Purchase Plus Improvements Mortgage

As a Buyer is out and about with his real estate agent looking at houses, he may come across a home that is perfect, except that it needs repairs and updating.Perhaps it needs a new roof, an updated kitchen, another bathroom. With a purchase plus improvements mortgage he can do the improvements and fold it into the mortgage.

If a Buyer just takes out a loan to do such improvements, the interest rate is usually much higher and the payback time is much shorter. With the purchase plus improvements mortgage, the cost is factored into the mortgage principal.

This is how the program works:

• In the Buyer's offer on the chosen property a clause is included that says the offer is conditional upon the Buyer obtaining a purchase with improvements insured mortgage.
• A list of improvements is submitted to the lender along with cost estimates from qualified contractors.
• The lender qualifies the Buyer under the total amount of purchase price plus improvement costs. The Buyer has to qualify for the improved value of the home.
• The mortgage application reflects the purchase price plus the cost of improvements. Downpayment is based upon the improved value. For example, a purchase of $200,000 plus $15,000 in improvments would equal $215,000. The 5% or 10% downpayment is based on the $215,000 price, not the price on the offer.

The process involves two mortgage advances. The first advance is to close the transaction so the Buyer can move into the home.
The second advance is given once all the work is done.

The benefit of such a process is that the Buyer can buy the home he wants and do the necessary improvements but only have one mortgage, one mortgage payment, and do so with a minimum downpayment.

This is a great way to buy the perfect house that just needs a little TLC.