Posted on: 27th Aug, 2009 05:26 am
I want to buy a home with an FHA loan. I spoke to a mortgage agent and he said it would work. My issue is that I wanted to do some remodeling after I bought the home, but the closing costs would eat up all of my savings.
Is there a way for the bank to lend me more money in addition to the mortgage for repairs? I believe I can ask the seller to pay closing costs to a maximum of 6%, but would they do that if the seller is a bank (the house is a foreclosure)?
What is my best option here?
Is there a way for the bank to lend me more money in addition to the mortgage for repairs? I believe I can ask the seller to pay closing costs to a maximum of 6%, but would they do that if the seller is a bank (the house is a foreclosure)?
What is my best option here?
guest, i think your best option is an FHA 203(K) loan, which will allow you to purchase the property and incorporate funds for remodeling/rehabilitation as well. you didn't give any dollar details, but let me suggest a scenario:
purchase price of $100000. funds needed for renovation, etc. = $20000. after value (upon completion of your work) = $140000. you would, in this scenario, be able to borrow the full $120000, and there can be additional sums to cover contingencies, inspections, etc...let's say it becomes $125000. your down payment is based on the $125000 instead of teh $100000, so 3.5% d/p = $4375. a seller, even a bank that has taken the property by foreclosure, can certainly pay up to 6% of the purchase price towards your closing costs. whether this particular bank will do so is impossible to tell, but it's not unprecedented.
check out your local area, and if you've already been in discussion with a lender, ask about 203(K). and don't restrict yourself to the numbers i've used, because you can also do voluntary enhancements to the property - new appliances, hardware, etc.
purchase price of $100000. funds needed for renovation, etc. = $20000. after value (upon completion of your work) = $140000. you would, in this scenario, be able to borrow the full $120000, and there can be additional sums to cover contingencies, inspections, etc...let's say it becomes $125000. your down payment is based on the $125000 instead of teh $100000, so 3.5% d/p = $4375. a seller, even a bank that has taken the property by foreclosure, can certainly pay up to 6% of the purchase price towards your closing costs. whether this particular bank will do so is impossible to tell, but it's not unprecedented.
check out your local area, and if you've already been in discussion with a lender, ask about 203(K). and don't restrict yourself to the numbers i've used, because you can also do voluntary enhancements to the property - new appliances, hardware, etc.
I'm the OP.
Thanks for the info! The mortgage lender never mention the 203(K) plan.
The home is listed at $400k in westchester, NY. It doesn't have any major defects that I can tell. Will I still be eligible for the 203k or does it have to have major defects? I think $25k extra would help me out a lot.
Also, 400k is my top top limit for a loan. The mortgage guy made it sound like it would not get through underwriting if it was any higher. So does the 203k plan raise the rations so that I can get more lending? Or would I need to get the seller to reduce the price to $375k.
Still trying to make sense of the numbers, I think that in an ideal world, I'd like to get this house for $375k + 6% closing costs paid by seller. And a $400k 203k mortgage.
Thanks for the info! The mortgage lender never mention the 203(K) plan.
The home is listed at $400k in westchester, NY. It doesn't have any major defects that I can tell. Will I still be eligible for the 203k or does it have to have major defects? I think $25k extra would help me out a lot.
Also, 400k is my top top limit for a loan. The mortgage guy made it sound like it would not get through underwriting if it was any higher. So does the 203k plan raise the rations so that I can get more lending? Or would I need to get the seller to reduce the price to $375k.
Still trying to make sense of the numbers, I think that in an ideal world, I'd like to get this house for $375k + 6% closing costs paid by seller. And a $400k 203k mortgage.
sd, if your ratios are at or close to maximum now, you'd have difficulty in trying to obtain additional funds. your lender might not have access to this type loan, so that might be why he didn't mention it. and yes, the additional money available with a 203K would raise your debt ratios. if your seller is amenable, you can certainly try to renegotiate your price to your betterment.
yes SD.
As a first step you negotiate with lender & try to get property in 375K.
Also negotiate with other lender who are ready to give you FHA 203(K) loan
As a first step you negotiate with lender & try to get property in 375K.
Also negotiate with other lender who are ready to give you FHA 203(K) loan
which, of course, contradicts what i've just noted, but that's okay.
sd, if your current lender doesn't offer 203k, then you'll want to check around a bit, but the ratio situation doesn't differ. but let me ask - what are your debt ratios at this stage?
sd, if your current lender doesn't offer 203k, then you'll want to check around a bit, but the ratio situation doesn't differ. but let me ask - what are your debt ratios at this stage?
It's all a catch 22. I can't make an offer without applying for a mortgage. And I don't want to apply for a mortgage until I know if my offer will be accepted! If they accept $375k + 6% concession (look at me using the lingo!!) then I'll forget the 203k business.
I'm not sure about my debt ratios. The paper lists allowable debt ratio as 43%. If I remember correctly through all the math he put out, the Mortgage agent mentioned I was at 46%. We then agreed that I should pay off my $450/month car so that the ratio would fall below 43%. I paid off the car that same day. That was another catch 22. I didn't want to pay off my car so I could use the cash to buy a home. But I couldn't get financing without paying of the car.
I'm not sure about my debt ratios. The paper lists allowable debt ratio as 43%. If I remember correctly through all the math he put out, the Mortgage agent mentioned I was at 46%. We then agreed that I should pay off my $450/month car so that the ratio would fall below 43%. I paid off the car that same day. That was another catch 22. I didn't want to pay off my car so I could use the cash to buy a home. But I couldn't get financing without paying of the car.
sd, as you mentioned way back when, you hadn't noted any "defects" in the property. given that, you may be just as well off doing the standard purchase and then seeking a personal loan or (perhaps) a home equity loan later on that will provide funds for improvements.
often a 46% ratio wouldn't prevent you from qualifying, but of course, credit score, reserves, etc. also come into play. if you borrowed another $25000, that would result in about $125-$150 additional per month (ballpark figures).
often a 46% ratio wouldn't prevent you from qualifying, but of course, credit score, reserves, etc. also come into play. if you borrowed another $25000, that would result in about $125-$150 additional per month (ballpark figures).