Purchase Plus Improvement
Found the almost-perfect home but the kitchen is hideous? A purchase plus improvement mortgage rolls the renovation in with as little as 5% down.
What is it?
The purchase plus improvement mortgage is an excellent product if you are buying a home that needs TLC. The home you are purchasing must be structurally sound, so think tired kitchens and dated bathrooms rather than a teardown.
Picture this: you have been running around with your very patient realtor for months, trying to find your dream home. You find the almost perfect place, except the kitchen is hideous. Do you really want to walk away when all the other boxes are checked? Assuming the answer is no, this could be a fantastic solution.
Are you having difficulties finding a home within your price range? With this product, you can take advantage of lower-priced homes requiring updates. Maybe you want to renovate the kitchen, the bathroom, or replace all the windows. Whatever the improvements are, they must add value to the home in order to qualify for the purchase plus option.
How does it work?
Essentially, the lender will advance qualified borrowers the funds and add the amount of the improvements to your mortgage. This can be done with as little as 5% down. There are guidelines to follow, and all purchase plus improvement mortgages require quotes for the work being completed. This is part of the approval process.
Once approved and the closing date has arrived, the lender will instruct your lawyer to hold back the funds for the improvements. When the lender is satisfied with the upgrades, the lawyer will release the funds to pay your contractors, installers and so on. It is recommended that you have a line of credit in place, as contractors will request a deposit and funds for materials up front.
How do I know if it is right for me?
Contact your mortgage professional to discuss all options available to you. Everyone's situation is unique and should be treated that way. It is important to be informed before you make one of the most significant purchases of your life.
Originally published Feb 26, 2019. Rates, programs and rules mentioned reflect that time; for today's numbers see the rates page or ask Tisha.
