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johngeorge · Joined: 11 Sep 2007 Posts: 1 1.49 Dollars($)

I purchased my home 6 months ago. The house needed to be completely remodeled. We tore down walls, added an addition, and bathroom. Now we are in the finishing stage of the remodeling. The only problem is we ran out of money. I was trying to pull some money out of my house but my house will not appraise for the amount I need in the condition it is. Comps for finished houses in my area are 350,000 – 400,000. I need my house to appraise for 275,000 to pull the money out for remodeling. Is there any loan program that we could use to get the money without having a high interest rate or having to settle with a 5yr ARM. Thank you in advance for your advice.

miller_st · Joined: 17 Jan 2007 Posts: 918 168.95 Dollars($)

You can look at fha 203 k renovation loan as an option for your requirements. You can read more about this program from here - http://www.hud.gov/offices/hsg/sfh/203k/203k--df.cfm

Miller

livinginnky · Posted: Tue Sep 11, 2007 6:38 pm Post subject:

Hello,

I have been a mortgage professional for 5 years and have run in to this countless times. I know I will get a chuckle from all the other mortgage pros out there. I am not trying to discount your situation however.

Unfortunately many lenders don't allow for construction costs in a refinance. They call this a cost to cure appraisal value. It all makes sense when you take it at face value but lets look at it from the lenders perspective. Say you need $75000 for repairs to make the home worth $350,000. Now if you don't do the work and default on the loan the bank is stuck with an unfinished house that still needs $75000 in work.

The good and the bad is this. There are lenders willing to take the risk however they will charge a much higher rate to make up for the risk. Here is what you need to do.

Take a higher interest rate just make sure to get out of the prepayment penalty. Finish the work that needs to be done in order for the house to appraise for full value. Then refinance into a lower rate. You will have to pay more closing costs this way but you get a finished house.

As far as the 5 year ARM, I have been hearing this more lately. I don't know of any programs were you can only qualify for an ARM not a fixed rate. Or maybe you just meant the rate was better on an ARM.

This is what happens on the flip shows on TV. These guys either pay cash or get insanely high interest rates that need to be sold or refinanced immediately to make any money.

Hope this helps even though it wasn't good news.

livinginnky · Posted: Tue Sep 11, 2007 6:43 pm Post subject:

miller_st · Joined: 17 Jan 2007 Posts: 918 168.95 Dollars($)

Yes John needs to look into that as well. The comps in his area are coming to 350-400k. It might be a factor he needs to look into.

He needs to know if it is going to be within the loan limits specified for his area.

Miller

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Johngeorge,

You can go for 5 year ARM. This 30 year loan will offer you a fixed interest rate for the first 5 years of the loan and then it will become variable after 5 years. This type of loan is much secure as adjustment begins after 5 years. After 5 years, the adjustment in the interest rate will occur each year, but with a maximum increase of 2%.

But this ARM option will be beneficial only if you live in the house for less than 5 years. Then only you will be able to save some money. But if you stay in the house for a longer period, then the yearly increase in interest rate after the 5 years initial term may bring some risks to your finances.

ezmortgageloanz · Posted: Tue Sep 11, 2007 11:29 pm Post subject:

I would need to know the following:

a. Cost of repairs remaining
b. FICO
c. Purchase Price
d. Current Mortgage Amount
e. State (property location)

Assuming that the remaining repairs don't exceed 35K and you are located in a high lending county, the FHA 203k is a solid recommendation.

Other options you might consider are:

a. Unsecured LOC (line of credit)
b. A loan program based upon ARV (after repair value)

Regards,

Scott Miller

Guest

if i go for a loan based on ARV, will that be one with a fixed rate?

Samantha · Posted: Thu Sep 13, 2007 4:24 am Post subject: RE: loan for renovating home

Hi John,

I would say you go for a fixed rate loan. The mortgage industry isn't doing that pretty well and there's a rise in foreclosures as i have been hearing since the past few months. So, right at this moment, i feel it is better to go for a fixed rate loan instead of ARM.

Now, one reason of your getting a 5 year ARM may be that you're looking for a short term loan and then you will perhaps refinance it to a fixed rate. But it is better to go for the fixed rate right now. And, if it's a short term loan that you prefer, then you may go for a balloon mortgage. This loan would allow you to pay almost fixed monthly payments till the short etrm, say 5 to 7 years and then either you pay it off by going a lump sum amount or else you refinance it to a long term fixed rate loan.

If you're interested to know more on balloon mortgages, refer to the section on this topic.

Hope this helps...

God bless you.

Samantha

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