Re: Help w/creative financing - Posted by Bob (Md)
Posted by Bob (Md) on March 20, 2001 at 16:29:50:
You didn’t say if you were going to live in it. If so, check out the HUD 203k program. Money to purchase, and to fix it up to HUD/FHA standards. You’re supposed to live in the property for at least 2 years, but I’ve never heard of anyone getting in trouble for selling sooner. You just can’t do another 203k loan for 2 years. The 2-year restriction nicely matches the 1997 rule that you have to live in the property for 2 years in order to roll any equity into another residence tax-free.
You should be able to find a 203k through most major lenders, with terms something like 8-8.5% on 30 years, with up to 95% of After-Repaired Value. You’ll have to jump through a bunch of hoops because the government is leery of being taken to the cleaners (which used to happen a LOT) when they guarantee the loan. Beats the heck out of hard money if you’re going to live there.
Otherwise, approach a small-town local bank and ask about the possibility of a construction loan (some call it a “portfolio” loan). Typically, it will have reasonable rates (maybe even 7-7.5%), interest only with a one-year (or sooner) baloon. Gives you a year to control the property, fix it up, and get it refinanced. They’ll probably only go 65-75% of after-repaired value, but they will often do a bridge mortgage taking an interest in another property in addition to the primary one in order to secure their position. If you can find this type of loan and buy the property right, the whole deal can work with zero down!
Hope this helps.