My name is Eric Green, I’ve been in the lending business for about 20 years.
I like to answer questions with my experience that I’ve gained. There is a lot to know, a lot of questions, and today I’m going to answer the question:
Do you need a down payment for a rehab loan?
A rehab loan is another name for a renovation loan. That means you have an existing home that you would like to upgrade, remodel, make better, OR you’re going to purchase a home that you’d like to make more aesthetically pleasing, more livable, or more functional for your family. Rehab and Renovation basically mean the same thing, only one is for a purchase, and the other — a refinance.
To answer the question, do you need a down payment — so, a refinance you would not need a down payment, nor would you have a down payment. the equity in the house itself acts a s a down payment if you will. Thats the equity position you would use and I would use as a lender.
For example, if you owed $200,000 on your home, and you wanted to do a $50,000 renovation/remodel, we would basically add that $50,000 to your $200,000 so your new amount would be $250,000. From there we would get an appraisal on your home, find out what that amount would be, and that would dictate what the terms on your loan would be, and how much of that $50,000 could be used for renovation.
If appraised high enough, you could use all of it, if it didn’t quite appraise high enough then you wouldn’t be able to use all of it, but those are the things we would go through after having the appraisal.
More directly, for a down payment for a rehab loan, (203k), there is what’s called a cosmetic 203k, and that loan is more for cosmetics — paint, countertop, flooring, and the maximum on that is $35,000. For a full 203k loan, for a purchase of a property, there would be a minimum down payment of 3.5%.
If you were buying a home for $300,000, and you put the minimum 3.5% down, your down payment would be $10,500, that would be considered your down payment.
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