Los Angeles

[Mannyy]

I'm  a first time home buyer and just submitted an offer with conventional loan, 5% down. This property needs a lot of fixing and I will borrowing funds from friends/credit cards to fix it up after buying it. After the renovation, can I get a apprisal for the renovated home and get a mortgage for higher value and use that to pay off my debts incurred for renovating it.

Just to know, is there any way I can obtain a mortgage that includes rennovation/fixing up costs.

Please share your thoughts.

[vfxdrummer]

I am also interested in this information.
We currently have an accepted offer on a short sale that is livable, but will need some improving.
We are putting down 20% to go conventional, and will have some funds left over. But, ultimately,
if we want to do $100k of work over time, I'd rather borrow it up front, do the improvements, then
focus on paying off that loan as fast as possible.

II imagine that we are talking about a HELOC, right? Are HELOCs capped @ 80% LTV?

Anyway - I am looking forward to hearing any info about this. Thanks

[Filmmaker48]

You can get a home equity loan. Penfed Credit Union has an excellent rate - 1.99 APR - if paid off after 5 years (rates go up for longer periods of time). You do need a high LTV though - 80 percent or less. There is also an appraisal fee. I guess you could get it f you home is worth more than you paid for it. 

I'm a first time home buyer who put 80 percent down as well, and I'm not convinced my home will appraise for higher than the price I paid so this really isn't an option, unfortunately. 

Los Angeles used to have a program for low income home owners to get cheap loans for renovations but it was discontinued in the mid 2000s. 

If anyone knows of any loans or programs for renovations that are affordable for middle income earners who have recently purchased a home, I would love the info as well! 

[agl25]

If you can get a 203(k) loan to cover the cost of the home + renovation costs, you will end up with a much lower interest rate than you would on those credit cards. You'll probably also wind up with PMI but if you really think that you will have 20% equity after the renovations, you should be able to refinance into a conventional and get rid of that PMI.

[Mannyy]

When I do a refinance, what are the typical cost involved? Do I need to do apprisal, escrow and everything like a new loan. Assuming that my property appreciates 20% after improvements, then I am in luck., But not counting in entireity.

[manueldiva]

We just wrapped up a doing a renovation on our newly purchased house. We opted to go with an FHA which requires a lower down (3.5%) and also did a 203k streamline for 35k in renovations. If you're renovations are going to be under 35k I would suggest looking into a 203k streamline. Even with a conventional loan with a down less than 20%, I believe you're going to still need to carry PMI. 

When you refinance, I believe the costs are similar to like buying a new home with the same associated fees you already mentioned, appraisal, escrow etc. Definitely look into a 203k then your renovation costs are lumped in with your mortgage and with a much cheaper interest rate than credit cards.

[agl25]

manueldiva, are you going to be refinancing now that your work is complete? (congratulations, by the way! I'm still a couple months away on mine) If so, I'll be interested to hear your experiences. I'm hoping I'll be able to hit 20% equity and refinance after my renovations are done (and possibly also after paying a bit towards the principal).

[vfxdrummer]

Please excuse my ignorance, but is this 203k loan something that I can take out on top of my traditional conventional loan?

Thanks

[agl25]

No, it's something that you do instead of a conventional loan. It's a single loan that covers the home purchase and the cost of renovations.

My understanding is that you can refinance a conventional loan into a 203k loan.

[LoansbyJW]

Yes. Close conventional, refinance FHA 203k. Fannie Mae has a renovation program, but very very few lenders know how to structure them. 

If you don't want to refinance, it's possible to get a second post closing. The big banks offer 2nd loans up to 85% Combined Loan To Value. There are a couple of local credit unions that offer lines of credit up to 90% CLTV. I think First Entertainment Federal Credit Union does, but that was some time ago when I last heard they did HELOC's to that level. May want to reach out to them and see.

http://www.firstent.org/loans-realestate_mortgage.shtml#hep

The company that is funding 90% CLTV purchase seconds is TCF Bank. Don't know what their post closing HELOC policies are, but you can also get information here:

https://www.tcfbank.com/account_loan-mortgage.aspx

Thanks for reading,