Renovation financing options for second story addition

Asked by Waitingforwinter, Chicago, IL Thu Jul 11, 2013

I would like to add a second story to our standard 950 sqft raised brick ranch. I estimate that it will cost around $125 - 150k to do the work. What kind of financing options are there for this type of build? Are renovation loans based on the future value still available? We bought in 2007 close to the top of the market, so we don't have a ton of equity, a little but certainly not $150k! We looked into selling to buy a larger house, but with realtor and taxes/closing costs we'd have to bring money to closing. It seems like building up would take care of our issues. Now only trying to figure out how to pay for it... Are we screwed or are there financing options out there? I know it's not 2005 with banks throwing money at you any more!

thanks!!

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14
Tatumlea, Home Buyer, Sebastopol, CA
Fri Jun 17, 2016
If your house is too small for your needs, you have two choices: move to a larger home, or add a second story.

Neither option is stress-free. Given today's depreciated home values, many owners might prefer to add a second story instead of moving.

Adding a second story isn't that different from building a new house, at least from the builder's perspective, according to Gary Henley, president of Henley Homes, a home remodeling company in Liberty Hill, Texas. New construction is simply placed over the existing footprint.

Web Reference: http://USAConstructionLoans.com
1 vote
Huy T., Home Buyer, Chicago, IL
Wed Jan 28, 2015
Hello Waitingforwinter,

I'm curious as to what you ended up doing? Costs? I'm also looking into a ranch where a second story needs to built. The architect is quoting me 250K! This seems to be very overpriced based on everything I've read online. Looks like it should be somewhere between 70K-150K in Chicago suburbs. Thanks!
0 votes
, ,
Thu Oct 10, 2013
Waitingforwinter,

I'm guessing you're probably still in the process now as of when I read this but you possibly have many options here.

You could use a Full 203k to add the second story and the appraisal will be done on the future value of your home. The bids and write-up from the consultant and architectual drawings will be required before the appraiser can do their job but that's probably the stage you're still working on given the cost and complexity of what you're doing (I recently had a client spend two months deciding on contractors and cost for a ~200k project).

The HomeStyle renovation loan is a conventional version of this as well that'll offer the same thing but requires a slightly larger equity position.

If the home happens to be a jumbo loan, my company just introduced a Jumbo Renovation product as well that can finance well over 1m though it does require a larger down payment than either of the two options above it. Since this is a new product, guidelines will change over time, best to call and ask about the current guidelines.

The 203k loan would be the better choice if you or perhaps your Realtor who sold you the home think the home won't appraise out with all the work you're doing or will definitely come in a little low. You can use 110% of the future value of your home for your calculations to determine your max loan amount (that doesn't mean a 110 LTV loan though but close). The conventional version doesn't allow for this so if you're 5% equity short, you're bringing 5% equity to the closing table). If qualifying your ratios are very tight or high (>45%), the 203k is your only option as the conventional version won't give an automated approval over a 45% debt-to-income ratio.

There's so much that I could go over here, best to stop here for now. If you need anything, you may contact me via my profile or you may call my cell @ 847.404.7006..
Web Reference:  http://RobWeber.com
0 votes
Daniel Mirea, Agent, Chicago, IL
Wed Sep 18, 2013
Shop @!!!!!$125-150K it is a lot for a second story! One of my investors is doing addition on the homes he is flipping and maximum he pays is @ 70,000. (i've noticed you want brick on the front)The most will go to the brick on the front!

Small banks will be mach likely to approve you faster for a construction loan!
0 votes
, ,
Tue Aug 20, 2013
On renovation loans we can lend up to 80% of the "subject to" improvements being completed value.

Greg Bleyl
216-496-0211
greg.bleyl@charteronebank.com
NMLS 117969
0 votes
Mary Nack, Agent, Chicago, IL
Tue Jul 16, 2013
If you have a loan officer you trust, you should check with them. There are so many programs now that if you check around, you may be able to find one that will fit your needs. However, I was unaware that you could do a 203k loan (as some here suggest) as a refi. I thought those loans were only for a purchase. I could be dead wrong about that. Also - if you don't have enough equity in your home, I doubt any lender will give you the loan - UNLESS you have other assets you can put up for collateral.

