Borrow less than approved and take difference to reno house?

[Joshua Larivaux]

Hi everyone, 

My question is exactly as the title suggests. 

Is it possible to get a loan from a bank and 1. buy an off-market home for less than we're approved and 2. take the difference and immediately start a renovation on that house before moving in?

Example: Bank approves for 495k. I buy off market home for 410k. Use 70-85k to renovate said home. [then] Pay back 495k to bank in normal mortgage fashion.

We have a very good off-market deal within our grasp, that's not possible as a brrr or fix and flip, but it would make a perfect main residence, which we are also currently looking for. 

Is the above possible? If not like this.. then how?

[Chris Seveney]

Quote from @Joshua Larivaux:

Hi everyone, 

My question is exactly as the title suggests. 

Is it possible to get a loan from a bank and 1. buy an off-market home for less than we're approved and 2. take the difference and immediately start a renovation on that house before moving in?

Example: Bank approves for 495k. I buy off market home for 410k. Use 70-85k to renovate said home. [then] Pay back 495k to bank in normal mortgage fashion.

We have a very good off-market deal within our grasp, that's not possible as a brrr or fix and flip, but it would make a perfect main residence, which we are also currently looking for. 

Is the above possible? If not like this.. then how?

 Banks will lend the lower of a percentage of the appraised value or what you qualify. So in your example, it does not matter what you are approved for. If you are buying it for $410k they will give you a loan for the value of the home minus their required down payment. This is for conventional loans. If you wanted to do a construction to perm or another type of loan, you potentially could do that but typically you will need to have plans done, and estimates from contractors etc. so its a lot of work to get that done.