Getting a mortgage on a property in poor condition

What Is1 said. If you don’t get the mortgage you’ll lose your downpayment if you were the accepted offer. You should have a real estate lawyer who would advise you on this.

daveinbedstuy

in General Discussion 8 years and 3 months ago

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pgfgyckqcjdvzrjd | 8 years and 3 months ago

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Some mortgage bankers I’ve spoken to have suggested that if the condition of a property is too poor (e.g. if it’s “uninhabitable” in its current state), you might not be able to get a mortgage at all. Does anybody have any experience with this? We had submitted an offer on a property and are bidding against all cash offers, so we’re trying to figure out the risk of waiving the mortgage condition. The property was only partially inhabited for the last several years and clearly needs a gut renovation. Is it possible that the bank may not be willing to lend against the property at all (as opposed to the appraisal coming in lower so we can’t get the full mortgage amount we were expecting)? I know sometimes you have just an appraisal condition rather than a mortgage condition but am wondering if we can live without even that.

empathie00 | 8 years and 3 months ago

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Have you looked into the 203(k) program? This is a mortgage specifically for properties in need of major reno – folds your mortgage and reno costs into one loan. Definitely more hassle than a “normal” mortgage, but was the only option for us.

stuyheights | 8 years and 3 months ago

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Most properties do not fall within 203k loan limits here in Brooklyn. Please email me at just8155 at gmail. I can offer some advise

slopefarm | 8 years and 3 months ago

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We dealt with this, though it was twelve years ago, so pre-2008 crisis and its aftermath. We did privately what a 203(k ) does, a single mortgage for the house plus construction costs. The lender had to approve the scope of work, plans, and contract. The appraisal had to anticipate the value of the renovated house and the LTV ratio had to meet the loan requirements before the bank will approve the loan. We did all that. Loan proceeds were used to close on the property, and the balance of the proceeds to cover construction were withheld and then released in accordance with a schedule as the work was completed. Talk to a few mortgage brokers and see if this kind of loan is still a possibility.

resident2 | 8 years and 3 months ago

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TD has a construction loan program that does much more than the 203 K.
But to answer your question: NO you cannot get a conventional mortgage on a house that does not comply with the basic standards of warranty of habitability. Many appraisers will not even turn a blind eye to flaking paint, let alone incomplete kitchens and bathrooms! All plumbing, electrical & heating must be in working order etc. at a minimum.
If you are putting 30% down and have some serious reserves of cash in the Bank depending on the Bank and your relationship to them….. you may be able to get a mortgage. But not so sure you would want to waive the contingency if you need the mortgage to buy it.
My rule of thumb is any house that needs a “gut renovation” as you say. If you do not have the cash to buy it, you certainly will not be able to get the funds to renovate it. So Do Not Buy it!

CarmenR | 8 years and 3 months ago

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Our house was in pretty bad shape (pretty serious leaks, sagging floors, rotted front porch) but did have a working stove and fridge and we appraised and got a traditional mortgage with no issue in 2014. What seems terrible to you might not seem bad to an appraiser.

daveinbedstuy | 8 years and 3 months ago

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If I were the seller, I’d take the all cash offer even if lower.

Solomonsmines33 | 8 years and 3 months ago

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You shouldn’t waive the mortgage contingency if you don’t have access to alternate financing.unless you and your mortgage broker are very confident about the financing. If you have these kind of questions– you should be working with a buyers broker who can help advise you and knows where to direct you for construction loans etc. There are other houses; this doesn’t seem like a good fit for you.