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How do I finance property repairs and updates when buying a home?

I plan to put 5-10% down on a home and have been preapproved by my mortgage broker for more than my desired price range.  Most of the properties require repairs and/or updating. Once I pay the down money plus closing & moving costs, I won't have much cash flow. Is there any way to roll these costs into my mortgage, or can I negotiate a rebate from the seller to be paid at closing?
  • February 19 2014 - Chicago
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Answers (17)

This is a 2-part question as the concern is cash-flow and funds for renovation. To improve your cash flow after a purchase transaction, you may want to negotiate the closing costs with the seller as part of the purchase agreement. It is possible for the seller to agree to cover part of your closing costs. You can also ask your lender about getting a lender credit to cover closing costs. Property taxes are typically paid in arrears and most times the seller will provide a credit at closing to pay the taxes through the date of closing. The combination of a seller credit, a lender credit and the credit for property taxes means a buyer will require less funds for the closing table. FHA requires a down-payment of 3.5% but with the credits described, you could end up bringing a lot less to the closing table.
  • April 22 2014
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There is the option of doing a HomeStyle Renovation loan or a FHA 203K.
The FHA Renovation loan allows for a higher loan to value compared to HomeStyle
The HomeStyle Renovation Mortgage is a Conventional product that has less fees compared to the  typical FHA 203K.  Both types of loans use the "As-Completed" value in order to determine the final loan amount.
  • April 22 2014
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I would speak to your lender about this. They may have some options for you.
  • March 12 2014
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I would look into FHA 203k loans. They are great!
Check out this video [Hotlink removed by Zillow moderator. Please see our Good Neighbor Policy for information.]
  • March 11 2014
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Not only can you apply for an FHA 203k renovation loan in most cases for single family and 2-4 unit owner occupied multi units. You may qualify for downpayment assistance via the Illinois Housing Development Authority http://www.ihda.org/homeowner/gettingLoan.htm. On top of that a good real estate professional negotiates with the seller to pay up to 3% of your closing cost and prepaid items.

Best Success...
  • March 09 2014
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You should consider 203K or homepath renevoation if the property qualifies.  Many banks are now allowing you to lump the rehab into your loan again and a variety of programs exist.  If it's a condo you may run into problems and you'll need to find a private lender who will portfolio your loan as it won't be salable on the secondary market.
  • March 07 2014
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First, during the J-1 period here in Hawaii we have 21 days to look into the home and all reasons to cancel for ANY REASON.  

Then, find the areas of concern and have them quoted on by a contractor, preferably licensed.  Then have your agent go to the seller's rep with an addendum of the costs to fix.  I just did a deal were it was bought "as is"  and the buyer asked for 20k in repairs, rather than possibly losing the deal the seller relented and gave 50% that's----- 10K off the selling price, not bad...  
ALOHA
  • March 06 2014
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I love the 203K program that my company has a "nitch" in.... It's a great program and I would definately recommend you look into it! Not many lenders specialize in it so make sure you select one that knows the in's and out's of the program so it is expedited quickly and smoothly for you!

Good luck and best wishes!
Scott
  • March 06 2014
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Hi:

We work with a few lenders that offer one-time close for renovation and purchase money for owner occupied, investment and 2nd homes here in Illinois.  If you would like to click on the logo next to my name with more information, I would be happy to see if we can help you.

Best regards,

Patty Harrison
Smart Mortgage
  • March 06 2014
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There are a handful of lenders that offer rehab loans aside from products like the FHA203K, Fannie Mae Homepath, and Freddie Mac Homestyle loan already mentioned below. First ask your current lender. If he/she doesn't offer what you are looking for I suggest you find another lender. I have folks I can recommend you to.
  • February 28 2014
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  • February 20 2014
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There are a few options; FHA 203k, homepath renovation - for Fannie Mae owned properties only & the homestyle rehab loan - conventional product which is not property specific. Feel free to contact me for more information on these products.

Ashley

  • February 20 2014
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Profile picture for Matt Laricy
You can try to get a 203k loan.I would talk to a few different lenders to get some options.
  • February 19 2014
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the only mortgage product that is out there is the FHA 203K loan. it will allow you to borrow extra money up front to do improvements. good luck. [contact information deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines]
  • February 19 2014
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Profile picture for Tony Mitidiero
It sounds like you will need some form of rehab loan.   There are conventional, FHA, and streamlined FHA (FHA 203K) loans available to most mortgage lenders today.  I just noted them in order from most difficult to qualify for to most lenient.   A conventional rehab loan will allow you to do the most work, but will have tighter parameters.   An FHA 203K will limit the amount of money you can spend to somewhere around $30K, but qualifying for it and getting the work done should be the easiest. 
Get all of your ducks in a row prior to writing any offers if you can.   Many will have a tendency to view an offer from a buyer using a rehab loan as relatively weak, so you will want your agent to be able to show you have a well thought-out plan with an experienced team on board to insure a successful sale at the time he/she presents your offer.  
Good luck!
Tony
  • February 19 2014
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Hey,
I'm in NY but the Rehab Loan rules work pretty much the same in all states.  Yes you can roll in those expenses.  Down payments can range from 3.5% on up.  You can always ask the seller for assistance in financing closing costs.   The amount allowed can also vary depending on the loan program.  
If you give me a general price range/example I can give you a rough idea on what you would need out-of-pocket.  
  • February 19 2014
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You need to check with your lender to see what programs he might have for this. You can get 'rehab' loans but you need to ump through some hoops as to how to get the work done.
  • February 19 2014
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