Do I Have To Save Up...?

Question

I am saving money to purchase a home. I was told if I go to a hard money lender, I still need to use my own cash for part of the deal. I'm saving around $15,000. I'd buy the house, use hard money lender cash to rehab it, then convert to a bank loan.

The problem is, it will take me over a year to save $15,000.

What can I do to speed this up? Is there something I didn't think of?

The problem is, it will take me over a year to save $15,000.

What can I do to speed this up? Is there something I didn't think of?

David Scott · Answer

Udoka,

You'll want to go to your local banks and see what line of products they have to offer.  There are a few government programs in which they allow for a construction loan to be rolled into the mortgage itself.

You'll need to get a few quotes from contractors for the cost of renovation for that property.  What usually happens at this point is the back will assess the value of the property and the ARV to see if the numbers make sense and it is a good investment for them.  These loans are harder to get but they do exist.

The product I'm most familiar with in the FHA 203K but I know there are other lines of products out there.   Also I want to emphasis and try to impress upon you that getting a loan is not "getting a loan"  you are purchasing a product and the interest is the amount you pay for that product in the case of a loan.  A loan is a purchase of debt, and traditional methods of purchasing debt is very cheap at this moment in history.

David Scott · Answer

If this is your first deal I would HIGHLY suggest looking at other forms of financing first.  There are a lot of options for first time home buyers.  I personally would try an FHA 203K for a rehab.  With an FHA you can put as little as 3% down and you get preferred interest rates.

Conventional loans can also have a construction loan component as well and you will get lower interest rates as well.

A hard money lender will tend to have higher interest rates and points.  This is a method of securing a loan when the conventional methods have been exhausted and you no longer fit the debt to income ratio that banks like to see.

Brian Mathews · Answer

This guy built a house years ago using credit cards to get all those points, over $100k worth.   His plan was to get a conventional loan when the house was finished to pay it off and reap the rewards of traveling with all those miles.   Funny thing was, that when he went to get a loan, nobody would give him one   He obviously went into a panic knowing he'd soon be paying 28% interest on his new home    He was able of find a small bank in North Dakota that would do it finally.     My point is not to mess with hard money for it because the same could happen to  you or lending could get tight again as it's only a matter of time before we have a recession again.

Ralph R. · Answer

I would stay away from hard money if at all possible.  its expensive and is going to put a lot of pressure on you to get financed out quickly.  better if you can live below your means a while and save up a bigger down pmnt than house hack or some similar strategy to get started

RR

Udoka Omenukor · Answer

You're saying a bank will give me money for fixing it because I thought they will only give me money for the value of a home in live-able condition?

If hard money lendering won't actually be converted to bank loan, what are other people doing? Using their own money?

Udoka Omenukor · Answer

Thankyou I will research the HUD areas later and see if people are renting there.

Udoka Omenukor · Answer

1) I don't know what you mean? But I want to purchase a cheap home that I can fix so that I can rent it out.

2) No

3) This is for investment use

4) Yes

I need all the luck thankyou!

Brian Mathews · Answer

Cut your lifestyle and take a 2nd job.   That's the fastest way I know to get money.

Lee Lockhart · Answer

Hello,You may can go FHA and qualify for a smaller down payment  (2% to 5%)...

Mike Cumbie · Answer

Hi @Udoka Omenukor and Welcome!

There are a few things missing that may help to guide you some.

1) Are you looking for a "House Hack" Owner Occupy type deal or just a flip?

2) Do you own a home currently?

3) Is this for investment of personal use?

4) Do you have a good credit score?

Thanks and good Luck!

Do I Have To Save Up...?

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