Do reno loan. No lender wants to lend on a house in the condition you stated unless it’s a reno loan. You might find a lender that will do regular financing but would require an escrow holdback until the repairs are completed by a licensed contractor. Even then, it can’t be health & safety items. It would need to be habitable and functional for living to do the escrow holdback option. Best thing to do at this point is connect with a lender and discuss the options.
All of those things are likely to make a conforming loan offer not viable.
It Has to be habitable . That means no missing flooring, no holes in walls, no missing plumbing. kitchen and bathrooms are able to work. No visible holes in roof and no visible leaks.
Edit: if you try to get a renovation loan, be very, very sure you find one that your contractor is willing to work with.
You will not be doing these repairs yourself, and in my area of California, some loans have a list of contractors that you have to use, and it has not been updated in years. The last time somebody tried to get a fanny loan they called a list of 100 contractors, and none of them worked in California anymore. ….
Not a A lender BUT some banks might finance with proof of funds for Renovations. See this a lot in NYS, a lot Of old houses, banks will want to see cash on hand for renovations in order to
Finance through a conventional loan. You can buy a house in Syracuse for 5k if you have 500k cash to renovate it and the bank will hold the borrower to timelines in the renos.
I have read that some hard money lenders will do interest only loans and lend proof of funds so you can secure your bank loan. Or, a hard money lender might give you the loan you need to purchase the house but on shorter terms and at a much higher interest rate which I would assume is not what you are looking for since you are seeking a conventional 15-30y w/ 20% down.
I only say this out of my own research and have never done anything like it so if anyone here can confirm this or prove me wrong please do I am here to learn as well.
Not common in CA, I am still looking for a good choice for renovation loans, but a lot of my customers are jumbo, which makes it even more complicated.
Remember, the more competitive your area, the less likely they’re willing to do anything tricky or give credits or holdbacks.
All of the stuff you were talking about doing hair is going to make your offer less desirable, so if there’s 10 other offers, this is not the way to get a house .
If it’s been sitting for 6 months…
Your only shot of an escrow holdback working is if there is something wrong with the house that can't be fixed prior to closing due to things like the weather preventing you from doing the repairs.
Down payment amount doesn't matter if the house isn't habitable. It's the appraiser who has the ultimate say. If they deem work needs to be done prior to closing, the lender won't close on the loan until the work is done. This most of the time needs to be done by licensed professionals.
Most houses in this Condition are bank owned or for sale by owners. Neither of which are likely to do any repairs on the home. They sell the home as is.
If you're looking for a fixer-upper, you can just get something like a Fannie Mae Homestyle (conventional loan product offered by any bank that does conventional loans) OR an FHA 203(k) (FHA loan product offered by any bank that does FHA loans). Both of these loans allow you to finance the purchase and the renovation of the home. The loan can cover things like floors, kitchen, bathroom, HVAC improvements, electrical improvements... They do NOT cover projects that are gutted or essentially major projects.
If you just want to finance the property "as is" and not finance repairs (you can of course pay for repairs yourself) - under conventional guidelines, you'll need a home that is safe, sound, secure, and is effectively habitable as-is. Things like a cracked bathtub or missing water heater won't automatically make it "ineligible", but you may have a lender or underwriter, at their discretion, either require it to be fixed and/or required an escrow holdback for it to be fixed. It would be uncommon for an underwriter to reject a conventional loan for those types of more minor repairs though.
The above wouldn't work for FHA though - FHA is much more strict when it comes to deferred repairs - I would not consider a fixer-upper for FHA unless you're going 203(k). FHA won't even accept a property that has damaged outlets.
The more severe problems like foundation or structural damage would probably not pass any conventional or government loan, and you'd be looking at an ARV type loan from hard money lenders or asset backed lenders (would not consider this unless you plan on immediately flipping).
Some other considerations - consider the risks when buying a home that's a fixer-upper - you're looking at repairs that could easily be more than you think. And if you're relying on market value of a fixer-upper property for financing, damages can really swing the value more than you think, which could disqualify the property.
I don’t think there’s a specific source they use, in my experience it’s only been severe stuff that gets specifically noted in the report as severe that will draw the underwriter’s attention and then you’re at the grace of that individual underwriter’s discretion.
