FIXER FINANCING METHOD #1 – The FHA 203k Program
Here’s how it works:
- Down payments are low, usually 3.5%
- You can get your down payment from an external source, (like family)
- You can have “less than perfect” credit.
- Great for Properties where major renovations make a property “Livable” again.
- “Streamlined 203k’s” are available for less complicated fixer uppers.
- Property must have 1-4 Units To Qualify.
- Only available to Owner Occupants (no investors)
- Prior to purchase you’ll coordinate with a contractor to come up with an Estimate of Repair costs.
- Repair funds will be placed in Escrow at closing.
- Funds are released according to a draw as phases of the project are completed.
FIXER FINANCING METHOD #2 – HomeStyle® Renovation Mortgage
But there are a few key differences.
- You don’t have to “Owner Occupy” (You Can Be An Investor)
- If you’re an Investor, your down payment will likely be in the 10-20% range.
- And There’s No Limit On The Size Of The Project (Great if you want to do something “High End”)
- Includes “Luxury Items”. Want a pool or BBQ pit? How about all new land or hardscaping, no problem. As long as it’s permanently fixed, it’s allowed!
FIXER FINANCING METHOD #3 Private, “HARD” Money
Finally, if you want to avoid the hassle of dealing with banks, underwriters and complicated repair “draw” protocols, then “Hard Money” might be the right option for you.
Hard Money is basically a loan from a Private Investor who specializes in funding “Fix & Flip” or “Fix & Rent” Projects.
Typically a Hard Money transaction is WAY more convenient than the other 2 options on this page, But… a Hard Money Loan can be MUCH more expensive.
Many Hard Money Lenders will charge anywhere from 2-6 points (% of entire project cost) up front with High Monthly Interest rates for the duration of the loan term.
And with hard money, you’ll often have to “get the investor out” of the project by selling the property fast or refinancing with a conventional bank or mortgage company in 6-12 months.
That said, even with the expense Hard Money is a very popular option with many investors because it allows them to do more deals, quicker, and with less stress.