Buying Distressed Property
I would like to preface this post with an invite from all Mortgage professionals to add to, correct or clarify anything in this post.
So you think you want to buy a distressed or fixer-upper property? I've bought several over the years, my first was a 100 year old Victorian complete with gas lights, an old octopus type furnace (at least that's what we called it) wrapped with asbestos and everything was sinking to the center of the house...about six inches out of level (not the home below). That house was a real eye opener and I learned a lot about remodeling and keeping to a budget...about a year or so later I managed to sell that home at a profit and my real estate career had begun. It was a different time then regarding financing of investment property and safety measures required to remodel a home...which were pretty much non-existent...I'm specifically referring to the dismantling of that asbestos wrapped furnace.
Distressed or fixer-uppers can be found in most any community. A fixer-upper has simply gone without regular maintenance and therefore suffers a lower market value than other homes in the area that have been maintained. While investors or owner occupants will buy in any community, it's generally accepted that you should buy the least attractive or desirable home in the best possible neighborhood. A good real estate agent or Realtor can help to determine what an expected market value for your purchase would be once work was complete. So you would need to determine what purchase price plus estimated costs to repair would be a feasible endeavor.
If you are not paying cash for your fixer-upper and require a mortgage, depending on the degree of the homes distress you may or may not be able to get financed. However, it may be possible to take advantage of the Streamlined 203(k) where you may be eligible to borrow in addition to the purchase price of the home up to $35,000 for needed or required repairs with a minimal 3%-5% down payment. The "Streamline" is meant for uncomplicated rehab work such as HVAC, flooring, plumbing, electrical, septic systems, lead-base paint stabilization or removal, etc., it's not intended for work requiring architect plans, consultations, engineers.
So it is possible to get into a home combining additional money needed for repairs with the primary loan/mortgage. Chances are that it wouldn't work for the home above, but at the very least if you are considering buying a distressed or fixer-upper property, call a Realtor and they will work with you and point you in the right direction and that direction will probably be towards a lender or mortgage person who's current with all the available loan products as well as new rules and regulations affecting the loan process.
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