How To Buy A home with a Renovation Loan. Montrose Colorado

How to buy a home with a Renovation Loan. Montrose Colorado

We have all seen the ad in the newspaper or the Real Estate magazine "Needs TLC" "Lots of Potential" that's the nice way of saying this place is a "fixer upper"

How are you going to fix it up ? when you don't have $10,000 or $20,000 or more in cash to fix the house up after you buy it. The simple answer is to borrow it from the mortgage company.

FHA has a loan program called 203 K which is exactly that. In simple terms this is how it works. You find a house to buy that you can buy for $40,000 you estimate the renovations that you will have to do the home is around $30,000. For a total of $70,000. The home will have to appraise for at least $70,000 based on all the improvements being done. You have to put down 3.5% for an FHA loan so it would be 3.5% of the $70,000.

It doesn't matter the amount of renovations that need to be done, you can even add sq ft or add a garage the key is the home must appraise for the total amount. FHA 203 k loans are only available to Owner Occupant buyers it does not apply to Investors. There is a conventional loan program for renovations for investors, multi family.

You cannot do the work yourself, the work has to be done by approved contractors. You have to obtain detailed written bid for all the renovations before you close and all bids are submitted to the lender for approval. The work is done after you close and has to be completed within 4 months for a streamline 203 k loan which are improvements under $35,000. For improvements over $35,000 the time frame is 6 months. FHA will do multi family renovation loans as long a s the borrower lives in one of the units.

Construction draws are handled by the lender once the work commences not by you the borrower.

Not all lenders are created equal when it comes to orginating renovation loans, many lenders can only do the FHA 203k streamline loan under $35,000. The lender in the Montrose Area that specializes in Renovaton loans FHA, Conventional and is Tracy Frank at Wells Fargo Mortgage 970-240-1006

Wells Fargo also do Renovation loans on Manufactured homes which no other lender does.

If you are looking to buy a home and you want to fix it up contact me Alan Brown 970-209-8436 or AlanBrownRealtor.com I can help you find the home and assist you in the loan process.