Question on Rehab Loans

Financing, Hard Money Lenders, Private Money
1

I am new to this forum and a wannabe real estate investor. I recently moved from Southern California to Raleigh, NC mainly because I felt locked out of the overpriced SoCal real estate market. I also have never owned property before, a lifetime renter.

I am currently concentrating an bank REO’s for a potential fixer-upper flip opportunity as I feel it is safer for a beginner like myself than trying to tackle preforeclosures. My situation is I have shaky credit but I have qualified for a no down loan, about 10K in cash to work with and finally a realtor that I am comfortable with and is very experienced in bank REO’s.

My idea was to try to find a good property to fix up and flip, hopefully get the seller to pay my closing costs (is this possible on a bank REO deal?) and use the 10K for the rehab costs. I have found about four properties in the last month that meet my buy/rehab/resale numbers (requiring 20K profit) but unfortunately all were already under contract or in some form of going under contract. This tells me I need to find out about these properties earlier and/or act faster, which hopefully my new realtor can help with, however I am looking into other alternatives, which leads me to my question.

I have had to pass on a couple of properties that I thought would have been excellent deals because I knew the rehab costs would be more than I could afford. I just found a property this weekend that I am very interested in that fits this situation. Owned by the lender since Sep '03 and looks like it’s been empty since then so I assume I could get a good deal (I know, big assumption, but play along with me). Of course the first problem is contacting the right person to negotiate with (anybody know how I would find out who it is I need to talk to at ABN Amro in Jacksonville?).

Anyway, I have looked into hard money rehab loans and it looks if I get a good enough deal I could qualify for one of these, however here is my dilemna. It appears that these loans are only for investors, not for owner occupants. I can’t afford at this time to pay a mortgage and my rent. I was planning on living in the property I was rehabbing until I sold it.

Am I mistaken on this? Can you get a HML for rehab as an owner occupant or does anybody have any other suggestions for me?

Thanks in advance.

2

Howdy Jackvdo:

You can go several directions. None of my HML’s have ever asked if I planned to live in the property. If need be you can put the property into a Corporation or LLC and then it can not be considered a homestead property if they are concerned with the homestead laws.

Another option is to get the first 6 months payments prepaid at the closing. If it is good enough deal you will be able to include this in the loan.

You should also be able to borrow almost 100% of the purchase price and fix up costs and closing costs. Let the HML know you are willing to put the $10,000 into the deal but want to keep it available for mortgage payments and any unforeseen expenses. You may even escrow the money with the HML’s repair escrow.

Hope this gives you some ideas. LOL

3

You can apply for a 203k loan which covers the cost of the home and the repairs. All you need is 3% down.

4

Yes the 203K loan will work if it is in the FHA loan limits in the county that you are buying in so you would need to check that part out just because you are moving to a new area

Or you could get a conventional construction loan if your scores were decent and the payments are deferred until the construction is complete and this works great for a primary residence

So you may have three options

5

Thanks everyone for the info. I’m going to apply for the FHA 203K through a lender that my buyer’s agent recommended. I’m also going to look into a construction loan. I was not even aware that there was such a thing available for something like this. Is it possible to prequalify for a construction loan?

6

Great Idea,

Yes you can get preapproved for these programs.

Your mortgage broker will do that for you