Mortgage with extra for improvements...

[Anonymous]

Hello all.  My husband and I just made an offer on a home in Texas that will need many improvements.  We have been pre-approved for a loan up to $100,000.  We hope to get the house bought for around $50,000...our current offer was for $53,000 but with the seller allowing $3,000 for a new roof (which is half the actual cost) and the seller paying up to $3,000 of closing/prepaid expenses.  The seller bought the home in Feb 2005 for $44,500.

My question is how would this be financed?  Will they give us a loan for the cost of the house and then add the amount for the improvements?  We want to get $15,000 to $20,000 for the improvements...the exact amount depends on what we get the home bought for.  But I would like for our loan not to exceed $70,000 - $75,000.  Or will we have to do two separate loans? 

I am waiting for my contact at CitiMortgage to call me back, so I thought I'd ask you experts out there.

Thanks in advance for any insights you can give!

[Anonymous]

I've recently looked into a similar thing.  I think you're looking for an FHA Streamlined 203(k) loan.  It will allow you to make up to $35,000 worth of updates and renovations rolled into a single FHA mortgage. 

Google "203(k) mortgage" for more information. 

[ShanetheMortgageMan]

You could do it 1 of 2 ways, the first is the 203k program mrthomas mentioned.  The second would be a construction rehab loan program which is a conventional loan program.  Both will consider the after-improved value of the home to base things off of... so in order to get the full amount you are looking for, the home would need to appraise for that amount given the improvements you plan on doing.  For example if the home only appraises for $65k assuming the improvements have been done, then you will only be able to get an FHA 203k loan for ~97% of that amount, and for conventional you would only be able to get a loan for 95% of that amount... the remaining 3% (for FHA) or 5% (for conventional) would be the down payment requirement.

[Anonymous]

Thank you VERY much Shane!  I wouldn't even be this far without all the advice you give here!  You have no idea how much I appreciate it!

Now if I could only get my mortgage guy to call me back!

[ShanetheMortgageMan]

You are welcome!