approval, the final loan
commitment of the lender will be based on you providing all information about current debts like
car payments and other, your income proof, and the purchase price, the lender will need the copy of the sales agreement, and the lender will send an appraiser of their choice to make sure that the
home you are buying will appraise out, if it does not appraise out you will not get the loan commitment....

You need a truly good Realtor, who will guide you through the entire process and explain every step to you in detail, including the financial side and the contract terms and what is required from you
the buyer. Feel free to get back to me anytime.

Good Luck to you and congratulations that you are ready to buy a home. It should be a very pleasant and fun experience with the right guidance of an experienced area Realtor by your side.

Remember that a buyers agent does not cost you anything, only your loyalty and commitment to
one...

Sincerely yours,
Edith YourRealtor4Life & Chicago and Northern Illinois Expert

Working always in the very BEST interest of her clients, Buyers, Sellers and Investors alike....
And always with a SMILE 
Covering for @Properties the city of Chicago, all N and NW suburbs, the fine homes on the
North Shore, and many of the W and SW suburbs, and with her trusted Partner Agents all of
the US and worldwide properties. Edith speaks French, German, some Spanish and other.....
@Properties ---- EdithSellsHomes@gmail.com
Check out my website at htttp://tinyurl.com/YourRealtor4Life
HAVE THE MOST WONDERFUL DAY :)
0 votes Thank Flag Link Mon Dec 31, 2012
No , unfortunately you are not able to use the extra 50k to renovate. The mortgage is for the price of the house only , not remodeling. The bank will send an appraiser to look at the house before they will make a firm ommitment for the loan . If the house doesn"t appraiser for the amount they wont loan it to you . The bank will also require a copy of the purchase contract to see the price of the house. Please call me with any qestions 847-962-3850 or if i can be of any help in finding you the perfect home .
0 votes Thank Flag Link Mon Dec 31, 2012
Hi Ellie,

Banks do not lend any more than what the purchase price of the house. Coldwell Banker Deerfield works with and has access to some great lenders. Please feel free to contact me should you have any questions
0 votes Thank Flag Link Mon Dec 31, 2012
Unfortunately no; banks will not lend above the purchase price these days. If you're buying a fixer-upper you may want to consider an FHA 203K rehab loan which does include money for repairs and updates. Contact me via my website if you'd like to get connected with some experienced 203K lenders that I work with.
0 votes Thank Flag Link Mon Dec 31, 2012
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