Getting Mortage worth more than House Value? 1st time buyer

TonyGoog · Joined: 08 Jan 2008 Posts: 1

Ok, some background information real quick. I'm 24 married and interested in buying our first home. Combined annual salary ~$50k, approximately 15k debt (10k student loans) my wife is finishing up RN nursing school this year, no savings (no idea what our credit/FICO numbers are).

We're located in the NE Indiana area (Fort Wayne/Angola). Our current rent is $610, 2 bedroom 1 bath apartment something like 1300 sq ft. We're looking into buying a house in the Coldwater, MI area. I have a very steady job in Angola, IN (~15 min from MI), so I'm not worried about buying a house in Michigan then losing my job.

Due to Michigan's current issues, housing in the country-areas surrounding Coldwater is at very very nice prices. We're looking at a 4.6 acre lot 3 bed 1 bath ~1800sq ft, listed at $69,500 today. The area we're looking at has somewhere in the vicinity of $800-1000 property taxes.

We're not looking to tax ourselves financially with high monthly payments. We're looking at a 30 year loan. We plan on living in our first home for 10-15 years minimum.

My question is most of these houses were built in the 1920-1950 era. They also need a lot of work. I have no problem with buying a fixer, but as a first time home buyer am weary as we don't have any money really. So, can I get a loan for say $85,000 to $100,000 with a good interest rate so I can rennovate the home we buy?

I've been told that either a 203(k) FHA loan or a OTC loan may be good options to consider. As we don't really have cash on hand I'm trying to figure out our options.

Any advice or comments are appreciated. Thanks!

Marty 1stMet · Joined: 20 Sep 2007 Posts: 38 Location: Williamsburg

An FHA 203k loan or a rehab loan will suit your needs. You would need to check your credit, get pre approved, etc. Contact me for more details.

jaredevenson · Joined: 17 Oct 2007 Posts: 27 Location: Spokane Valley, Wa

yea, i'd contact marty on that one!

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

The 203k loan is a fantastic resource for renovation a property. Some of the benefits:

Down payment same as normal FHA loan (at your range in MI you'd be looking at 2.25%) This would be the total of your purchase price plus renovation costs.

Credit and Underwriting standards are the same as a normal FHA loan. The only difference is that your ratio would be slightly higher because of the increased loan amount. This usually won't make much of a difference overall, unless you start talking about the larger loan sizes.

The 203k Streamline will allow you to do up to $35,000 in repairs that are NON STRUCTURAL in nature and you can avoid the increased cost of having a consultant and inspection fees. The other benefit is that the streamline is a 50%/50% draw, meaning that the contracter will receive 1/2 their money up front for completion of the job.

Many people are unaware that you can even finance in appliances on the loan. Not everyone has an extra $3000 for all of their appliances, and this makes it easy.

The best part however is that the COMPLETED appraised value is what is used, not the current. That means that no matter what the state of the property now, you can use the home's value as it is in your imagination, rather than the falling-down walls and termite infested studs to determine value. Since some things won't add to your value directly (see above about appliances) you can even go slightly above that completed value (110%) to cover those costs.

I'm a huge advocate of the 203k renovation loan, so I'd recommend doing some research. You can get more information at www.hud.gov