I could use some professional advice on financing my first rehab deal. Just won a bid on a HUD foreclosure. The numbers are sales price of 94K including 4K in closing costs, estimated 33K in rehab costs, after repair value of 150K to 165K. My FICO is about 640 and I am going to live in the house but plan on selling as soon as the rehab is completed. Here are my options as I see them now however I am always open to new ideas.
I am preapproved for a 203k and am going through the process but what concerns me is that after down payment and other upfront costs (inspection, appraisal, etc.) I am going to be down to almost no cash. While I could still probably swing it with credit card credit that is available to me, it’s an uncomfortable feeling and I am also concerned that the financing may fall through because I won’t have any cash on hand after closing.
Hard money but with the current numbers it looks like I would need about 80% LTV on after repair value and from my research it looks like about the best you can do is 75% which would leave me in the same cash poor position.
Conventional loan, which I can get 100% financing for (80/20) which would require almost no cash up front from myself but then I don’t have the money for the rehab costs. I am wondering if there is such as a thing as a HELOC based upon after repair value.
Any suggestions and ideas appreciated.
You could do an 80/20 Escrow HoldBack or Purchase-Plus, based on the “subject-to-completion” value.
Could do a construction loan up to 90-95% of subject to like billy said or you could do a conventional loan off the sales price and use 6% seller concessions to take care of your clsoing costs. Then if you can find a lender that will let you do a HELOC with no seasoning, you could pull cash out for the rehab.
According to Donna Fox, having a Heloc is bad for your credit score. It would be better to have a standard second mortage instead. Installment loans instead of revolving loans are much better. Getting a Heloc should be your last choise. Good luck. Hope this helps
Getting a 100% conventional loan may work but getting the heloc afterwards may difficult as the value will be base on the as-is. There are several lenders that can do cash out with no seasoing. Your credit score is a little low but this may just work.
Other than the options above, you could go with a conventional rehab loan that offers 100% financing for the purchase + fix. They allow an ARV up to 80%.
Your equity is used instead of bringing in a down payment. Terms are a little better than Hard money.
LO’sS you are giving such blaket old fashion ideas and may or may not work with 33k worth of work on a HUD HOME that is more then cosmetic
JACK you need and must do one of TWO thing on a HUD home
There is what is called a 203k rehab FHA loan that is a high LTV construction loan that is perfect for this kind of cash poor owner occupied home a lot of loan officers do not know how to do this loan and it is a lot of paper work for them and IT IS A GOOD LOAN FOR YOU PLEASE FIND SOME ONE THAT DOES THIS TYPE OF LOAN
you may also look in your local new paper to find a local hard money lender that will do 80%ltv they are very very common just watch out on the closing costs because on the first option you will not have as much as you could with a private lender
Richins’S you are not reading the post a 2nd time before responding. Did you catch the part about the client being preapproved for a 203K already? Did you read the part about he’s already checked into HMLs and can’t find one at 80%?
Thanks for your input though.
PS… My spelling isn’t the best either but I’d suggest reading through your responses a couple times before sending. I know it’s late and probably been along day but they tend to be a little confusing. I’m sure everyone would like to learn from what you have to offer.
Your pre-approval for 203k is great, but remember that this is a FHA product and can be very difficult to close at times. There is a mirrored product called the Fannie Mae Homestyle loan which is almost identical to the FHA 203k product, but with less of a headache. see http://www.reiclub.com/forums/index.php?board=26;action=display;threadid=10711
You will need 10% down and an estimated 10% “window” of unforeseen costs to be added into the cost breakdown. This may be the product for you.
Make sure your appraiser has the proper licensing, and is willing to go out and do inspections as the lender will require during each phase of the rehab project.
As for you running low on cash after you put money down, well… open a savings account with what little you have left. http://www.reiclub.com/forums/index.php?board=26;action=display;threadid=10574
kikaider69, What do you mean that a HELOC is bad for your credit score?
There are lenders that offer 80% rehab loans.
check out www.umwsb.com