Question by Tami: Looking at a home that requires a REHAB loan! please help?
How does this work? My credit is excellent. I was going to go with a regular fha loan, but i found a home that we are looking for and it says requires a rehab loan. WHat kind of an interest rate can you expect? How much money down will this require? Any info is appreciated!
Best answer:
Answer by cactusgene
Unfortunately, that is the type of loan that a bank is NOT interested in making, unless you are a licensed contractor. If you have real good connections with an officer in your own bank, go and talk to him, but that’s still no done deal. If the property will be owner-occupied, then a 10% down-payment (with mortgage insurance) with the additional full amount of the required repair cost in a hold-back or builder’s control account might be an option.
If it is an investment property (or a flip) that basically leaves a finance company (see your local yellow pages) at about a 15% interest rate offering long term amortized mortgage payments, or a hard money lender. The trouble is that hard money lenders interest rates are quite high, say in the 11-14% range with 5-8 loan points upfront, short 1-4 year term and a 6 month prepayment penalty (all is negotiable within limits). Hard money lenders are trying to keep the loan to value ratio at about 70% or less, because many of their investors were burned by the recent down-turn. Good luck.
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