IF YOU WANT TO BUY A PROPERTY WITH A HOUSE ON IT THAT NEEDS TORN DOWN, HOW DO YOU FINANCE IT?

Asked by Lorraine, 21842 Fri Apr 18, 2008

I want to buy a piece of land that has an old house on it. I want to take down the house nad rebuild. I have been told that this property does not qualify for a morgage because of the condition of the house and that it does not qualify for a lot loan because it is not a cleared lot. How do you finance a property like this?

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Byron’s answer
Byron, , Maryland
Sat Apr 19, 2008
Hi, I work for a local bank. If your plans are to live in the property, it is simple. My Bank provides a lot of this type of financing in the area. If your credit, income and assets are decent, the application process is straightforward and you should not have too much difficulty getting financing for this project. It does require more documentation than buying a resale home, as you need to provide all the related to the construction plans, specs, budget for the construction. If you are using a good local builder, they will take care of this for you. If you are considering acting as your own GC, it is more demanding and you will need a resume that shows you have the ability to manage the project and see it thru completion. Unlike the few banks (a lot have cut back or stopped lending for this purpose in wake of credit crunch) for this we provide acquisition and renovation funding based on the completed value of the property, instead of the lot cost + construction costs. We provide the renovation funds and the permanent loan after the completion of the project. Standard construction periods are 6,9,12 months... for larger projects, we provide 15, 18-month construction terms. If you wish, you can email me at homeloanhelp@goowy.com. I will provide written explanation of our program, documentation requirements and other important details that you will need to have when considering this option. If you include your best estimate of the cost to purchase existing property and construction budget and how much money you are considering borrowing that would be helpful to give you the information you need. Best of success, Byron
1 vote
Jim Cavoto, Agent, Denver, CO
Fri Apr 25, 2008
Lorraine your best bet might be hard money, hard money lenders only lend on the as is value- at about 65% ltv but less restrictions on what you can do- you just need an exit plan- I dont lend residential in your state but google hard money and call them. I will warn you the cost on hard money is HIGH but if you stand to get what you want out of the deal its worth the cost.
0 votes
Art Lane, , Howard County, MD
Sat Apr 19, 2008
I agree with Megan's recommendation, e.g. you should talk with a mortgage lender. More than likely you will end up financing the tear down and replacement with a construction loan.
Web Reference:  http://home-sweet-home.us
0 votes
Megan Mcgoni…, , North East, MD
Fri Apr 18, 2008
A construction loan? Your best bet would be to talk to a loan officer.
0 votes
Lorraine, Home Buyer, 21842
Fri Apr 18, 2008
All of the local banks are who told me the information in the first place. A rehab loan is for if you want to rehabilitate the structure that is there, which I do not.
0 votes
Lewis Poretz…, , Annapolis, MD
Fri Apr 18, 2008
A local bank may be you best source...... there are rehab loans available as well..... are you planning on putting money down on this?
Web Reference:  http://www.openmortgage.com
0 votes
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