FHA Rehab Loan or pay for remodel out of pocket? (… – Redfin …

We are considering buying a home that is in desperate need of repair. That being said, it is also in a great area, a great neighborhood, and has an acre of land. The house is 3,000 square feet, with 4 bedrooms and 2.5 baths. It has two private balconies and a wrap around porch. SO MUCH POTENTIAL!

That being said, it needs a new roof, new floors (horrible cat pee smell), new paint everywhere, new appliances, new kitchen/bathrooms. The entire acre of land is an overgrown mess with no fence. When the market picks back up, this house could probably sell for $900K+, as other homes in the neighborhood are on the market for $899K+ right now. It is currently bank owned and we could probably get it for about $300K, hopefully less but you never know.

So, we have about $70K in the bank right now that we were originally going to use for a 20% down payment.  Now that we are looking at totally rehabing this house, we know we are probably looking at putting anywhere from $50-100K into it. Now, I know there are FHA Rehab loans out there, but they have so many restrictions, and they expect it all to be done in SIX MONTHS which I think isn’t possible for this house. They also have higher interest, and we would have to pay PMI because we wouldn’t be able to do 20% down.

So, would it be better to get a 30 year fixed loan for the selling price of the house, put a minimal amount down (3.5%?) and then use the money that we have saved up for the remodel? Then we wouldn’t have all of the rehab loan restrictions, and we would have a lower interest rate, with the opportunity to do a lot of the work ourselves. Or should we do a regular 30 year fixed with 20% down, and then seek a second loan for the floors and roofing, and do the rest over time with our own money?

Thank you!