Yes, you can! 🙂
Here’s some information on the purchase plus improvements mortgage. Get ready, it’s a long one 🙂
- you can generally take up to 10% of the purchase price to use toward improvements to the property. For example, if the property costs $300,000 then you can include up to $30,000 worth of improvements.
- has to be something that improves the property and can’t be used for furniture or appliances, or for paying off other debt.
- amount of the improvements is added to the purchase price of the property and then that amount is considered to be the new property value.
- your down payment is based on the new amount. Using the same example as above, if you’re buying something for $300,000 and doing $30,000 worth of improvements, then the property value would be $330,000 and your down payment would be a minimum of 5% of $330,000.
- you’d be required to get quotes for any work you are going to have done.
- additional funds have to be approved up front, before you get the final approval for the purchase. Your lender has to know what you’re planning on doing and how much it will cost to complete. You will only be able to get funds in the amount of the quotes that you provide. For example, if you get a quote for a furnace and air conditioning for $5,600, you can’t take $6,000. You could only take $5,600 which was the amount of the quote.
- The lawyer will hold back the amount of money you’ve requested for your improvements until they are all done. In other words, you won’t get any of the money to pay for your improvements until the work is 100% complete. This is because the lenders don’t want to give people the money up front and then have it used for something else. They have to make sure that the value of the property is correct for the amount of money they’ve loaned. So you would have to find a contractor willing to do the work and then be paid at the end, or you’d have to find some short term financing to pay for the work and then when it’s done, you will get the money and be able to pay back the financing.
- the work is done, the lender will require an inspector to come out and make sure that everything you said you were going to do has been done. Some lenders will also ask for paid receipts for the completed work. You’ll have to show that you’ve done what you said you were going to do. For example, if you’ve said that you were going to put granite counter tops in the kitchen and you end up installing laminate counter tops, they will only release the funds for what you paid for the cheaper product.
- once we can prove that the work has been done, the lender will tell the lawyer that he can release the funds to you and then you can use the money accordingly to pay off however you financed the initial improvements.
WHEW!! You made it to the end 🙂 Cyber high five for you. my friend!
