Ability To Swing A Conventional Mortgage For First Time Rehab Project?
First, thanks to everyone from this forum......it's been a great source of information for someone like myself trying to get started with my first rehab project.
To my question - I'm reading through Buy It, Fix It, Sell It by Kevin Myers per recommendations from several REI folks, and I see stated in this book as well as other forums I've read that it's near impossible to get a conventional mortgage on a fixer-upper.
My plan originally was to use a conventional mortgage to cover 80% of the purchase price, and an equity line of credit on my own home to cover the other 20%, as well as closing, holding, and rehab costs. I called a bank that I've done business with before, and they said they can do a conventional mortgage on an investment fixer-upper, and that I may just be held to slightly higher qualification criteria (my credit is excellent, so hopefully not an issue).
Am I missing something here? Is there an advantage of using a hard money lender in my situation that I'm not aware of? Am I fooling myself to believe I can get an additional conventional mortgage here?
Thanks in advance for any help!!
A lot depends upon the condition of the property. If ot is just a cosmetic fixer your plan will work just fine.
However if it is not habitabel then your plan will not work.
It all depends on the condition of the property. Most lenders will not give you conventional mortgage for any property with less than good condition (according to appraiser) If the condition is not at least good, you can try to get rehab loan.
the advantage of the h/m/l is that it is processed much quicker than a www.conv.loan.....km
Does anyone happen to know the typical turn around time differences (ball park)?
As far as turnaround time, it could take anywhere from 10 days to 4 weeks. Once you get the title and appraisal, it's usually down hill from there. Maybe a week tops.
Turn around time...with my HML, you apply for "general approval" first (FICO, biz plan etc) then once approved (2 weeks or so), you need to only apply for a funding request, and that comes in 24 hrs or so.
Get the property appraised for the "fixed up value". the bank will loan you 80% of that appraisal. After subracting your purchase price you will have your rehabbing money. Doing a one year note like this is best b/c the cost is only about $500 to do the note instead of $1500-$3400 closing cost on conventional loans.