So I had a house, but I didn't have a contractor and having a contractor was a big deal because I'm using a Fannie Mae Homestyle renovation loan. If you don't know what this is and want to finance a fixer-upper you need to go learn about it. Basically, you can borrow for the purchase of the property and up to 50% of its as completed "after renovation value" (ARV) for repairs. So let's say you buy a house for $50,000 and the appraiser says that when it is finished it will appraise for $110,000, you can borrow 50% of that $110,000 for renovations. Math: $50,000 + $55,000. The Homestyle loan does require at least a 5% downpayment so you can only borrow up to 95% of the ARV, but it is much more flexible than its cousin, the FHA 203K renovation loan. You can find a good explanation of both the FHA 203k and the Homestyle loan here.
My lender has me working with 2 people - one for the regular mortgage approval stuff and one for the renovation loan. L (the reno loan specialist) gave me a list of contractors in my area on the "approved" Fannie Mae list. You can work with any contractor, but if they aren't approved they have to get approved (I'm told it's not complicated) so that's an extra step.
Closing on these loans is complicated because there's a lot more to do than for a typical loan.
1. Get a contractor (ideally already Fannie Mae approved) and have her/him write up a bid that details the proposed repairs/renovation and cost estimated for labor and material.
2. Get an inspection
3. A HUD consultant must also do an inspection. The HUD consultant will detail everything that is a MUST DO for health and safety. You hope this doesn't eat up your whole reno budget, which, by the way, you know nothing about yet because you need . . . .
4. The appraisal. The appraiser will give an as-is appraisal and then, based on your plans for renovation and what the HUD consultant says must be done, will give an appraisal for after the work is done. In my case, given the comps in the area run from $120k to $170k, I think that a safe number for my after reno appraisal would be $125 - $140k. I'm hoping to be able to borrow about $60k. My goal is to not be in the house for more than $125-$130k.
5. The lender will then work with the HUD consultant and the contractor to draw up a proposed timeline (work is supposed to begin within 30 days of closing and not take longer than 6 months).
As you can see, there's a lot to be done on the reno side of it to get to closing.
After a few days of calling around I finally got in touch with someone on the approved list and, it turns out, he had hoped to buy it himself to flip! It seems my spidey senses were on, because his estimates for repairs were close to mine - a bit lower because he would not have done as much to it as a flip whereas I actually plan on living in it. He was also amazed I got it for the price I did. So there's that.
So I have a contractor. We've walked through the house. I've been madly working in my HomeDesigner software drawing up floor plan options.
Here's a list of what HAS to happen (that I know of so far):
- New roof
- New fascia/soffits
- All new windows and replacement of casings
- New HVAC
- New flooring throughout
- Upgrade electrical panel from fuses to circuit breaker
- New front door and new french doors in back
Here's a list of what I want to happen after that:
- Take down walls between kitchen, dining, and living room to open it up
- Complete gut job of kitchen
- Take one of the four bedrooms and convert to master bath and closet
- Expand family bathroom into the space the current master is in (seriously - both bathrooms are tiny)
- Possibly open up living area into 4th bedroom which means adding a bedroom at the front
- Converting the weird bonus room that used to be a garage back into a garage
The current layout
Just one of my many proposed layouts (I have to wait on the plumber to know what is realistic for the bathrooms and we have to figure out whether I have trusses and what's going on with the walls to determine how open we can go without raising costs through the roof.
I'd be taking a 2340 square foot 4 bed/2 (tiny) bath house and turning it into a 1750 square foot 3 bed/2 bath house but the master suite, garage, and open living space will be worth it (I hope)!
So what's next? On Tuesday, 8/8 (in 2 days!), the HUD consultant who is also an inspector is coming to kill 2 birds with one stone and I will then finalize the plans with my contractor, submit the bid to my lender, and get the ball rolling. I know that there's no way I can close on 8/31, which is when I close on my current house. This is a pain because although I have a place to stay, my 4 cats do not! I'll deal with that when I have a better sense of closing.
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