New Loan Program from Carolina One Mortgage
Posted on | November 11, 2008 | No Comments
Carolina One Mortgage (a division of Guaranty Bank) has a neat new loan program that lends more than what the purchase price is, if the money is going to be used for repairs or renovations to the home. It is an FHA backed loan, which allows people with less than perfect credit to qualify, and allows slightly higher debt to income ratios, as well as loan to value ratios than conventional loans. There are some special stipulations, of course, but for the most part, this is a great program that can allow a home in need of repairs to go to someone willing to make the repairs, but without the cash to do so. Essentially, the buyer is rolling the cost of the repairs into the loan. It can be negotiated that the purchase price is reduced by the amount of the cost of the repairs, or an agreed upon portion thereof, making it really the Seller’s expense.
For an example, let’s say a Buyer has a contract on a home for 200K. As the inspections are taking place, it is discovered that there is wood rot in the crawl space. An estimate for the repairs comes in at 10K. The Seller does not have the money to make the repairs, and the buyer does not want to purchase the home without having the repairs done. The buyer can either renegotiate the purchase price to 190K and use this loan program, and get the loan for 200k, as they had originally planned. This leaves 10K for the repairs.
Or, if the seller cannot sell for 10K less, and the buyer loves the house enough to pay an extra 10K for it, the purchase price can stay the same, and the loan amount can be adjusted to 210K.
Although the second option may be harder for the Buyer to swallow, they are somewhat protected by the fact that the bank will do an appraisal based on the value of the home once repairs have been completed. This is the appraisal they use to determine how much over the purchase price they are willing to lend.
This is a brand new program being offered, so I haven’t done a transaction using it yet. I’ll be interested to learn more about it. If you have any questions about this loan program, please let me know, and I will put you in touch with Katie Mahoney, who is the Carolina One Mortgage senior loan officer in my office.
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