Looking for a loan to buy and fix up house
Dear Dr. Don,
I have found a house in Texas, but it needs some repairs. If I want to purchase it, must I fix it up before I secure financing for it? The loan amount would be $50,000. The seller won't be doing repairs, but it seems like this is a terrific opportunity for me and my family.
-- Elizabeth Ingress
It sounds like the Federal Housing Administration 203(k) loan program may be just the ticket to secure financing to buy and improve this fixer-upper home. The Department of Housing and Urban Development website describes it as the "primary program for the rehabilitation and repair of single-family properties."
The borrower gets just one mortgage loan. It can be either a long-term fixed rate or an adjustable-rate loan. It would provide funds for both acquisition and rehabilitation of the property. This happens by basing the mortgage amount on the projected value of the property after the work is completed. The loan funding process takes into account the cost of the work.
The home appraisal process considers the home's "as-is value" and the expected market value of the property after the proposed rehabilitation and improvements are finished.
The next step for you would be to contact a HUD counselor in your area to learn more about the loan program. You can then determine whether this will work for your family. Good luck!
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