What’s the best way to finance a condo and improvements simultaneously?

Posted on Mar 7, 2013 in FHA Information

Question by Supercoolyo: What’s the best way to finance a condo and improvements simultaneously?
Hey everyone, information pills link

I’m looking into purchasing a condo, price and it’s asking price is $ 37,000. I put in an offer at that price, and I’m hoping that it will get accepted. The only issue is that it’s air conditioning/heating unit isn’t functional, so that will need to be replaced the moment it’s purchased, which should run about $ 4,000 or so.

I’m a first time home buyer, and by the time the deal would close if accepted, I’ll have about $ 4,800 in savings, while I’m asking the seller for 3% toward closing costs, and I’ll likely have to pick up about $ 500 of the closing costs. I also have a 725 credit score and a debt to income ratio of under 5% before this purchase, being only about 20-25% with it, as I’m trying to keep minimal debt.

The property is not FHA approved, because the condo complex doesn’t fit its criteria, and everyone who has tried a spot approval on other units have been denied. I know that an FHA 203K renovation loan would have been good, but it’s seeming like FHA won’t be an option at all.

I’m being told that right now that a conventional loan is my only option, and that I would have to probably finance the unit through an air conditioning company. I’d prefer not to do that, because of high interest rates and high monthly payments due to short repayment plans.

I know that home renovation conventional loans exist, but I hear that they have specific criteria about the Loan to Value ratios, etc. and that going 90% LTV due to a 10% down payment doesn’t leave room for the improvements. With that being in mind, I’m thinking that it eliminates the ideas of a home equity loan or line of credit.

Does anyone have any ideas for options that I may have? I would prefer not to do a personal loan with a high monthly payment and gouging interest rates of 16% or more. If there isn’t a specific type of mortgage that can do it, then any ideas with no payments no interest for 6+ months would be nice too, as I would have freed up money for settling in at first, and maybe even could just use my tax credit to pay it off entirely.

If you do have ideas for a type of mortgage that may help me out, please name a specific bank/credit union/broker who offers it. I’m in Arizona, 85203 Zip Code is where the property is.

In response to Debra’s comment, it’s bank-owned and as-is, and honestly, similar condos in the market with a working A/C and everything else in great condition, updated appliances, cabinets, fixtures, flooring, and more like this one is, go for about $ 60,000 or higher. I’m set on this property and know I’ll get no assistance from the bank. Any suggestions to make this scenario possible?

Oh, and Amanda, 10% will have to go down on the property, or $ 3,700, and about $ 500 toward closing costs will still be due from me. That’s $ 4,200 of that gone, with $ 600 left over, in the scenario that I go conventional.
Oh, and the seller can only pay up to 3% of closing costs (both bank property who’s selling it, and a requirement on a conventional loan, at least in AZ if not everywhere).

Best answer:

Answer by debra
The sellers are required to fix the AC unit and you should have put in your contract that you wanted that fixed. You’re actually paying $ 41,000 for the condo and whoever told you to put in a full price offer in this economy with a glut of condos on the market is giving you lousy advice. You need to get out of that contract and start over. Bid lower, get a home inspection to make sure nothing else is broken, the seller should pay all closing costs and get a new realtor!

Know better? Leave your own answer in the comments!

4avg.rating 12 votes.


  1. Ask your lender about the FHA 203K program. I fear your first hurdle is going to be the appraisal. Some lenders are now requiring all infrastructure be in working order.

  2. With your credit score, you could probably find a credit card with 0% interest or a very good interest rate for a period of time (6 months to a year), to finance your A/C.

    You cannot do a mortgage and a home improvement loan simultaneously, isn’t going to happen. Typically, there is a waiting period of 30 – 60 days after you purchase before you can get a HELOC.