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Is my recently purchased with cash HUD home worth enough to get a HELOC?

I recently purchased a HUD home in Taylor, Michigan with cash (no down, mortgage etc). And I desperately want to know if I can get a HELOC on it to bring it up to code and remodel it so we can begin to finally live in it (add family room, bed rooms, bathroom and enlarge the kitchen and living room, bring it up to code etc.)
The address is 6442 Cooper St, Taylor MI 48180.

Would I be able to get a HELOC on it, how would I know the value of my home. Would I really need to get it appraised by parying over $300 first to even attempt getting a HELOC on it. Is their anyway I can figure out whether it is even worth the attempt for free? I don't want to lose that much money for nothing. Can anyone on here look at the information on Zillow or elsewhere by using my address to figure out whether I could even get a HELOC and up to how much money could I get?

Thanks in advance to any and all who reply...
  • July 18 2011 - Taylor
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Answers (6)

Sounds like there are alot of repairs to be made. Chances are, even if you could qualify for a HELOC, the home would have to be repaired prior to closing on it. Your best bet, assuming this is your primary residence, is to get a FHA 203(k) renovation loan. Basically, this is a mortgage where you wrap the cost of the repairs into the mortgage. The work must take 6 months or less to be completed. You cannot do the work yourself, but must higher out the contractors.For more info, go to www.HUD.gov.

  • July 18 2011
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What was the purchase price? Since this was a HUD home what were the repairs required to get it insured? or was it uninsurable? If it was un insurable than it's likely won't be able to get a heloc.  But most banks don't have any out of pocket costs on HELOCS. You can contact the Fifth Third in MI.  They do the credit UW first before before ordering the appraisal. The appraisal is generally a drive by. 

If you aren't living in the property now it may be a challenge getting a HELOC.  You may want to look at the 203K streamline or Full 203K depending on what are the most pressing and priority repairs/renovations.
  • July 19 2011
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Well, I'm not quite sure what the repairs to get it insured were, as my realtor never went over the subject with me. But I do know that I was given an inspection report telling me what needed to be done in order to get it up to code. Not really sure what would need to be done to get it insured, right now Im simply too fussed with trying to get the house up to code and if possible do some renovations that will make it more useful to our family. I want to get a large family room added on (quite large, as we have a toddler and plan on having more children soon, they need a space to play and we need a place to spend time together as a family since the house is very small and cramped(the current living room is long and not wide enough with doors and windows everywhere so it is very difficult to furnish). The property is large enough at 1100sqft, but the actual house must be at the very very most almost a quarter of that. There is a large double garage which is separate from the house. It is currently rendered useless right now since someone had brutally cut out all of the electrical before we had purchased it, and it has auto doors so we can only get in it from the back door, which needs to be replaced itself as its lock is broken. about half a page of the four paged Inspection report is dedicated solely to the garage itself.

Basically, there are alot of things to be done, and I hope to increase the size of the tiny kitchen and add an extra large family room and a second bathroom (as the current one is incredibly cramped, almost to the point of being useless for child use/bathing etc). I am also interested in adding two more bedrooms, a master and a normal one. The house supposedly already has three, but to be honest they are so tiny that if we placed a queen bed in any one of the rooms they would be rendered inaccessable. The two upstairs ones are useless as I believe the upstairs was once an attic, turned into two oddly shaped small/infant sized bedrooms. They are both very low/angled ceilinged and cramped. The landing/stairs are almost directly connected to both bedrooms with no place to put railings to make it child safe.

Carpets will need to be changed, paint, dry wall, replace doors and trims, some electrical, a bit of piping replaced, no water damage thank goodness! LOADS of work, much more than our realtor had thought to mention clearly. Basically we need more than 25,000 by far to get all of this done. When I did some research on the 203K I came up with two options, one where primary residence comes into play and they will let you borrow upto 100,000 and pay it back in 30yrs. (Problem here is that we cant prove we are currently living in it as, it is currently unlivable (a mold area in the basement and a few spots in one of the upstairs bedrooms). And another which can be used for a non-residential property but the will only loan upto 25,000 and the term is much less. Either way, both ask for very good credit and we have none. We are a young couple just starting out, so we have no credit whatsoever. Although, I may be able to manage co-signers, but I don't know if that will work out or not.

I am still quite confused as to which option would be best for us. We are also considering renting the place out once all of the repairs are finished for a few months if we do get the loan soon since my husband just got a promotion at his current job and we do not want to move from our apartment just yet. However, we will be moving in to the house sometime within the next 6 months. Please advise what we can do?

Thank you.

P.S.
We closed the purchase of the house at around 16,300. Our purchasing price was something around 13,500 I believe. I can't remember the exact figures at the moment.
  • July 21 2011
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You need to go see a lender and lay this all out to him/her. I am more concerned about the lack of credit than the repairs. Call your realtor and ask if there is anyone he/she knows that specializes in FHA 203(k)s. That would be the best place to start.
  • July 22 2011
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An FHA 203k loan is rolled into your mortgage and is initially done before purchase of the property. It covers the acquisition and repair of the property up to the after completion appraised value. Work is cosmetic and mechanical , no altering of the structure. Lenders have a cap on repair , Bank of America has a program FHA , 580 and a $35000 repair cap.

What I would do if I were you. THINK SWEAT EQUITY!
The garage is on the back burner, no need to put money there yet.
Do all of your neccessities 1st. You want to get the property lived in first and pass any seasoning issues. 
Don't go in and tear everything out, think repair and patch. Get rid of carpet and other things that pose a health hazard.If you Paint , new toilet ,reglaze the tub etc. you can see a big difference and it doesn't cost as much as you think. There are usually good hardwood floors under carpet, utilize them. Focus on the good points of the house. Get moved in with the minimum. After you are established then look into your loan options along with tearing out and major updates.

You made an excellent move by purchasing cash. Don't put out all of your equity by getting a loan in the beginning  it defeats the purpose.
You can possibly get this one rented out and after you and your husband's credit is up to par, look into going 203k at the beginning and fixing another house the way you want it.

  • July 22 2011
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Derek,

There are 2 programs through FHA. The streamline version is capped at $35,000. The full program has no cap and can be used for structural changes. The mortgage is capped at the county limit.

Mark
  • July 22 2011
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