A buyer resource

Financing a House That Needs Work

Buying a house that needs work starts with one question: which loan can buy it? The answer decides which houses are realistic for you and how much cash you’ll need. Here’s a plain-English overview. A lender can tell you exactly what you qualify for.

Your main options

Renovation loans

One loan that pays for the house and the repairs, based on what the house will be worth after the work. The FHA 203(k) and Fannie Mae HomeStyle are two common ones. They take written contractor bids, a scope of work and a timeline.

Conventional and standard loans

These can work on a house that needs cosmetic updating. If the appraiser finds a problem the loan doesn’t allow, the repair may have to be made before closing.

Cash

The simplest path for a house with major problems. Some buyers pay cash, fix the house, then refinance. Talk to a lender before you count on that.

Renovation loans are used less often around here, mostly because they need a lender and an agent who have done one before. In an as-is sale, the seller may not agree to make a repair a standard loan requires.

What appraisers flag

  • A roof near the end of its life, or leaks
  • Peeling paint on an older house
  • Missing handrails or other safety items
  • Heating, water or electrical that doesn’t work
  • Water, moisture or foundation problems

When a repair is required in an as-is sale

If the appraisal requires a repair and the seller won’t make it, the usual options are a different loan, a price change, a repair the seller allows the buyer to make before closing, or walking away under the contract. I talk through these before you write an offer, not after the appraisal comes back.

Why I can help with this

Between my years in real estate, I spent nine years on the marketing and business-development side of the mortgage business. I’m not a lender and I don’t quote rates. But I know how lenders and appraisers look at a house that needs work.

Looking at a house?

Send me the address. I’ll tell you which loans might fit it and run the Fixer Math, free.

Call or text 256.207.8127

Melissa Harmel, Realtor®, CRS, ABR · eXp Realty, LLC · AL # 000164573-0 · GA # 451015 · Equal Housing Opportunity. Melissa Harmel is a Realtor®, not a mortgage lender, and receives no compensation for lender, inspector or contractor referrals. If you’re already working with an agent under a written agreement, please disregard.