1,502,998
Rehab loans are more complex. They need quotes from licensed contractors and you'll be having a much larger mortgage since you'll be funding not only the purchase but also the rehab, over the next 30 years.
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John Juarez
Fremont, CA
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Chris Ann Cleland
Gainesville, VA
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Debe Maxwell, CRS
Charlotte, NC
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Olga Simoncelli
New Fairfield, CT
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Carol Williams
Wenatchee, WA
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Candice A. Donofrio
Fort Mohave, AZ
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Kathleen Daniels, Prob...
San Jose, CA
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Lyn Sims
Schaumburg, IL
247,599
There can be fees for inspections to confirm the work has been done and the added work/risk to the lender. Lenders love the simple rehabs, windows, roofs, HVAC, etc.. If you are planning to add/subtract walls or spend more than $35k on rehab, plan on a contingency reserve of 15% or more for unforeseen expenses. Take a close look at what the sale comps are going to be on the finished home, the appraiser will be doing the same. Don't over improve!
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Carol Williams
Wenatchee, WA
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Candice A. Donofrio
Fort Mohave, AZ
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Kathleen Daniels, Prob...
San Jose, CA
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Lyn Sims
Schaumburg, IL
5,216,409
As there are additional steps in terms of payouts, and inspections cost money, expect to pay some additional fees and possibly a slightly higher rate commensurate with the risk involved.
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Carol Williams
Wenatchee, WA
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Kathleen Daniels, Prob...
San Jose, CA
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Lyn Sims
Schaumburg, IL
6,393,609
A good question for your lender, likely it may cost more to gain flexibility.
We never go with conventional financing for our investments as we find it well worth a little extra interest to gain flexibility through inhouse financing.
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Carol Williams
Wenatchee, WA
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Kathleen Daniels, Prob...
San Jose, CA
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Fred Griffin Florida R...
Tallahassee, FL
634,531
From the perspectives of pricing (rates/fees) and ease-of-approval (the bank not nitpicking what type of improvements you are making), a simple cash-out refinance can be a viable option in most cases. That said, there is a definite niche for the rehab loan programs (and they can sometimes offer solutions on scenarios where a cash-out refinance is not possible).
Thanks for looping me in Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Olga Simoncelli
New Fairfield, CT
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Thomas J. Nelson, REAL...
La Jolla, CA
1,543,823
I'd ask Jason E. Gordon he's one of the best lenders in Active Rain to use as a resource (and for purchase loans).
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Jason E. Gordon
San Diego, CA
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Thomas J. Nelson, REAL...
La Jolla, CA
3,345,091
I strongly recommend you get connected with a local lender who can be your go-to person to help you better help your clients.
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Carol Williams
Wenatchee, WA
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Kathleen Daniels, Prob...
San Jose, CA
1,844,301
yes, last time I did an FHA 203K it was around a 1/2% when all was said & done. Sometimes that's your only alternative. Takes a long time to get done because of all the inspections.
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Carol Williams
Wenatchee, WA
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Carla Freund
Raleigh, NC
1,052,211
Caroline Gerardo would know this.
With the FHA 203K the downside is the time frames . . . time is money!
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
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Carol Williams
Wenatchee, WA
417,221
I can close a purchase or refinance conventional loan in four days.
For a rehab loan the borrower needs to have contractor estimates lined up. In many states I recommend two contractors who will vet the costs and get the numbers exact the same day.
FHA 203k or Conventional Homestyle renovation loan or two other conventional reno products do not require more time for Underwriting and processing with nominal cost differences.
Rehab has inspection fees at $150 approx per visit, general pricing add is .5- 1% point cost is often converted to interest rate long term, impounds mandatory... Borrower takes out a larger loan than a standard so the payments over time are more.
Your question as stated "rehab loan to a conventional" isn't exactly how products align - there are: FHA rehabs, conventional rehabs, and Non QM rehab products. Each is meets different needs, different down payment, different FICO requirements and ins and outs. Call me to chat about the deeper dive.
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John Juarez
Fremont, CA
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Olga Simoncelli
New Fairfield, CT
1,076,551
Yes, but for small renovation/rehab items, there are conventional products that allow some repairs/renovations to be escrowed and funded through the loan.
For alternative renovation products like Homestyle, 203k, etc, fees aren't always different but rates on these products do tend to be higher. That said, the interest is often far cheaper than what you'd see financing the same amounts on a credit card, HELOC, or through a contractors financing options.
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
901,535
That's a really good question. There are many things to take into consideration including the alternative. Sometimes it is the best option if a buyer doesn't have the funds to do it on their own.
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
7,836,164
Possibly. A good topic to discuss with your trusted local mortgage loan officer.
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John Juarez
Fremont, CA
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Debe Maxwell, CRS
Charlotte, NC
3,383,334
Any loan that costs more in time, inspections or has more risk, is going to be more expensive...so yes. It costs more. But if you are working with a buyer that has no funds on hand to renovate a property, it is worth it to get in and refinance after work is done.
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John Juarez
Fremont, CA
5,230,113
1,311,397