A renovation loan can be the answer to this dilemma. The interest rate may be slightly higher than a standard purchase loan, and there are hoops to jump through, but it may mean the difference between a transaction or none. The basics are:
- Start with your real estate agent, who can help you coordinate and navigate through the process
- Find a property that needs a lot of work and start setting up the financing
- Get a renovation coordinator
- Obtain construction proposals from reputable contractors
- A specialized appraiser prepares an appraisal of the current value and the value after approved contruction is completed
- The coordinator assists in finalizing a construction contract and approving a loan that includes the original purchase cost and the construction cost.
- Settlement can occur with the unrenovated value, according to the sales contract with the seller
- Additional funds are released from the lender to the contractor as the work is completed and inspected for approval
You are left with a loan that is larger than the original purchase price, but includes your renovation costs. Your house is now a home with the updates and repairs that you want.
This is a specialized area of the lending field. I have a licensed loan officer at Prosperity Home Mortgage who handles these loans exclusively. Let me know if you want to be connected with him.