Bid on foreclosed property - will I be able to get a mortgage?

[dri]

Hi, I want to bid on a foreclosed property at auction but am concerned I might not be able to get a mortgage because of rehab needs.

I have an estimate of repair costs that runs to 75k, but that is a VERY high estimate used to make an (unsuccessful) short sale offer on the property. I am thinking more like 40-45k but again, that's to restore the property to perfect condition. To bring it to good, liveable standards it needs only cosmetic improvements (basically full repaint, carpet and two small window replacements), and we are talking about 15k max.

The mortgage lender I've been talking to has said there is a risk the underwriters might reject the application because of the cosmetic condition of the house (looks pretty ugly inside but easily fixed with repaint and new carpets). But it should appraise far in excess of what I plan to borrow, even in as is condition, and I don't need to borrow for the cost of the repairs.

Does anyone have experience with mortgages in this kind of situation? As you can imagine it would be a disaster if I bid on the property and then couldn't get a mortgage. Thanks!

[BelizeBreeze]

This is a LEGAL ADVICE site. Ms. Cleo is NOT a member.

[moburkes]

BB, you're on a ROLL today.

You will not qualify for a regular mortgage, but you should be able to qualify for an investment property mortage, or a hard money loan. However, I do not know your credit status, or your abilities in rehab.

The bigger worry is the insurance policy. You will need to get a vacant property policy, which is expensive, and offers no refunds if you complete the "project" early.

Have fun.

[dri]

I'm sorry - I should have explained that this would be a family home, not an investment. And I have excellent credit. And the as is value of the property is likely to be far in excess of what I want to borrow. Does that make any difference?

[moburkes]

I helped as best I could. However, it won't be a home at all, until you complete the rehab.

[LindaP777]

Originally Posted by dri

Does anyone have experience with mortgages in this kind of situation? As you can imagine it would be a disaster if I bid on the property and then couldn't get a mortgage. Thanks!

Do you have any experience in real estate or rentals? For a seasoned investor, there are banks (usually the small mom & pop, single location) out there that will give you mortgage loans based on the projected appraised value. I bought a house for $32,000 and got a loan for $75,000. Put an additional $10,000 above that and sold it for $135,000. Insurance (for me) was not an issue, as my commercial policy (multiple properties) allows a small amount of time (3 months) before a tenant is found.