Most people have never heard of a Purchase Plus Improvements Mortgage before. This is an amazing opportunity when purchasing a home that requires some renovations and updating. A Purchase Plus Improvements Mortgage allows you to buy a home and have the improvement costs rolled up into the mortgage. This means you have the money available to immediately renovate your home without having to apply for another loan or second mortgage. If you’re interested in finding out if this mortgage is right for you and how you can apply, read on.
How It Works
Let’s say you have found your dream home but it’s needing some serious work and updating, like a new roof or new windows. In this scenario, you already have a pre-qualified rate and can afford the home based on its “as-is” value. You will then need to have a quote drawn up to state what work is needed to be done and for what amount by a contractor. Your mortgage advisor can then revise the mortgage approval to reflect the price of your home, plus the improvements.
Once you purchase the home, the lawyer will hold back the amount that is to be used for the renovations, until the work has been completed as set out in the contract with the lender. Once finalized, an appraiser will be sent to valuate the home and confirm that the work has been done as agreed upon. Lastly, the lawyer will release the funds and you will pay the contractor from these funds.
What are the Conditions?
Usually at this point most people are wondering, what’s the catch? If you have the work done in the proper allocated time provided to you by your lender, there is nothing you need to worry about. However, you will need to ensure that your contractor does the work as agreed upon, in the specified time and price, or you will need to pay the rest out of pocket.
You will also need to enter into an agreement with the contractor that allows you to pay them only after the work has been completed and verified, or you will need to find a way to pay the money up front. That’s why finding a respected and professional contractor can make or break the project.
What are the Benefits?
Besides the fact that the loan is based on the improved value giving immediate access to that equity with as little as 5% down, one of the best parts of a Purchase Plus Improvements Mortgage is that your mortgage rate will not be affected. Your home is move in ready and you don’t have to drain your savings to get the work done. It’s truly a terrific way to get the money to ensure your home is safe and in good condition once you move in.
When buying a fixer-upper, talk to your mortgage advisor today about your options and if a Purchase Plus Improvements Mortgage is right for you.