Have you been looking at a great home, maybe even your dream home, but you just can’t get past the ugly carpets? Or maybe it’s that dated kitchen and wall-to-wall carpet in the master bath? What if the house is in desperate need of a new roof? Don’t worry! We’ve heard it all and have just the program to help you.
Purchase plus improvements is a program that allows you to add minor renovations into your mortgage (generally up to about $40K). Even better, you’re able to roll the cost of these improvements into your mortgage, so you won’t have to come up with the cash or finance two separate transactions!
Here’s how it works:
Step 1: When you find the property, make a list of what renovations will need to be done and include a rough estimate of how much they will cost.
Step 2: We will work to get your financing approved based on the house price ‘as-is.’ At that point, you’ll need to get in touch with the appropriate contractors and get firm price quotes, in writing, for the work. Make sure the quotes refer to the specific scope of work that is to be completed.
Step 3: We will revise your mortgage approval to include the price of renovations, as per the quotes, and help you complete your mortgage details.
Step 4: As soon as the sale is complete and you take possession of your new home, you’re ready to start renovating!
Step 5: Once the work is complete, a bank representative is dispatched to verify that the renovations were completed properly, as required and as agreed upon in Step 3.
Step 6: You’ll receive the funds to pay the contractors — your lawyer will be instructed by the lender to release the funds for the specified renovations. Now you’re ready to kick back and enjoy your home!
Important notes and some fine print:
- The lender will not advance the funds until the work is complete (they want to make sure you don’t use the money for something else!).
- The work needs to be done “as approved”; if we’ve approved funding for new kitchen cabinets, the funds won’t be advanced if you decide to renovate the bathroom instead, so be sure to stick to the original plan!
- This program does not not change your interest rate.
- You need to have your quotes approved by the lender prior to the mortgage funding.
- All work must be completed in a timely manner. Generally speaking, within 90 days after your possession date.
Want a real life example?
We recently had a client buy a home that had several different types of shag carpeting (which can be chic, but not in this case!) as well as some significant damage to the kitchen floor. They wanted to replace all the flooring on the main level of the home. After receiving a quote for $15,000, we worked with the bank to approve them for the purchase plus the improvements! The client was able to put 10% down on the home as a down payment (this represented nearly all of their savings) and they went with a 25 year amortization. They arranged to have the floors installed right after they closed (even before moving in any furniture).
End result: Their monthly mortgage payments increased by just $65 per month and they were able to move into a home with completely new flooring throughout!
If you have any questions about the Purchase Plus Improvements plan or about any stage of the purchase process, please don’t hesitate to reach out; the Mortgage Fit team is always here and ready to help!
