Home Buying in 48180>Question Details

Contact40, Home Owner in Taylor, MI

Where does the money come from when you are buying a house that needs work?

Asked by Contact40, Taylor, MI Tue Nov 16, 2010

If I were to be willing to buy a house at a reduced price, due to the fact that it may need several thousand dollars in repairs/renovations, such as a new roof, landscaping, garage door, etc, where would the additional money come from? Would I ask the lender for additional funds at the time of purchase, take out an additional loan after closing, or pay out of pocket? I'm a total home-buying novice, so I have no idea where to start with a lot of my questions. If the price of the home is say 30k, and we estimate 10k in renovations/repairs, would we ask the lender for a 40k mortgage, or explain to the lender that the money we are asking for is the house repairs?

Help the community by answering this question:


Definitely as the prior posts before me, an FHA 203K loan prior to closing allows for funds of repairs. Very common with a lot of distressed sales, foreclosures or HUD homes today. So the best advice to you would be to speak to a highly qualified loan officer in regards to financing options available to you.

Good luck to your home financing and search!

Cathy Carruth
Greater Midwest Realty
0 votes Thank Flag Link Tue Nov 16, 2010
You may want to try an FHA 203K Repair and Rennovation loan. We use Prime Lending, Courtney Wright at 239-425-1713. She can answer your questions.
0 votes Thank Flag Link Tue Nov 16, 2010
A 203K is your best bet, as Stacy said. You probably can't just take out an additional loan after closing, it's not that easy any more. If you can't or don't want to do a 203K and the property has major issues (like roof, furnace, etc.) the lender likely will not loan you money for the house. And normally, you cannot make repairs to a house BEFORE you buy it (which is risky anyway) so you can't move forward on it. The other option on a conventional loan is that you can escrow your own money (if you have it) for the cost of the repairs. Talk to a lender about this one. BTW, the sellers, if it's not a bank-owned, can always do any/all repairs if they are willing.... The most important thing to understand is that you can't just "tack on" money to the price and get a larger mortgage amount.
0 votes Thank Flag Link Tue Nov 16, 2010
FHA's 203K Sreamline (Under $35K of renovations) is the most common loan program out there, however there are similar programs like Homepath as well. Talk to your lender to see what programs they offer. You may have to shop other lenders if they don't have a renovation loan option. In any case, this is something you should apply for upfront to make sure you can qualify for the program.

Next, you want to find a 203K contractor. The lender you choose will most likely have a list of approved contractors. You'll want to make this selection upfront as well so they can participate in the home buying process. The contractor should be able to give you a quick estimate as a ballpark for the project.

And finally, choose an agent that is knowledgeable about these programs. The process can be a bit bumpy and it helps to have a strong team in place to help guide you through the processs.

Good luck!
Stacy Carter
Associate Broker
Home Appreciators Team at
Better Homes & Gardens Real Estate Metro Brokers
0 votes Thank Flag Link Tue Nov 16, 2010
Unless you are approved and buy the home with a construction or renovation loan, all improvements and repairs will have to come out of pocket.

Check with a local lender about a FHA 203K loan. This type of financing will allow you to purchase than complete repairs and improvements.

They are a pain in the neck - and expensive - but one of the few options in your situation if you don't want to pay out of pocket.

Good Luck!

Gerry Dunn
Associate Broker
Serving Maryland, D.C. and Northern Virginia
301-651-8600 - A few minutes ago
0 votes Thank Flag Link Tue Nov 16, 2010
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