Mortgage Questions
Hi, I was hoping someone can help. I am bidding on a 3 family 4 floor unit but plan to occupy the triplex and rent the garden apartment. The property is solid but needs a $200k renovation – new 2 kitchens, 3-4 bathrooms, new wiring, flooring. How should we pursue the mortgage? Here is are…
Hi,
I was hoping someone can help. I am bidding on a 3 family 4 floor unit but plan to occupy the triplex and rent the garden apartment. The property is solid but needs a $200k renovation – new 2 kitchens, 3-4 bathrooms, new wiring, flooring. How should we pursue the mortgage?
Here is are the stats: –
– looking to close on the property at $1.1M
– want to place 25% down payment ($275k) which will leave a mortgage of $825k.
I already have a commitment from my credit union for $950k+
Question is how should I go about financing the renovation? Do I have to take a $1.15M mortgage – would I need to put more money down?
Thanks!
Sorry was away from the computer all day yesterday. Yes FHA loans have both an upfront MI and a monthly MI.
FHA loans finance 1.75% upfront that goes to HUD and an additional .55% annually. I know it’s a lot but it’s the only way to get above 80% in Brooklyn these days as PMI companies will not insure 2-4 units in BK.
I have one bank that will do 90% on 2 units only in Brooklyn up to 90% with NO PMI but there rates are in the high 5’s low 6’s but they are not a Fannie Lender so loan limits donot apply to them.
-Adam Dahill
And do you have to pay PMI if you get an FHA loan?
How do FHA loan rates compare to conventional loan rates? And are there restrictions on who is eligible to receive an FHA loan?
You are not going to get 1.15 million mortgage when you are buying the property for 1.1 million.
There are a few Rehab lenders out there still if you are looking for HARD MONEY rates and terms. 13-14% rates and multiple points for short term loans.
I would borrow as much as possible with an FHA loan and use my own funds for the renovation. If you are short funds then you should scale back on your renovation or do a little bit at a time. Rome wasn’t built in a day.
Just my honest opinion.
This is a good job for a mortgage broker. The main referrals that keep coming up are Adam Dahill, who posts here, Al Trachtman of Trachtman and Bach (who we used and like), and Norman calvo of Universal. THey will know who is making these types of loans, if anyone.
We did this back in the boom. You borrow against the anticipated equity, so you need an appraisal that says that the renovated house will be worth what you need to meet the loan-to-value requirements. If you are putting 275k down and borrowing 825k, you need another 200k in your loan to finance the reno (assuming no overruns, and there are always overruns). That would make a mortgage of $1.025m, or a $200k line of credit. In the current climate, it may be difficult to get the appraisal you need and few, if any, banks may be doing this. Also, your contractor needs to be prepared for funding to lag behind the work because you get the construction proceeds in pieces based on a completion schedule.
Please le us know when your Credit Union comes through with a 950k loan from what I am hearing and seeing banks and credit unions back away from jumbo loans like that once the work out the figures.