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bucketmouth64

fixer upper tv shows

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Curious how do people on these shows get a mortgage when the house is being renovated? Can you, for example, get a 150K loan on a purchase of 100K and the difference used to renovate the home? We've been in the market to buy a house, but lots of work needs to be done to bring house up to date. I thought financial companies only mortgage what the value of the house is, which means before renovations.

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There are programs that do allow you to finance for more than the house is worth currently but less than value after renovation. Meaning you either need a lot of equity built in or have a large down payment.

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for example, get a 150K loan on a purchase of 100K and the difference used to renovate the home?

I don't think you would be able this for two reasons. If the house is only worth 100k at time of purchase no mortgage company is going to give you 150k simply because there is no collateral to cover the additional 50k. In this scenario you could simply finance the additional 50k, walk away for whatever reason and the bank is holding an asset 50k less than the loan value.

The other reason would be insurance. No insurance company is going to insure 100k home for 150k for the same reason. Lets say during your repairs you start a fire and the house burns down. The insurance company would be paying the mortgage holder only replacement value which would also be 50k less than the mortgage amount.

The way to do what you want would be to finance the 100k to purchase the home. Find some other way to finance a construction loan of 50k, do the repairs and refinance the house for the new value and pay off the construction loan.

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The mortgage is set up to be based on the market value of the house after the work is completed.

I have done projects for clients for 2 decades using programs like that.

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Here’s how ya do it. (You learn more here by accident than anywhere else by design) laugh

Source: http://www.interest.com/fha-loans/news/finance-fixer-upper/

If you're buying a home that needs a little TLC, a typical fixed-rate mortgage isn't going to help you pay for repairs.

Your lender, for instance, isn't going to approve a $300,000 loan to buy a home that's only worth $250,000. And, while homeowners sometimes use home equity loans to remodel, you can't get a home equity loan when you have no equity.

This can be a big obstacle for buyers who don't have extra cash to make needed renovations or repairs before moving in.

But there are two loan programs that can make your dream of rehabbing a fixer-upper a reality: the Federal Housing Administration's 203(k) mortgage and Fannie Mae's HomeStyle Renovation mortgage.

The programs achieve the same goal — providing homeowners with a mortgage and access to money to make necessary improvements — but come with different requirements and best serve different types of buyers.

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The 203k is a good program, albeit with a few challenges.

Better yet is building a long term relationship with a smaller local bank. One that is lending their own money, rather than one needing to meet Fannie or Freddie guidelines. They are often willing to do about anything that comes close to making sense for a qualified buyer.

Never believe what you see on TV. Every single show is staged to some extent. Those buyers aren't jumping through 203k hoops, this I assure you.

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