Posted on: 17 September 2021
Do you want to purchase a home that is a bit of a fixer-upper, but you don't have the cash to pay for the repairs on your own? If so, you'll need a rehab loan to get the job done. Here are some things to know about getting a rehab loan.
What Is A Rehab Loan?
What is unique about a rehab loan is that it allows you to roll in the cost of your home purchase and the rehab work into a single loan. This can make the process much easier for purchasing a home that needs some work, because you don't have to worry about being approved for that second loan to do the actual repairs. It streamlines the home buying process and gives you peace of mind that you'll have all of the money that you need.
Are There Inspections?
Your lender will require a few inspections in order to approve a rehab loan. They'll want to look at the home before you purchase it to make sure that the home is livable and repairable. The lender may not want to buy a home that is unlivable and requires extensive work, so they are verifying that the work is practical and manageable.
Who Can Perform The Rehab Work?
Know that a rehab loan requires that the work is done by a contractor, and they must be licensed and insured in order to do the work on the home. Even if you are capable of doing the work yourself, homeowners are not allowed to perform their own rehab work with the money received from a rehab loan. Be prepared to get estimates from several contractors so that you can be sure of how much the repairs will cost when factoring the price into your rehab loan request.
Do You Need Good Credit?
There are many types of rehab loans out there, and some of them have higher credit requirements than others. If you have bad credit, consider looking into an FHA rehab loan. The credit requirement is going to be lower than other types of loans and can make it possible to get the money you need.
What Kind Of Work Can Be Done With A Rehab Loan?
Know that different rehab loans have different limitations on the type of work that can be done. With an FHA rehab loan, you will be limited to non-structural changes that do not alter the footprint of the home. This is part of the lower credit requirement, which is more on the safe side in terms of what is allowed. A conventional rehab loan may allow you to make structural changes, but those loans are harder to get.Share