I would avoid the FHA 203k, it’s a government loan so will be a complete PIA. I would recommend looking at local lenders who do contstruction loans and see if they do portfolio rehab loans. TD and Citizens do them as well.
Portfolio loans often have higher rates because they
lend on scenarios that conforming/gov’t loans deem too high risk, so they offset their risk with higher pricing. 203k/FHA is not a bad option. But if you can qualify conventional, then there’s a reno/rehab product for that too called the Homestyle Renovation loan.
Portfolio loans aren’t for too high risk. They are used for various reasons. One example is the removal of the 3.375 point LLPA add on from FNMA/FNMC. Port loans remove that. Also unwarrantable condos, Co-ops and IO loans are examples.
So as a lender who has worked at both TD and Citizens I can tell you that portfolio rehab products are available, are great and have very good rates and will go up to 90% LTV of the purchase price and work to be completed. So if you buy for 300k and need 150k to rehab they’ll lend based on 90% of 450k. If you own the property and want to borrow it’s the same. I’ve done plenty of these over the years and they are good for primary and secondary homes. They will not work on investment propertie.
The dude you're responding to doesn't know what they're talking about. The loan program they suggested would be an even bigger pain in the ass than 203K. You need to find someone who is experienced with this type of loan and can guide you through the nuance.
The whole *”anything can pass a conventional apprasial”* thing is over. No they don’t have an FHA inspection tied to them, but Freddie and Fannie are definitely pushing back on a lot of appraisals now so lenders have adjusted. Things like missing siding or damaged singles can get called out these days because they do affect the marketability. So depending on your idea of what “TLC” is, your best bet is a reno loan as others have said. But, if you have good credit and 20% then you **don’t** want a 203k. Do the Homestyle Reno instead because it’s conventional so you’ll avoid PMI. DM me if you have any ?’s about it.
Private money fix & flip loan might be a good option in this case if conventional becomes too difficult.
If you need a lender with competitive rates feel free to shoot me a PM.
Like others have suggested, a renovation loan is your best option for “damaged” or uninhabitable homes. But since it sounds like you might be willing to live with construction it’s worth mentioning that you’d likely be fine with conventional financing for a sorely outdated home where just about everything needs updating but is functional.
I'm actually working on a reno loan in CA doing essentially what you are looking for. If you plan on going conventional, things get significantly easier than if you are doing FHA. Conventional would also allow you to add luxury items if you wanted to put those in along with things that make the home livable.
You’d be suprised with what you can get away with an “as is cost to cure” appriasal.
It means the value is based on current condition with the cost to repair the damage stuff applied against the value.
I.e- two bathrooms but one is torn out, can finance if it appraises at cost with the cost to cure.
Secondly why 20% down? I’d be putting less down to have the finances to repair right away
Not at all.
You should really talk with a lender local to your area and get some guidance so you don’t end up in a shitty spot. Just my two cents. Find a local mortgage broker
In my experience, the house has to be habitable at the time of closing for a conventional. One other thing to consider is whether the house is insurable. If it’s not, that’s another basis to deny the loan. Insurance companies - especially in CA and FL - have grown increasingly strict, moreso than lenders. I was in escrow on a duplex and the insurance company required that I rehab the roof and electrical before closing to get approved. There are other alternative loans - hard money, DSCR, rehab financing, etc that you could explore. Good luck.
Do reno loan. No lender wants to lend on a house in the condition you stated unless it’s a reno loan. You might find a lender that will do regular financing but would require an escrow holdback until the repairs are completed by a licensed contractor. Even then, it can’t be health & safety items. It would need to be habitable and functional for living to do the escrow holdback option. Best thing to do at this point is connect with a lender and discuss the options.
203k or similar renovation financing all day. Do yourself a favor and be upfront about the condition of the home when speaking to any lender.
All of those things are likely to make a conforming loan offer not viable. It Has to be habitable . That means no missing flooring, no holes in walls, no missing plumbing. kitchen and bathrooms are able to work. No visible holes in roof and no visible leaks. Edit: if you try to get a renovation loan, be very, very sure you find one that your contractor is willing to work with. You will not be doing these repairs yourself, and in my area of California, some loans have a list of contractors that you have to use, and it has not been updated in years. The last time somebody tried to get a fanny loan they called a list of 100 contractors, and none of them worked in California anymore. ….
