There is a house going up for auction in my neighborhood. It needs work but I’m up for the task. Any suggestions on a mortgage company that will lend me money for the renovations.
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Jim-
Most mortgage companies will only lend on the appraised value of the house at the time of purchase- not on the future value after renovations. The HUD 203K program was designed to provide funds for purchase and renovations, but it's been cut off for investment properties.
You're better off finding a local hard-money lender for a few reasons:
- They'll lend money for the renovations and purchase, but usually at a lower percentage of the final value of the house.
- They can get you money far faster than a mortgage company, and with less paperwork. Usually at auctions you need to provide a certified check for the full amount of your bid, or a portion of it (at least 10-20%)- a letter of pre-approval from a mortgage company won't even get you in the door, and the mortgage company won't write you the loan ahead of time.
Hard money usually costs a higher interest rate, but you'll hopefully only be paying on the loan for a short period until you rehab abd flip the house. If you analyze the deal correctly, you just factor in the carry costs to the total expenses of buying and rehabbing the house, and make sure there's enough left over after resale for profit.
Bob
Bob is right. The banks and traditional lending institutions really don't want to lend money for repairs, nor for that matter on houses that need them. Their fear, and rightfully so is that you will get halfway done and bail. I have bought a few houses that were started and never finished by a homeowner.
Hard money lenders or private lender are the only solutions short of doing it with plastic. All are more expensive but the goal is to get it done and refinance it to pay it all off. Good luck. DanT
Depending on the amount and the time frame and your relationship with your bank, you may be able to set up a demand loan or secured line of credit (if you have enough security i.e.). Or you do as the other posters suggested, find some private money. Either way, most money lenders are a PITA to deal with... unless you are a developing country which owes them billions and on the brink of default.
Tom