Credit for repairs?

15 years ago

Say I want to buy a house that's listed for $300K in a neighborhood with other houses that are similar in age and size and style and where I think $300K is a fair price for one of these houses. The house for sale is old and hasn't been modernized, but I'm ok with that. So I make an offer for $300K and it's accepted. I have $60K for a 20% down payment and $10 for closing costs. An inspection shows that the house needs $20K of work immediately just to be habitable. The roof is in really horrible shape and is leaking and should've been replaced years earlier. The electrical needs updating and the plumbing needs fixing in multiple places.

If I request a $20K credit from the sellers for repairs, how does that work? If they just lower the price from $300K to $280K, I still need $56K for down payment and almost $10K for closing, leaving me with only $4K for repairs. That won't work for me.

Is it possible to pay the full $300K, and at closing get a check for $20K for repairs? It seems my mortgage company would consider that I then had only $40 invested in the house, which is less than the 20% I need to get the best rate.

Anybody know the answer/solution to this? I plan to talk to my mortgage co. about this, but would like to understand from others knowledge and experience before hand what can or might work. Thanks!

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Comments (3)

classicalone
Original Author
15 years ago
No one knows how this typically works?
Billl
15 years ago
It can work any way you want it to as long as your lender approves. Typically, most lenders will balk at you getting money back at closing.

You can definitely ask for closing costs up to the full actual amount and then just keep that money for repairs.

You also may be able to arrange a HELOC for the difference. Some lenders will approve up to 90% that way.
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lyfia
15 years ago
You could also ask that the money be set aside by the owner in escrow for you to use for repairs. Any money you don't use this way would be returned to the owner. You'd set a time limit on the repairs being done etc.

That shouldn't matter to your lender. It is essentially asking the owner to do the repairs except you have control over who does it.