A few months ago, a previous client called me about an opportunity to buy their dream home, OK that sounds great. The problem was that the property was bank owned a totally gutted and need total renovations.
Even though these folks made a great income, they owned a home already along with a second home. They wouldn’t be able to qualify for three properties. Even if they sold their home, they needed a place to live while the renovations were going on. If they went into a rental, financing for homes that need renovations are not as easily financed as in years past.
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If we did the purchase as an FHA 203 K loan, the additional cost and the monthly mortgage insurance just didn’t make any sense.
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I sent them to a hard money lender that gave them a loan to purchase the property, which was 80% of the purchase price and loaned them 100% of the renovation costs. Going this way was the least expensive was of accomplishing their goal. Fortunately, their existing home was in a desirable location, so getting their existing home on deposit wasn’t an issue. The buyers are aware and flexible, so we’ll be able to coordinate the sale and the refinance out of the hard money loan on the same day.
Their new home is almost complete and we’re getting a new mortgage for them, as they are only a couple of weeks away from completing the renovations.
Using a hard money lender in situation a situation like this accomplishes so many good things.
