I'm a soon to be first-time home buyer. I've got my eye on a home. I want to buy - but I would want to remodel. What mortgage options are there?

Asked by brianwatson30, Bloomington, IN Wed Oct 24, 2012

So, I want to buy this house, but I would want to remodel. It is in sound condition as it is, but I would want to knock down/erect non-load bearing walls, fence in the backyard for my kids safety (waterfront), and maybe add another bathroom. I'm interested in finding out what options there are in financing this. I qualify for a mortgage that is more expensive than the house, is there a way to use those funds for remodeling? Are there mortgages out there that would work this in (either diy, or contractor)? My bank tells me no, their mortgages would only cover the purchase price of the home, but there has to be other options out there, right?

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Tom Michalic, Agent, Indianapolis, IN
Wed Oct 31, 2012
203K loan will do it for you. Call me we work with several lenders that can get it done. We also have consultants and contractors experienced with the 203K process

360 Realty
0 votes
Susan Ancona,…, Agent, Indianapolis, IN
Wed Oct 31, 2012
Happy to help 20 plus years in the business, tons of first time buyers give me a shout lets talk.
0 votes
Tiff Atkinson, , Indianapolis, IN
Thu Oct 25, 2012
Your bank is correct. All banks and mortgage companies will only finance the purchase price of the home. Perhaps take out a small loan so that you can rennovate or get a personal loan through your bank in addtition to a home mortgage.

Good luck
Real Estate Broker
0 votes
Tom Michalic, Agent, Indianapolis, IN
Thu Oct 25, 2012
You want a 203K loan. Call us for a list of good lenders, contractors, inspectors to get the project done right the first time.

Tom Michalic
360 Realty & Eco-Nomical Contractors
0 votes
Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Wed Oct 24, 2012
Good morning Brian,

What you want to do is get a referral to a Local Mortgage Banker and Prequalify for an FHA 203k Renovation loan. This mortgage program will help you accomplish exactly what you wish for this home purchase.

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

There you have a good fundamental look at the miracle program known as FHA 203k.

Trevor Curran
NMLS #40140
0 votes
Dana Thompson, Agent, Indianapolis, IN
Wed Oct 24, 2012
Depending on the price range, etc., there are financing options that would allow for "rehabbing" the home -- meaning that it would assist with repairs and/or "fix up." Remodeling may be considered different in that you're "improving" the home. In that case, you might want to check into a home improvement loan or a line of credit secured against the home once you purchase it. Check with Ken Blaudow at Indy Mortgage -- 317-578-6300

Dana Thompson
Remax Legends Group
0 votes
Adam Catron, Agent, Indianapolis, IN
Wed Oct 24, 2012
The mortgage game has changed dramatically in the last 5 years. It has become much more difficult to finance these kind of needs. Different lenders provide different products that could help with remodeling. However, many of the mortgage products out there that provide money to help remodel and update, like the 403k loan, is meant to help investors. Meaning the home that you use the 403k type loan for, are homes that are NOT your primary residence. It's sort of meant to provide investor types the funds to make a home better and increase the value of homes in a neighborhood.

Adam Catron
F.C. Tucker Inc.
0 votes
Peter Knight, Agent, Fishers, IN
Wed Oct 24, 2012

Contact a lender with experience in FHA 203K loans (Primary Residential Mortgage for example - 317 579-0232). I think the limit for remodeling expense is $35,000. The work has to be done by a contractor and the final appraised value has to support the total expenditure.

Keep in mind that all this (estimates, appraisal, etc.) takes additional time, so allow for that in the offer.

Peter Knight
0 votes
Christi & Am…, Agent, Greenwood, IN
Wed Oct 24, 2012
I have a lender that will do a 203K conventional loan or a 203K FHA home. Feel free to call me with questions. Thanks! 317-694-0087
0 votes
Jenny Laughn…, Agent, Greenwood, IN
Wed Oct 24, 2012
Yes! Sounds like you need a 203k rehab loan. Call me for more info! 317-339-6972
0 votes
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