Home > Rehab/Purchase Combo
ONE WAY TO GO... FIX IT UP BEFORE YOU MOVE IN!!
Here's an example of a “Purchase/Rehab construction loan and how it could work for you.
Overview
You actually get an Interim Construction Financing Loan from the same mortgage company as your regular mortgage. You make the repairs on the house with a construction loan, then automatically convert it to a standard mortgage in a few months from date of purchase, after the repairs are completed.
In more detailed terms, you've got the two parts of the loan - the first part – the Purchase/Construction phase - maybe 3 –4 months to remodel the house - and then the second part- the permanent loan phase - the regular loan you switch to when the house is complete.
Remodel/Construction (Phase1)
During the construction phase, most people go with the 9.25 % rate (this rate has to do with Prime rate (It’s Prime plus 1%….For this example let's use Prime at 8.25, not the mortgage rate). It's Interest Only for the money that the lender has expended each month. So, let's say we sit down at the closing table 30 days from now - and give your seller $219,000 to purchase the house and $10,000 to the builder to get started. So your payment that month is $229,000 x 9.25 % divided 12 = $1,765.20 per month for that month. That’s simple interest only at 9.25 %. Then, let's say they give the builder another $10,000 in 30 days - then - now you have $ 239,000 outstanding of your loan and your payment for the following month is $239,000 x 9.25 % divided 12 = $1,842.29/mo and so on.
Conversion/Mortgage (Phase II)
Once the repairs are complete, you simply convert to a standard mortgage and start your normal 30 year fixed principal and interest mortgage payment. You can also convert to the other one hundred or more type mortgage loans available at that time!!
Some of the beauty of this type of plan is there can be no money going in, with a good appraisal. You also have flexibility and time to chose your permanent loan type. You can also lock a permanent mortgage interest rate or not lock in a rate- at any time, depending on the market.
For more information or a live discussion, call David at 713-213-3900 or email at David@HomeLendingofTexas.com
To know more about building and financing an entire newly constructed home from the ground up, click here.
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