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Question About Financing a House
Posted on 8/29/15 at 6:39 am
Posted on 8/29/15 at 6:39 am
You watch all these shows on HGTV about fixer uppers, but how does the financing work?
Say for example I'm pre-approved for $450k, but being a fiscally responsible person I don't feel comfortable carrying a mortgage greater than $350k. I also have $70k for a down payment in cash.
On these shows, if true, you would buy a $250k house and use the remaining $100k for renovation budget.
How is that financing done exactly?
Say for example I'm pre-approved for $450k, but being a fiscally responsible person I don't feel comfortable carrying a mortgage greater than $350k. I also have $70k for a down payment in cash.
On these shows, if true, you would buy a $250k house and use the remaining $100k for renovation budget.
How is that financing done exactly?
5
Posted on 8/29/15 at 7:41 am to OleWarSkuleAlum
I don'to watch a ton of HGtV with exception to Flip or Flop (Christina) and Fixer Upper (Joanna).
Flip or Flop is basically all cash Foreclosures, whereas Fixer Upper is usually houses that look like they qualify for 203k products. Most lenders can do Heloc up to 89% LTV so I'm sure some work it that way as well.
If you can qualify for USDA I guess you could put next to nothing down and use entire 70k for upgrades.
There's a couple lenders on here that know more than me, these are armchair QB scenarios.
Flip or Flop is basically all cash Foreclosures, whereas Fixer Upper is usually houses that look like they qualify for 203k products. Most lenders can do Heloc up to 89% LTV so I'm sure some work it that way as well.
If you can qualify for USDA I guess you could put next to nothing down and use entire 70k for upgrades.
There's a couple lenders on here that know more than me, these are armchair QB scenarios.
Posted on 8/29/15 at 7:42 am to OleWarSkuleAlum
Not sure if I follow.
You would get a mortgage on the house for 250k from a lender. Then you would get a separate loan for 100k for renovations?
You would get a mortgage on the house for 250k from a lender. Then you would get a separate loan for 100k for renovations?
Posted on 8/29/15 at 7:56 am to HailToTheChiz
quote:
You would get a mortgage on the house for 250k from a lender. Then you would get a separate loan for 100k for renovations?
That's what I'm asking how exactly does it work.
Posted on 8/29/15 at 8:36 am to OleWarSkuleAlum
quote:
You watch all these shows on HGTV about fixer uppers, but how does the financing work?
For the guys and gals on HGTV, it works like this: They get paid by HGTV, they take that money to buy the first couple of houses, then they roll the profits into the next house, sell, roll, rinse and repeat!!!
For everyone that doesn't have a tv show, I don't know how much of them are using traditional financing. My friend that does this, did his flip four years ago. He borrowed 50K from his home equity line and had received an inheritance of 50K. He bought his first property at foreclosure for about 42K and put 40K into it. Sold it for 128K. So he had 146K in cash. Paid off 25K of the home equity line. Then with remaining 121K, put about 110K between purchase and upgrades. Sold it for 145K. So he now had 156K in cash. Paid off other 25K of equity line, now had 131K in cash. Spent about 120K on third house, between purchase and upgrades, sold it for 165K. Now has 176K with no debt. Just kept finding and rolling.
Posted on 8/29/15 at 9:33 am to ItNeverRains
(no message)
This post was edited on 10/20/21 at 11:35 am
Posted on 8/29/15 at 10:39 am to lsutiger2010
I've actually seen them lose 3k on one house.
I'm curious about this topic, too. It sounds like the renovation budget can't be included in the initial mortgage, is that right?
I'm curious about this topic, too. It sounds like the renovation budget can't be included in the initial mortgage, is that right?
Posted on 8/29/15 at 10:50 am to LSUFanHouston
I'm talking more about the people buying the home. Not flipping homes. So for example on Fixer Upper Chip and Joanna gains are the real estate agent and contractor. I want to know how the financing works for the homeowner in terms of mortgage vs renovations.
Posted on 8/29/15 at 11:14 am to OleWarSkuleAlum
quote:
I'm talking more about the people buying the home. Not flipping homes. So for example on Fixer Upper Chip and Joanna gains are the real estate agent and contractor. I want to know how the financing works for the homeowner in terms of mortgage vs renovations.
I answered that already. 203k loan is most likely product. Terms vary from buyer to buyer depending on budget scope of work, liquidity, and loan amount available to buyer.
Could also be possible Magnolia has LOC and buys house, does renovations, and then sells property back to buyer. That might be cleanest route
This post was edited on 8/29/15 at 11:20 am
Posted on 8/29/15 at 1:20 pm to OleWarSkuleAlum
I've done this type of thing a few times and it was different every time. I have a mortage broker and a banker that I trust. I go see both and look at my options. Now that I have a large chunk of equity in my current home I use a heloc. They are low interest and no closing cost. Before I had a solid chunk of equity I would buy a house on loan and do a heloc for the reno. Before that I would do a construction loan for the whole deal. The costs are higher for that option.
So, find a few hard workers in the bank industry and they will compete to get the best thing they can for you.
So, find a few hard workers in the bank industry and they will compete to get the best thing they can for you.
Posted on 8/29/15 at 1:46 pm to lsutiger2010
quote:
This show is so damn stupid. Every episode is exactly the same. The guy says "Easy flip, 10-15k in reno." They buy the house. The girl says "No, we are going to turn this house into a fricking palace." Unforeseen problems arise and he claims they will go belly up on the house. Finish the house and it ends up in a bidding war and they make 100k. Wash, rinse, and repeat.
And my g'friend and her parents will watch every episode. Honestly all the home reno shows seem like this.
Posted on 8/29/15 at 3:58 pm to lsutiger2010
quote:
This show is so damn stupid. Every episode is exactly the same. The guy says "Easy flip, 10-15k in reno." They buy the house. The girl says "No, we are going to turn this house into a fricking palace." Unforeseen problems arise and he claims they will go belly up on the house. Finish the house and it ends up in a bidding war and they make 100k. Wash, rinse, and repeat.
Yep, but my wife is addicted to it. I will say this - for the first time I ever saw, the other night the show ended with them losing money.
Posted on 8/29/15 at 4:08 pm to lsutiger2010
quote:
This show is so damn stupid. Every episode is exactly the same. The guy says "Easy flip, 10-15k in reno." They buy the house. The girl says "No, we are going to turn this house into a fricking palace." Unforeseen problems arise and he claims they will go belly up on the house. Finish the house and it ends up in a bidding war and they make 100k. Wash, rinse, and repeat.
They were doing this long before HGTV gave them a show, at any given time they have 12 to 15 houses undergoing rehab, HGTV knows that who their viewers are and that most want to see the big winners.
Posted on 8/30/15 at 8:26 am to OleWarSkuleAlum
Man, I was really hopeful that your question would be answered. Should've left out the HGTV part of the question...
Posted on 8/30/15 at 8:44 am to BengalBlood81
quote:
Man, I was really hopeful that your question would be answered. Should've left out the HGTV part of the question...
A bunch of arse clowns derailing a serious question.
This post was edited on 8/30/15 at 8:45 am
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