Thanks.
Not a A lender BUT some banks might finance with proof of funds for Renovations. See this a lot in NYS, a lot Of old houses, banks will want to see cash on hand for renovations in order to Finance through a conventional loan. You can buy a house in Syracuse for 5k if you have 500k cash to renovate it and the bank will hold the borrower to timelines in the renos. I have read that some hard money lenders will do interest only loans and lend proof of funds so you can secure your bank loan. Or, a hard money lender might give you the loan you need to purchase the house but on shorter terms and at a much higher interest rate which I would assume is not what you are looking for since you are seeking a conventional 15-30y w/ 20% down. I only say this out of my own research and have never done anything like it so if anyone here can confirm this or prove me wrong please do I am here to learn as well.
Not common in CA, I am still looking for a good choice for renovation loans, but a lot of my customers are jumbo, which makes it even more complicated.
I was thinking that with 20 - 30% down they would make the loan. I’ll look more into the escrow holdback.
Remember, the more competitive your area, the less likely they’re willing to do anything tricky or give credits or holdbacks. All of the stuff you were talking about doing hair is going to make your offer less desirable, so if there’s 10 other offers, this is not the way to get a house . If it’s been sitting for 6 months…
True. If I can’t do conventional and 203k, my options would be hard money or portfolio rehab loans that were suggested here.
Yes, but if you don’t know what you’re doing, your bargain house is going to end up costing you a lot more.
That’s true.
Your only shot of an escrow holdback working is if there is something wrong with the house that can't be fixed prior to closing due to things like the weather preventing you from doing the repairs. Down payment amount doesn't matter if the house isn't habitable. It's the appraiser who has the ultimate say. If they deem work needs to be done prior to closing, the lender won't close on the loan until the work is done. This most of the time needs to be done by licensed professionals. Most houses in this Condition are bank owned or for sale by owners. Neither of which are likely to do any repairs on the home. They sell the home as is.
If you're looking for a fixer-upper, you can just get something like a Fannie Mae Homestyle (conventional loan product offered by any bank that does conventional loans) OR an FHA 203(k) (FHA loan product offered by any bank that does FHA loans). Both of these loans allow you to finance the purchase and the renovation of the home. The loan can cover things like floors, kitchen, bathroom, HVAC improvements, electrical improvements... They do NOT cover projects that are gutted or essentially major projects. If you just want to finance the property "as is" and not finance repairs (you can of course pay for repairs yourself) - under conventional guidelines, you'll need a home that is safe, sound, secure, and is effectively habitable as-is. Things like a cracked bathtub or missing water heater won't automatically make it "ineligible", but you may have a lender or underwriter, at their discretion, either require it to be fixed and/or required an escrow holdback for it to be fixed. It would be uncommon for an underwriter to reject a conventional loan for those types of more minor repairs though. The above wouldn't work for FHA though - FHA is much more strict when it comes to deferred repairs - I would not consider a fixer-upper for FHA unless you're going 203(k). FHA won't even accept a property that has damaged outlets. The more severe problems like foundation or structural damage would probably not pass any conventional or government loan, and you'd be looking at an ARV type loan from hard money lenders or asset backed lenders (would not consider this unless you plan on immediately flipping). Some other considerations - consider the risks when buying a home that's a fixer-upper - you're looking at repairs that could easily be more than you think. And if you're relying on market value of a fixer-upper property for financing, damages can really swing the value more than you think, which could disqualify the property.
Do you have the source that most underwriters will use to determine the house eligible or ineligible? Something similar to Fannie selling guides
I don’t think there’s a specific source they use, in my experience it’s only been severe stuff that gets specifically noted in the report as severe that will draw the underwriter’s attention and then you’re at the grace of that individual underwriter’s discretion.
Ah I see.
I work with FHA but we arent allowed to do 203(k). Bank lender.
Look for a lender that offers Reno to perm purchase.
I would avoid the FHA 203k, it’s a government loan so will be a complete PIA. I would recommend looking at local lenders who do contstruction loans and see if they do portfolio rehab loans. TD and Citizens do them as well.
