By Neena Vlamis, President of A and N Mortgage

Carrie RosenbergOne problem facing buyers in the current market is the lack of available inventory. Sellers continue to bide their time. However, buyers do not need to miss out on low interest rates or the ability to purchase in their target neighborhoods. Although Renovation Lending is not the solution for every borrower, it is an opportunity to get into certain areas by purchasing a potentially lower- priced property and then borrowing enough money to fix it up.  It is by no means a panacea, but it is certainly an option and in many cases, one which can rapidly increase the equity in your property.
A Renovation Loan differs in many ways from a traditional construction loan. Reno loans are closed one time, with the purchase money going to the seller and the renovation funds placed in an escrow account held by the lender throughout the draw process. In most cases, there is no upfront money from you or the lender for the contractor; the General Contractor works on a draw basis. This is not a hardship for any solvent contractor as they should have the ability to buy materials and pay their sub-contractors while being reimbursed through inspected draws.
Most neighborhoods still have a large quantity of foreclosures that need to be fixed up or even properties that are simply outdated.  Here are some key words that indicate that the property may be right for a Renovation Loan:
  • Sold “as-is
  • Estate Sale
  • Any foreclosure that has NOT been recently updated
  • Fannie Mae or Freddie Mac foreclosures (especially the Fannie Mae HomePath properties)
  • “fixer-upper”
  • Handyman’s dream
  • Current occupant has 400 cats
  • Property needs “love or attention”
Depending on your budget, you can gut a property or just update the kitchens and bathrooms. As long as the property is habitable at the end of the six month rehab period and you remain within the guidelines of the loan program, you can often use your imagination as to what you would like your home to end up looking like. You can even purchase and rehab a 2-4 unit property as long as you occupy one of the units!
So, before you start your next tour with your agent, consider asking about properties that are ripe for renovation. It may be an opportunity to create the home you dream about and live in the neighborhood you choose!  Contact Carrie Rosenberg, renovation loan specialist, for more information.
Next topic: Which Renovation Loan Product is right for you?
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