120% Financing?


I am looking at my first rental property, and I picked it up off the foreclosure market for cheap.

My question is:

I negotiated the contract for $60k. I want to finance it for $72k. The extra $12,000 will go to rehab type work (i.e. carpet, appliances, etc).

Is it even possible to finance a loan for MORE than the stated contract price?



Yeah. There is such a thing. It’s called a “rehab loan”.


I did some research on this board on rehab loans, and I think I found what I needed.

The house is in good shape, it just needs carpet, paint, appliances, etc, and I think it could appraise for around $80k.

So based on the information I found in related threads, I could get a loan for about ~80% of that ARV, right?

Shooting for a conventional 30 yr, non-owner occupied loan. Credit scores are not an issue.

From what I’ve found, I should be able to get a conventional loan, with standard non-owner occupied rates, right?


If the appraisal comes in and “credit scores are not an issue”, you should have lttle trouble.

Understand that if you already own it, you will actually be doing a “cash-out refi”…

I recommend that, if you can swing it financially, that you do the fix ups, get the appraisal based on the property fixed up, and then pull the cash out. This is how I do mine…when the dust settles, I am usually out of pocket just a few thousand, have at least 20% equity, and a strong positive cashflow.

The last one I did:

Purchase: $64,900
Repairs: $1,700 (darn that water heater!)
New appraisal: $77K
New loan (80% @ 6.75%): $61,600

Out of pocket: $5000 plus a lttle bit of closing costs
Equity: $15,400
Positive cashflow: $300+ a month

It’s not a get-rich-quick kinda thing but it adds up!


Thanks Keith, I’ll have to run the numbers and see if that is an option.

I had a loan officer tell me that he’d heard of a rehab loan, but said they do those AFTER the intial loan is closed. He said a rehab loan can’t be part of the initial loan, the lender wouldn’t allow it.

Any truth to that?


Not True. For example:
United Midwest Savings Bank
offers 80% LTV rehab loans (purchase, rehab and cc can be rolled into the loan)