Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Borrowing More than purchase price
Is it possible to borrow more than the final purchase price of your home? For example if the purchase price is $300K could you borrow $325K for updates, renovations etc so those things could be rolled into your monthly payment?
Re: Borrowing More than purchase price
Not anymore...
Seriously, though, if you can't come up with an additional 10% of the purchase price for renos, you probably aren't in the position to purchase a home. Or at least not a home that expensive.
Good luck
Agree. Isn't that how we got in this mess to begin with??
I agree that we got into this mess by letting people borrow more than they pay for the home but you both are incorrect.
There is a 203k renovation loan. Unfortunately you have to have a licensed contractor do a quote and I think there is a timeline that you have to have the repairs made. There is a 203k streamline which is up to $35,000 and then a regular 203k loan for over that amount. The streamline is supposed to be less paperwork and hassle. We looked into them temporarily when we were looking at a house that was unfinished. We did end up buying a huge fixer-upper but we paid cash for all renovations and got a great deal on the property.
Do you really want to pay interest on your renovations for the next 30 years??
Our credit union sent us a flyer recently that advertised loans for home renovations. We briefly considered getting our mortgage for the house with a 20% DP, then applying for a small (and short-term) loan to do the renovations.
We decided instead to put down a smaller DP on the mortgage and pay cash for the renovations. I knew we'd be more conservative if we were paying cash.
that's exactly what we were trying to decide on. right now we have a little more than 20% to put down but I don't want to drain our savings on a DP... just trying to figure out how much "buffer room" people ended up leaving themselves
thanks!!!
I will say that we had a pretty realistic budget for renovations because we do almost all the work ourselves (DH is a master of all trades, friends are awesome, and we've done renos before). However, once you open up walls and rip things out you can find a host of problems. DH had to redo the plumbing in the whole house, a ton of electrical stuff and some restructuring. My point is renovations cost a lot more than you originally plan
We ended up doing a 5% down conventional loan and kept most of our cash for renovations. We are paying PMI for 12 months and then we can have the house reappraised and drop PMI if our loan is 80% of the value of the house (which we are confident it will be with the renos we've done). So there are options and if you work with a good mortgage broker, they can help you find the loan for you!
I did a home renovation loan, similar to the 203k but not FHA and I had 20% down - but I borrowed = to the purchase price as that is the extent of the work I needed/wanted to do. NOTE: dp is based on loan amount &/or post renovation market value, Not purchase price. YOU CANNONT borrow more than the appraised value post renovations. also, Closing costs are higher and you can't really shop for interest rates. Very few banks offer these programs, and you'de be well advised to avoid BofA (well, for pretty much anything), so that decreases options even further. I used Wells Fargo, I thought the program was really well run. There were faults and frustrations, but they were for my own protection financially.
Streamline 203k are possible with how you phrase your question ( but still need atDP) and MUCH simpler, but as the above poster notes, do you really want to pay for it for the next 30 years? If credit card debt is your only option to do the work, then yes, talk to your mortgage broker about 203k. I would ask the question - does this work have to be done NOW for us to live there, and will it increase the home value significantly? If the answer is yes to both, then 203k I great. If not, buy regular and save until you can pay on cash.
Complex Reno loans are hard. I'm in the design industry and I still went grey. Contractors hate them and there's LoTs of paperwork.... But they are a wonderful option if you know what you're getting yourself into.
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The OP might not have the funds to make renovations and updates but some of the posts here are making assumptions that are not accurate.
DH and I used a 203k streamline in order to fix the septic system on our recently purchased home. We didn't have the full 20% of the home price - as it was a bank owned and we were going to have pay for appliances, moving expenses, etc .and wanted to keep X amount for cash reserves.
We increased our asking price and the bank wouldn't bite, we then asked if we could pay to have the work done but of course, we didn't yet own the house so they wouldn't let us do the work; we then asked to escrow the funds for the septic ($15k) and they wouldn't let us do that either. SO, the last option we had b/c the septic was not up to code was to do the 203k. This was a very unique home and therefore, we decided to bite the slightly higher interest rate (the house was appraised for 40k more than what we paid (yes, rare)) and was higher once the work was completed. However, it was the only way we were able to purchase the home under the circumstances.
After our DP and closing costs, we closed on the house and paid off the septic with extra money so Im not paying for it for another 30 yrs. So, I'm actually a person who has X for a purchase price and had X higher for the septic added into the mortgage. ...and I'm not going to default....