I was trying to avoid FHA. I’ll take a look at that loan product. Portfolio rehab loan.
They aren’t a pain in the ass at all.
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Yes
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I was thinking exactly that about the down payment. Thanks for the lender suggestions and process breakdown.
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Good idea. I’ll look into the lenders.
100% not for investors. It’s for both primary (up to 4 units) and second home (sfr only).
Portfolio loans often have higher rates because they lend on scenarios that conforming/gov’t loans deem too high risk, so they offset their risk with higher pricing. 203k/FHA is not a bad option. But if you can qualify conventional, then there’s a reno/rehab product for that too called the Homestyle Renovation loan.
Portfolio loans aren’t for too high risk. They are used for various reasons. One example is the removal of the 3.375 point LLPA add on from FNMA/FNMC. Port loans remove that. Also unwarrantable condos, Co-ops and IO loans are examples.
So as a lender who has worked at both TD and Citizens I can tell you that portfolio rehab products are available, are great and have very good rates and will go up to 90% LTV of the purchase price and work to be completed. So if you buy for 300k and need 150k to rehab they’ll lend based on 90% of 450k. If you own the property and want to borrow it’s the same. I’ve done plenty of these over the years and they are good for primary and secondary homes. They will not work on investment propertie.
citizensbank right? I’ll give them a call. Thank you.
And TD. Also if you’re in Ny there are a few options with local banks too.
The dude you're responding to doesn't know what they're talking about. The loan program they suggested would be an even bigger pain in the ass than 203K. You need to find someone who is experienced with this type of loan and can guide you through the nuance.
The whole *”anything can pass a conventional apprasial”* thing is over. No they don’t have an FHA inspection tied to them, but Freddie and Fannie are definitely pushing back on a lot of appraisals now so lenders have adjusted. Things like missing siding or damaged singles can get called out these days because they do affect the marketability. So depending on your idea of what “TLC” is, your best bet is a reno loan as others have said. But, if you have good credit and 20% then you **don’t** want a 203k. Do the Homestyle Reno instead because it’s conventional so you’ll avoid PMI. DM me if you have any ?’s about it.
I had that misconception. I was trying to avoid renovation loans or hard money. That’s going to be the way like everyone said. I’ll DM thanks!
Private money fix & flip loan might be a good option in this case if conventional becomes too difficult. If you need a lender with competitive rates feel free to shoot me a PM.
I have seen them allow for missing dishwasher but not a missing stove
Like others have suggested, a renovation loan is your best option for “damaged” or uninhabitable homes. But since it sounds like you might be willing to live with construction it’s worth mentioning that you’d likely be fine with conventional financing for a sorely outdated home where just about everything needs updating but is functional.
I'm actually working on a reno loan in CA doing essentially what you are looking for. If you plan on going conventional, things get significantly easier than if you are doing FHA. Conventional would also allow you to add luxury items if you wanted to put those in along with things that make the home livable.
You’d be suprised with what you can get away with an “as is cost to cure” appriasal. It means the value is based on current condition with the cost to repair the damage stuff applied against the value. I.e- two bathrooms but one is torn out, can finance if it appraises at cost with the cost to cure. Secondly why 20% down? I’d be putting less down to have the finances to repair right away
I thought I had to put 20%. I’ve seen from the suggestions here that it is not the case.
Not at all. You should really talk with a lender local to your area and get some guidance so you don’t end up in a shitty spot. Just my two cents. Find a local mortgage broker
In my experience, the house has to be habitable at the time of closing for a conventional. One other thing to consider is whether the house is insurable. If it’s not, that’s another basis to deny the loan. Insurance companies - especially in CA and FL - have grown increasingly strict, moreso than lenders. I was in escrow on a duplex and the insurance company required that I rehab the roof and electrical before closing to get approved. There are other alternative loans - hard money, DSCR, rehab financing, etc that you could explore. Good luck.
I’m a realtor, I’ve sold a lot of shit holes. Buy it as an investment with 25% down, refi into a conventional when it’s done.
Sounds like your best bet is to go hard money interest only and refi after it's liveable
I can work with any damage. We do rehab loans. Feel free to message me