How to Finance a Fixer Upper Home
Getting a mortgage for any home can be a challenge, but it's even more difficult to finance a fixer upper. Lenders feel more comfortable lending money for a home that's in good condition. In the case of a fixer upper, you're often asking for money to fix the home in addition to the home purchase--making the total amount worth more than the actual value of the home. Fortunately, you can get money to purchase a fixer upper home through the Housing and Urban Development's 203K program.
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Instructions
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Perform an analysis on the desired property. Look closely at the property to determine what work you'll need to do in order to make the home livable. You'll then prepare a statement that details the current value of the home, the expected cost of repairs and the estimated value of the home once you complete the repairs.
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Write a sales contract contingent upon getting a loan. This says that you will purchase the home as long as you can get financing to cover it. You'll need this in order to apply for a loan.
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Contact HUD approved lenders. HUD provides a list of lenders that will give money to rehabilitation projects. Choose from this list to ensure that your 203K application will go through smoothly.
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Meet with a 203K consultant at the property. A 203k consultant is an experienced contractor who has knowledge of the 203K program and what types of repairs the loan can cover. The person must have certification from HUD. The 203K consultant will look at your proposed changes for repair and help you determine if they're feasible and if you need additional repairs. They'll also write an official cost estimate from the bank.
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Submit results to the lender. Return to your lender to let them know how much the repairs will cost. The lender will also figure about 10 to 20 percent more to account for unexpected costs. Assuming you have good credit and a way to repay the loan, the lender should approve your request.
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