Your best bet MAY be, in fact, to sell and buy another (cheaper?) home with a 203k loan that will allow you to get the money you need to fix up the new (cheaper) home. Bringing money to closing isn't the worst thing in the world if it gets you into a better situation. But beware: the 203k loan is complicated, takes a long time to get approved and really requires someone who specializes in doing that particular loan. Evelyn below mentioned Christine dePaepe with Guaranteed Rate. She could be a good choice for you.
0 votes
Santiago Ken…, Agent, Chicago, IL
Tue Jul 16, 2013
Talk with a Lender in Chicago for advise , good luck
0 votes
Riccardo War…, Agent, Bolingbrook, IL
Tue Jul 16, 2013
sounds like a great idea, its sure t increase your homes value as well as create a more comfortable home for your family. you need a 203K loan...


Riccardo Wardlow
Owner
Quality Mortgage Lending
630-670-8266

RATED A+ WITH THE BBB

*We do Conventional loans down to a 620 score
*We do FHA loans down to a 580 score
*We do USDA loans down to a 620 score (no money down)
*We do $100 down payment FHA program
*Unlimited Loan To Value refinances on Fannie/Freddie refinances (only on loans originated before May 31st 2009
*We do VA loans down to a 620 score
*We give free counseling on what needs to be done to improve your credit score.
*We do 203k loans down to a 620 score
*We do reverse mortgages
*We do JUMBO loans to 12 million
0 votes
But can she do a 203k loan on a refi? I thought they were only good for a purchase. ??
Flag Tue Jul 16, 2013
Joe Schiller, Agent, Chicago, IL
Mon Jul 15, 2013
unless your really into this ..sell your houseand buy a finiushed one
0 votes
, ,
Fri Jul 12, 2013
I do have a conventional loan program that will fit this profile - as long as you can qualify this should not be an issue
A 203k can be a great option as well - however conventional financing will save you a lot of money in upfront fees as well as mortgage insurance.
The key will be the future value of the property. Please call me to discuss your options
Sam Sharp
Senior VP of Mortgage Lending
Guaranteed Rate
773 290 0455
0 votes
Bill J Delig…, Agent, Naperville, IL
Fri Jul 12, 2013
As Manuel mentioned visit a few community banks and discuss your options with them.
0 votes
Evelyn S. Fr…, Agent, Chicago, IL
Fri Jul 12, 2013
Check with Chris DePaepe from Guaranteed Rate, she specializes in the renovation loans (203k), 773-848-4144 or chrisd@guaranteedrate.com, let her know I referred you.

Good luck!
0 votes
I thought those 203k loans had a max of $35k - can you get them for larger amounts??
Flag Fri Jul 12, 2013
Manuel Brown, Agent, Chicago, IL
Fri Jul 12, 2013
Dear Renovator,

No banks are not giving away money any longer. If fact they were not giving it away than. They just let the system collapse and have all of us tax payers bail them out.

Ok that is my banking blurb...

Try your local community bank especially if you already have an established account. Also my go to lender is Mary Kay Laurent with Guaranteed Rate 773-516-6859. Tell here I referred you and if she is unable to assist you I promise if she has a resource she will point you in the right direction.

Best of Luck...
0 votes
Matt Laricy, Agent, Chicago, IL
Thu Jul 11, 2013
You can try to get a construction loan, but these are tough. Also, the price seems outrageous. This addition typically costs around the 50-75k mark.
0 votes
We had a couple estimates about 3 years ago and they were on the higher side. One was over $200! I want it to have 2 baths and a solid brick front so it looks seamless. I don't want like a pop out or dormer style so I don't know if those things make a difference. If you know of a contractor that works at that price, please let me know!
How do construction loans work? We live here so it wouldn't be a new build. thanks
Flag Thu Jul 11, 2013
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