Is it better to do a mortgage w/repairs in the loan or pay4 repairs outofpocket w/smaller downpayment?

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I have $ 25,000 available for a down payment on a house. The sale price of the house is $ 103,000 and we need to do about $ 20,000 in repairs. Would it be better to include the repairs in the mortgage and do a 20% down payment. Or would it be better to do a mortgage for $ 103.000 with 3.5% downpayment and pay for the repairs out of pocket?

  1. Reply
    April 30, 2011 at 11:47 pm

    Put 20% down.
    This way you will not have to pay PMI.
    PMI – private mortgage insurance if you don’t put 20% down.
    This can cost thousands a year.
    This money does not go towards principal or interest and it’s not tax deductible.
    It’s like throwing money in the garbage.

    Put the 20% down, and use a bit of the rest for repairs and then make a loan.
    Not sure if you can include future repairs in a mortgage.

  2. Reply
    May 1, 2011 at 12:46 am

    The lender will not give you more then 80% of the purchase price. Getting an FHA loan might be impossible if the house is in that bad a condition.

  3. Reply
    May 1, 2011 at 12:46 am

    Depending on what the repairs are, you may not have a choice. Lenders are very strict of the condition of the property these days so you may be forced to fix it to close. I had a lender refuse to close on a property because the railing on the back deck was faulty. Make sure your loan officer is on top of this because you don’t want last minute surprises.

  4. Reply
    May 1, 2011 at 1:10 am

    The less you pay down on your house, the MORE you pay in interest over the life of the loan. Compound interest adds up to you paying up to ten times the purchase price of your home with small down payments.
    Without putting down 20% you also pay extra costs of PMI because you are a higher risk borrower.
    My advice, for what it’s worth, put down 20%!

  5. Reply
    May 1, 2011 at 1:48 am

    The answer to your question would depend on your financial situation. In my opinion the less you put down on a house the more you have in your bank account for your use. Also if you are approved for a FHA mortgage that allows the repair to be taken out with the loan then that might be the way to go.

    You would have more in your bank account for emergencies or investments that will earn more than your house will appreciate in value. Not only that if you have need of the equity in your house the process is extremely difficult, time consuming and the cost is extremely high.

    So make your decision based on what is better for you and your family as well as the financial situation you are currently in.

    I hope this has been of some benefit to you, good luck.

    “FIGHT ON”

  6. Reply
    May 1, 2011 at 2:02 am

    It really will depend on the type of loan you’re getting. If you have substantial repairs that need to be made (new roof, something that affects safety or inhabitability) you probably won’t be able to get an FHA loan without making those repairs prior to closing. You may not be able to get a loan at all. This is something you’ll have to discuss with your lender – not all lenders will allow you to finance more than the sales price of the property.

  7. Reply
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