“FHA Renovation Loans have Rules”
Your name was given to me by one of my co-workers. I was recently denied for mortgage to complete some renovations to my home. Just some general information. My current first mortgage is about $160,000 and have a second mortgage of $35,000 and have about $30,000 in credit card debt. The bid I have for the renovations is $50,000.
I was attempting to do an FHA 203K loan for $275,000, but even though my income is sufficient, I was denied and truly was not given a good reason.
Unfortunately, the loan officer should have known that you can’t pay off credit card debt as part of a renovation loan. If the goal was to accomplish the renovations and pay off credit debt, this can’t be done as part of the same loan.
The solution would be to pay off the first and second mortgages and do the renovations. Once the renovations are complete, there would be an opportunity to refinance, eliminate mortgage insurance and pay off the credit card obligations.