[Doug]

My daughter is looking to buy her first house using an FHA loan and is looking at properties that need renovating.

She’s approved for $325k loan – can she find a house for $250k and add $75k into the loan?

[Dion]

FHA isn’t designed for first time home buyers.
It’s a loan product for someone with bad credit and bad debt to income levels. (So, if that’s her then fine)

Conventional loans are only 3% down for the first property instead of 3.5% and often easier to get a seller to accept.

The rehab part can be an issue. So, I would recommend using a 203k loan (or 203k streamline) allowing for renovations as part of the loan.

[Keri]

An FHA loan requires that the home is in good condition. It can be outdated, but it must be up to code (safety features like GFCI plugs)

[Lindsay]

The answer is yes and no. You cant just get an additional amount of money unless you are going to switch programs to a 203K loan.

A 203K loan is an FHA loan that allows for repair and renovation of an existing home.

It does require you to use a licensed contractor for all of the repairs.

It can have slightly higher rates that a regular FHA loan and the process can be a bit longer. Hope that helps!

[Denise]

An FHA loan has requirements that the house be in very good condition. As folks have mentioned, there are loans specifically for renovating houses, like the 203k loan.

[Josh]

Do you have enough funds (or house equity to refi from) to buy a fixer upper cash and fund the rehab?

If so, you could fund the purchase and have her pay you back when the work is done and she gets it appraised and gets a mortgage.

If you buy it right and do a smart reno, this could also get her out of paying PMI

[Joe]

As a lender, I would suggest talking to her lender. VA and FHA properties have condition requirements but there are plenty of loan programs out there if she qualifies that might help and be a better long term purchase idea.

203k loans are expensive and most of the work would likely need to be done by contractors. MIP is also for the loan term on FHA products.

Her lender can guide her through programs like home ready and home possible as well as local programs that might be a good fit.

[Annie]

She should talk to her lender about her plans and FHA condition requirements. She may need a FHA203k loan if renovations is what she is wanting to do.

Regular FHA loans generally won’t work with a house that needs more than cosmetic work. They want it to be safe sanitary and secure for the buyer.

So, it must be livable, have flooring, no broken windows, no peeling paint, no electrical hazards etc.

If she has a Realtor representing her they can help guide her too.

[Author]

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