How to buy or sell a home that needs work

As a Main Line Real estate agent, I often get asked about homes that need work. The question may be phrased “Can I get a loan to buy and fix up this house that I otherwise love?” Or, “Can I borrow to make repairs that I think my house needs before I can put it on the market?”

My best value in such a situation is to refer my clients to a lender (or two) well versed in any and all options for them. Lenders do exist who will loan based on the expected value of an improved home that is renovated by a licensed builder with a good reputation. There are banks, savings and loans, credit unions, insurance companies (think USAA) and mortgage brokers all anxious to lend money under the right circumstances.

Federal Housing Administration loans can be used for most improvement projects and are a good option for buyers facing lower income and/or credit scores.

Guaranteed by Fannie Mae, HomeStyle mortgages require higher credit scores than FHA loans, but they can be used for almost any improvement.

The Department of Veterans Affairs loans include the purchase and renovation of a home. However, there are some limitations, like the need for a VA-approved contractor.

A home equity line of credit (“HELOC”) can be a great option for clients who already own their home, don’t want to move and have built up some equity. There may be a limit on how soon you can sell and pay off this type of loan, however.

The best advice is not to assume there are no avenues for loans in almost any situation. Cultivating a list of reputable, honest and creative lenders and mortgage brokers is a “must-do” task for any good agent. You want an agent with an arsenal of lenders to help you not just find, but obtain the house of your dreams.

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