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I purchased a home requiring major repairs. it has been done now but now the basement slab needs to be redone that was not anticipated . Along with two other huge unexpected costs I lack funds to get up to snuff. Without funds to get it up to par .. well .. it will not get up to par.

Let's say the home appraises at X. Would I be able to pull out say 30% of that? What makes a house mortgage-able? I had paid cash so there is presently no mortgage.

I am in the United States and the house is in Washington State.

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    What does "up to par" mean in this context? Is the house fit for human habitation? Or has it been condemned? If the house is habitable but merely run down, you should have no difficulty getting a mortgage. If the house has been condemned, you can still probably get a loan but it will require that you jump through more hoops. Apr 8, 2021 at 5:05
  • Can you estimate the value of the land alone? That roughly indicates an amount you could borrow regardless of the condition of the house.
    – nanoman
    Apr 8, 2021 at 7:25
  • @nanoman afaik mortgages are not possible against land only in the US Apr 8, 2021 at 16:31

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Generally the only requirement for a house to be mortgageable is that it has value. (An exception might be if it's uninsurable for some reason, but that's pretty rare.) The other side of the coin for obtaining a mortgage is that you have to be trustworthy enough for a bank to give a loan to you. If you have at least mediocre credit, with a paid off home getting a home equity loan should be a slam dunk. Typically you can borrow up to 85% with a HELOC, minus whatever amount you currently owe with your mortgage, which fortunately in your case is $0.

I suppose had you known you were going to need to do this, you might have been slightly better off getting a small mortgage when you purchased, so that you could use the leftover cash to do the repairs. The advantage of the mortgage over the HELOC is slightly better rates, but at least with the HELOC you won't have to start paying any interest until the day you draw the money, so you've already saved money on interest by not needing it until now.

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  • Perfect credit. Far more work than the appraiser, geo-engineer/structural engineer, and decades of experienced flippers had expected. Apr 8, 2021 at 5:43
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    Inquire with some lenders about a mortgage as well, plenty of people take cash-out and refinance, usually have to maintain 80% equity. Just make sure to compare total costs, HELOC will have higher rate but mortgage could have closing costs that make it unappealing depending on length of your payback period. Also shop around, there's more variability between lenders than seems reasonable.
    – Hart CO
    Apr 8, 2021 at 13:31
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The answers posted do not match my experience in the past. They may be correct in some scenarios but lenders I have worked with have not been as liberal. The following reference seems to most match what I had found -even though it is written for the UK

https://www.auctionhouse.co.uk/guide/what-makes-a-property-unmortgageable

What makes a property unmortgageable? It is always sensible to check on the mortgageability of a property before bidding on it. But as a rule of thumb, the following situations will likely make a property unmortgageable.

• Properties without a kitchen or bathroom.
• Properties with any kind of structural defect, damp, dry or wet rot.
• Properties close to mining works, areas of landfill, areas of recent flooding or subsidence. • Leasehold properties with a short lease, typically less than 70 years, or a defective lease. • Where there are boundary disputes or where planning applications have not been applied for correctly.
• Derelict property or where part of the building is in severe disrepair and needs demolishing.
• Properties of non-standard construction. Standard construction has brick or stone walls with a roof made of slate or tile, so anything that differs from this will be classed as Non-Standard.
• Some properties with sitting tenants or regulated tenancies.
• All properties with a value below a threshold, sometimes stated as £40,000.

In particular the item:

Properties with any kind of structural defect, damp, dry or wet rot.

That is more restrictive than the other answer and comment - and also more along the lines of my experience (with a couple dozen lenders in several states). I'm not sure if that means there do actually exist lenders as lenient as the other answer suggests. I will be looking more into that.

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    While most of the restrictions make kind of sense, some seem excessively picky like non-standard construction (wood is also a standard construction method) or leases less than 70 years. And mortgageable is not a binary scale, it is a continuum. If the bank estimates that they will get their money back, they will mortgage it, albeit at a lower value
    – Manziel
    Apr 8, 2021 at 9:49
  • @Manziel: Those are UK standards. Other places differ, e.g. in the US wood frame is standard construction, it's unusual to build homes on leased land, mortgages on just land (that is, nothing built on it) are fairly common...
    – jamesqf
    Apr 8, 2021 at 15:59
  • The question states that the home appraises for X. Regardless of the structural defect, if the home has value and can be sold, the bank's underwriting decision can be justified. If the structural defect makes the home literally unsellable, then the appraisal should come back at $0, or even negative! (Negative appraisals are possible.)
    – TTT
    Apr 9, 2021 at 14:51
  • Of course, that doesn't mean a bank will write a mortgage. Many may just not want to deal with it. ;)
    – TTT
    Apr 9, 2021 at 15:12
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My conversation with a VP at a US lender is that the home needs to be move-in-ready. Otherwise the mortgage would be contingent on completion of repairs to the remaining items . It's pretty particular actually -including dents to drywall fixed, painting completed etc.

Now the actuality may be different than that official stance: I certainly did get loans on homes that needed lots of cosmetic repairs. But the answer is becoming clear:

  • Official stance: home is move in ready
  • Actual: Your mileage my vary.

So its looking like "depends strongly on the lender and the actual mortgage broker/agent"

Update 17 months later I was entirely correct that in the US at least there have been strict requirements on getting a loan - well until very recently. I had had to ensure there were no safety issues and that was interpreted stringently. Only in September 2022 did I finally get an appraisal waiver - on the same day i notified the lender that I had just finally completed all the expected required repairs. The waiver seems to be partially due to a quite low LTV.But that is not the only condition since the low LTV had been part of the deal since the beginning of the loan application months earlier.

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  • Let's just downvote without any explanation - and across the question and answers. Sep 25, 2022 at 21:07

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