The ReHab Mortgage Place
How Do You get Started Buying a Home to Rehab?
There are definite steps that you need to take once you make up your mind to purchase and rehab or renovate a home. Before you begin to plan and prepare to purchase and rehab a home you need to be sure why you want to do this and what you want to accomplish in the process. I will focus on the process for someone who is looking to purchase and rehab a home in the neighborhood and or size and style that they otherwise could not afford.
1: Get your money together.
a) Determine how much you have for down payment and closing costs.
b) Determine how much you can pay for rehab without a loan.
c) Determine how much you can pay as a monthly mortgage payment.
This process takes for granted that you have reviewed your budget and are making you decisions based on your financial position. In addition to down payment, closing costs, and maybe rehab money you should have reserves for emergencies and contingencies. I would suggest anyone trying to do a purchase rehab loan have at least 5% of the total purchase and rehab money needed. For example if you are purchasing a home for $50,000 and it requires $50,000 for rehab you should have at least $5,000.00 to cover all out of pocket expenses.
(go to the budgeting group)
2: Get your credit together.
a) There is no minimum credit score for one program but it is getting more and more difficult to qualify without at least a 620 score.
b) With risk based pricing effective in all residential lending your rate and mortgage and mortgage insurance will be based on your credit score and the amount of money you put down. Also seller funded down payment assistance is no longer acceptable.
c) In addition to your score there should be no bankruptcies in the last 2 years (no more than one bankruptcy in the last 10 years) and no foreclosures in the last 3 years. Other than these major derogatory items you should have no lates in the last 12 moths.
d) If your credit is not together begin to correct it, repair it, pay on time, do whatever it takes to be prepared to qualify.
(go to the credit repair group)
3: Get Pre Approved.
Being pre qualified is different from being approved. A true pre approval happens when your loan application is submitted to an underwriter with income, assets, credit and everything that is reviewed accept the property. This may take a 3 to 10 days and it is a true approval. The approval is based on the programs guidelines when you apply and if the guidelines change before you have a property your approval will be invalid. Every approval expires. Therefore, if you do not close before the expiration date your information will be underwritten again.
IT IS IMPERATIVE THAT YOU ARE PRE APPROVE BY THE UNDERWRITER BEFORE YOU ENTER INTO A CONTRACT AS THERE IS NON REFUNDABLE OUT OF POCKET EXPENSES SUCH AS HOME INSPECTION, CONSULTANT AND APPRAISAL FEES THAT YOU WILL INCUR.
(go to the pre approved group)
After you have completed these three steps you are ready to assemble your team and begin to look seriously at purchasing a home to rehab.
1: Get your money together.
a) Determine how much you have for down payment and closing costs.
b) Determine how much you can pay for rehab without a loan.
c) Determine how much you can pay as a monthly mortgage payment.
This process takes for granted that you have reviewed your budget and are making you decisions based on your financial position. In addition to down payment, closing costs, and maybe rehab money you should have reserves for emergencies and contingencies. I would suggest anyone trying to do a purchase rehab loan have at least 5% of the total purchase and rehab money needed. For example if you are purchasing a home for $50,000 and it requires $50,000 for rehab you should have at least $5,000.00 to cover all out of pocket expenses.
(go to the budgeting group)
2: Get your credit together.
a) There is no minimum credit score for one program but it is getting more and more difficult to qualify without at least a 620 score.
b) With risk based pricing effective in all residential lending your rate and mortgage and mortgage insurance will be based on your credit score and the amount of money you put down. Also seller funded down payment assistance is no longer acceptable.
c) In addition to your score there should be no bankruptcies in the last 2 years (no more than one bankruptcy in the last 10 years) and no foreclosures in the last 3 years. Other than these major derogatory items you should have no lates in the last 12 moths.
d) If your credit is not together begin to correct it, repair it, pay on time, do whatever it takes to be prepared to qualify.
(go to the credit repair group)
3: Get Pre Approved.
Being pre qualified is different from being approved. A true pre approval happens when your loan application is submitted to an underwriter with income, assets, credit and everything that is reviewed accept the property. This may take a 3 to 10 days and it is a true approval. The approval is based on the programs guidelines when you apply and if the guidelines change before you have a property your approval will be invalid. Every approval expires. Therefore, if you do not close before the expiration date your information will be underwritten again.
IT IS IMPERATIVE THAT YOU ARE PRE APPROVE BY THE UNDERWRITER BEFORE YOU ENTER INTO A CONTRACT AS THERE IS NON REFUNDABLE OUT OF POCKET EXPENSES SUCH AS HOME INSPECTION, CONSULTANT AND APPRAISAL FEES THAT YOU WILL INCUR.
(go to the pre approved group)
After you have completed these three steps you are ready to assemble your team and begin to look seriously at purchasing a home to rehab.
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