If you have a lot of knowledge with repairing homes, you might be interested in buying a fixer-upper. By doing this, you can find a cheap home to buy and fix it up yourself, which is an affordable way to renovate a home. This can be a great way to save money on a home, but you might encounter a problem borrowing enough money to buy the house and remodel it. If you are thinking of doing this in the future, here are a few things you should know before you begin looking for a house to buy.
Banks may only offer 80% of value
The first thing to understand is how mortgages work. In most cases, a bank will appraise a home someone is buying to find out how much it is currently valued at. The bank will then determine what percentage they will loan you on the house, and this often depends on the type of loan program you use, but the rate is often around 80%.
If you find a house that is worth $50,000 that needs work, you might only be able to borrow $40,000 to buy this house. This means you would need to put $10,000 down to get the loan, but this is not all the money you would need. What about the money you need to make all the repairs and renovations? How could you get access to more money? These questions can be tricky, but there is a solution that might work for you.
Look into a rehab loan
A rehab loan is a type of loan program designed specifically for situations like the one you are in. A rehab loan will not only offer a way to borrow money to buy a house, but it will also offer the extra cash needed to make the repairs. This is one of the only types of loans you can get that will allow you to have the money needed for a project like this.
When you get a rehab loan, the lender may place all the extra money in an escrow account. As you perform work on the house, the money will slowly be released to you to pay for the materials and labor.
If you are handy with home repairs and are looking for a big project to work on, buying a fixer-upper house might be a great idea. To learn more about rehab loans for homes like this, contact a mortgage lender today.
For more information, contact Financial One Mortgage or a similar company.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.