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Updated almost 9 years ago on . Most recent reply
Need Advice on Financing- SFR Under Contract in MI
Hey BPer's,
I need some insight from you more experienced investors. I have a foreclosure under contract in Michigan, a 4/2 that I'm going to owner occupy. The ARV looks to be around 155-165K, purchase price is 86K. Needs probably 18K in repairs. Here is the problem: I am having trouble with financing it because of the repairs required (section of roof, burst pipes, floor joist). Anyway ideas? Would it be possible to do an FHA 203k on a property like this? Do hard money and re-fi out of it? Any thoughts?
Thanks!
Ryan
My local bank in Jackson MI has a loan they offer that allows you to finance both the purchase and renovation at 85,% LTV
Interesting.
Even if your ARV is only $150,000 with only $104,000 in it you are still under 70% LTV.
How many lenders have you called? This seems like something that should not be too difficult to do, especially as an owner/occupier.
Since you are going to live there are you in an area that is serviced by USDA Rural development loans?
I used one to purchase my primary residence and got a great rate and took an extra $15,000 for repairs. Of course, their process takes a couple months at least.
I would suggest calling more lenders and ask what their policies are. You can try to avoid having each one ding your credit, but generally as long as you are within a couple week period multiple dings are not too bad.
@Adam Klugh- Thanks for the heads up . I appreciate it. What bank do you use? Id like to get in touch with them.
@Tanner Thoman- Thank you for the reply. I agree. I havent called too many banks yet, will start calling some more and also look into USDA Rural loan! :)
Hillsdale county national bank. My branch is in Jackson MI.
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This is what a 203k is perfect for.
Thanks @Adam Klugh and @Wayne Brooks!
203k has a lot of hoops to jump through. Not saying it isn't a good option. But an "in house" loan from a local bank can be a lot less restrictive. What part of Michigan are you at
You can also look into a construction loan that may be offered by some banks. Huron Valley Financial in Ann Arbor reportedly has a one-close construction loan so you don't have two sets of closing costs for the end loan. And isn't there another equivalent to the 203K? The Homestyle, or something like that?
FHA max is $270,050. The 203K max is about $30K. There is some red tape and you have to meet the qualifications. If you already have a lender inquire with them first. *Hard Money is a quick infusion of cash. Therefore, get in and get out is the name of the game. You pay points upfront to originate the loan and then an agreed interest rate and terms. I use Hard Money when I know I can repay it within 4 months. I would advise a 203K. What stage are you in the offer process?
....BTW, when you refi you need to know the seasoning time frame. For example, if you purchase this property and rehab it you may not qualify to refi. They may require it to season for about 6 months. That will give you time to lease out the other side of your duplex. After 6 months the bank/lender may refi at that time plus you have an asset that is cash flowing which looks great for you once your refi. Waiting to show proof of cash flow will put you in a better position to refi. Banks/lenders like that.
@Adam Klugh was that 85% LTV on the ARV or purchase value? Also, was it going to be an owner occupied, a buy and hold, or a fix and flip? Just curious as they are building a new branch in Adrian. I will be looking for financing on a fix and flip but wanted to talk to them about financing before making offers. Is that considered a personal mortgage or a business loan? I appreciate any feedback so i can be prepared to ask the right questions.
it's 85% of the ARV, it's a personal mortgage, and it's exclusive to owner occupants. I WISH it was a fix and flip option. I would be doing that all day if it were.
