When you buy a house that needs repairs , you need to have money for the costs of your house and cover the improvements. Many lenders will ask you to take two loans separate, a mortgage and loan home equity to cover these two different costs. Other lenders, including FHA participating lenders, may be willing to offer you a loan to accomplish both tasks.

fix the house

Whenever possible, have only one loan to purchase and improve a property can be beneficial. First, only once have to qualify for financing. This can give you a guarantee in advance that you will be able to pay for the improvements you want to do before you decide to buy the house. Moreover, it is sufficient to track a loan and one payment each month. If on the contrary, a lender you issued two loans , both would be constantly monitored, and this requires two transactions for each payment period rather than just one.


In order to fix your house using funds from your mortgage, the loan must be greater than the purchase price of the house. For example, if you buy a $ 200,000 home and put $ 50,000 in upgrades, you’ll need $ 250,000 of funding. If you have $ 20,000 for a down payment, still need a loan of U.S. $ 230,000. This increased limits will increase the cost of borrowing . You’ll have to make sure you can be approved for a loan of this size before choosing this option.

Although it may be beneficial to take a loan larger can also be risky. First, you’ll pay more for your mortgage than if you simply borrowed the purchase price of the house. Second, if you can not pay the full payment, you run the risk of losing your home to foreclosure. These risks should be calculated when you take the loan ; just take a loan large if it is cheaper and easier than taking two loans for your home.

If you wanted to compare alternatives, investigates loans home equity. You may find that you prefer to have a loan not secured home equity to finance your improvements. In this case, you are not paying the house itself as collateral for the amount of loan you use to make improvements. This can reduce the risk that you assume the loan . However, loans home equity uninsured often have higher rates of interest that insured mortgages.

Expert information
You can consider a loan approved by the FHA 203k. This program is designed for people who buy a house that needs repairs and would like to get a single loan . Using the FHA guarantee on the loan , you can reduce interest rates and lower down payment you need to ensure the loan .