Anyone know about financing/insuring an "uninhabitable" new home? New home purchase

Hey everyone,

I've been looking for a place to live for a while and I finally found something that suits me. The only issue is it doesn't have any appliances nor air conditioning. That would be the minimum necessary to move it but it really needs much much more.

That being said, I have no problem with that. I have some cash saved up that I could use for repairs and it needs updating anyway. My issue is with financing/insuring the place. My original plan was to go with a 5/5 ARM through Penfed (online credit union) because the house is cheap and there are no closing costs associated with that loan. I'm wondering if the lack of A/C and no appliances are going to make it tough to get a loan. I've heard a little about the 203k loans which let you finance the renovations but I don't really want that because I have the cash anyway.

Where do I need to start looking to make this happen?

I guess there is no requirement to have AC (heat is I think), and a stove can be put in easy enough, so I don't think those are going to hurt your chances. If the house is otherwise habitable and will appraise for what you are borrowing, it should be doable.

Seems like I remember Carguy123 is a mortgage broker.

Mold, no plumbing, etc. are cause for not habitable.

Needing appliances is no big deal, I bought a foreclosure without them (and present, but non functional AC) and no loan issues.

So it doesn't have heat either but we live in Florida so who cares. Installing an A/C unit would be one of my top priorities within the first couple weeks, I'm just wondering if it will affect my ability to get financing.

On the other hand, I'm offering over appraised value but I was just planning on bringing the difference with me to closing.

Flynlow wrote: Mold, no plumbing, etc. are cause for not habitable. Needing appliances is no big deal, I bought a foreclosure without them (and present, but non functional AC) and no loan issues.

Good to hear. Who did you finance with? This is also a HUD property/foreclosure but the A/C is missing.

I assume you have the money to cover the difference between the appraised value and your offer?

I'd just ask Penfed, although the answer you get might not be to your liking. If it's a HUD property I'd probably talk to them as well.

We nearly bought an unfinished property that we really liked but the financing proved to be an issue, so I'd definitely make sure that you get all your ducks in a row on this one.

Could you talk to a lender as if you were building a place?

OK, I need $150,000. Give me $10,000 and I show you a foundation. Give me another $20,000 and I'll show you walls, $10,000 for plumbing etc., etc.

The worse thing that can happen is they'll throw you out of the bank.

I'd certainly hope this place has got a great property or a great location.

BoxheadTim wrote: I assume you have the money to cover the difference between the appraised value and your offer? I'd just ask Penfed, although the answer you get might not be to your liking. If it's a HUD property I'd probably talk to them as well. We nearly bought an unfinished property that we really liked but the financing proved to be an issue, so I'd definitely make sure that you get all your ducks in a row on this one.

I'm hesitating asking them because I wonder how they would even know. What they don't know can't hurt them (me). It is a HUD property.

And yes I have the money to cover the difference at closing.

914Driver wrote: Could you talk to a lender as if you were building a place? OK, I need $150,000. Give me $10,000 and I show you a foundation. Give me another $20,000 and I'll show you walls, $10,000 for plumbing etc., etc. The worse thing that can happen is they'll throw you out of the bank.

Maybe?

PHeller wrote: I'd certainly hope this place has got a great property or a great location.

I think it does.

You're not (probably) going to get a loan without an inspection that says the house is good. The question to be asking, is what does the bank's inspector look at and will the house pass those things. You'd be more likely to not get a loan because of mold or a really old roof than no appliances.

Up here, CMHC rules mean appliances are not allowed to be part of the mortgage. (Used to be that way, anyway.) I can't imagine not having a fridge would make a house uninhabitable.

Enyar wrote: Good to hear. Who did you finance with? This is also a HUD property/foreclosure but the A/C is missing.

Is the ductwork still in place? That will cut costs some.

BTW, you can get by with the window units until you can get AC/heat.

A range is as close as Lowes scratch and dent sale. I bet the water heater is gone too.

spitfirebill wrote:

Enyar wrote: Good to hear. Who did you finance with? This is also a HUD property/foreclosure but the A/C is missing.

Is the ductwork still in place? That will cut costs some. BTW, you can get by with the window units until you can get AC/heat. A range is as close as Lowes scratch and dent sale. I bet the water heater is gone too.

I believe the duct work is still in place. The thermostat is still there. It may require some modification because the handler/compressor setup is a bit sketch and I think relocating may not be a bad idea.

As long as the property appraises for as much or more than you're borrowing, you shouldn't have a problem. Insurance is based on the loan amount and property value. Appliances and AC are not required to get a loan. You can finance a shell as long as it's worth what you are borrowing.

mazdeuce wrote: You're not (probably) going to get a loan without an inspection that says the house is good. The question to be asking, is what does the bank's inspector look at and will the house pass those things. You'd be more likely to not get a loan because of mold or a really old roof than no appliances.

So the house was already appraised and inspected as per the HUD guidlines and it passes all of those mold/roof questions. The roof does look like it'll need replacing in the next 5-10 years though.

penfed.org is probably who I would use. The bank I used in Ohio I believe only does loans in that state.

capcenter.com also has no closing costs, but their rates are higher.

Any reason you're going ARM over 30/fixed?

In reply to Flynlow:

Answered my own question, wow 2.750% on the first 5 years and 3.5% on the next 25 is a smokin' good deal. Even more so with the no closing costs!

EDIT: Reading more, the 2.75/3.5 is an example with current rates, not the max. Max % on the loan, if fed rate were to skyrocket, is 7.75%. Still not bad, I paid I think 6% back in 2008 on my house, but still something to watch for. Today's low fed rate can't last forever.

Flynlow wrote: EDIT: Reading more, the 2.75/3.5 is an example with current rates, not the max. Max % on the loan, if fed rate were to skyrocket, is 7.75%. Still not bad, I paid I think 6% back in 2008 on my house, but still something to watch for. Today's low fed rate can't last forever.

Glad you caught that. Lock up whatever you can now if possible.

Flynlow wrote: In reply to Flynlow: Answered my own question, wow 2.750% on the first 5 years and 3.5% on the next 25 is a smokin' good deal. Even more so with the no closing costs! EDIT: Reading more, the 2.75/3.5 is an example with current rates, not the max. Max % on the loan, if fed rate were to skyrocket, is 7.75%. Still not bad, I paid I think 6% back in 2008 on my house, but still something to watch for. Today's low fed rate can't last forever.

So here is my logic and feel free to prove me wrong. The home is cheap (under $130k) and at worst, by year 10 I'm paying 4.75% which isn't much higher than today's fixed. By the time year 5 rolls around I'm hoping much of the home will be paid off (I'll have a good start because I'm putting 20% down) and the interest on the remaining principal won't be too bad. Also, by then I'll be on dual incomes and I'm thinking I could pay it off if the rates start to get too ridiculous.

That plus the no closing costs seems like a winner for me. Alternatively I could do a 15 year fixed but I think the 5/5 makes more sense.

I thought 5 year ARMs had to paid off in five years. Guess I learned something on the interwebs today.

Up here, unless the appliances are built-in they are not included in house purchases. You have to write them in as chattels to get them included.

AC - not required.

the only time I have seen a stove required was with my father looking for a house. Because he is doing it through the VA, they want it "turn key"