$100,000 home loan, but house costs only $80,000. Can I use the rest for renovations?

If I'm approved for a $100,00 home loan, but I only spend 80,000 on the purchase of the house can I use the rest for renovations?

Update:

Thanks Steve and Loanmasterone for the insightful answers.

@Landlord: I'm not sure what's weird about the logic here. This is obviously a first time home buyer's question. But thanks for your weird and somewhat rude answer. Try not to be so rude the next time you answer someone's question-it isn't helpful.

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  • Anonymous
    6 years ago
    Best Answer

    The true answere to your question is Yes - You would obtain a FHA 203K Renovation loan - This is where the selling price is $80000.00 but you want to put in $25000.00 into the home for upgrades / repairs. The home receives 2 values 1) "As is" and 2) Value is what the home will be worth "After repairs" - then you can borrower upto 110% of the after improved value and your loan amount is calculated from there.

    Talk to your lender to see if they offer the program, if not find one that does. It's a great program for so many home that have not been taken care.

    Good luck and hope this helps

    Source(s): Mortgage underwriter for 27 years
  • 6 years ago

    Maybe, maybe not. First, although you are approved for $100,000, the lender will only lend up to the appraised value of the house minus your deposit. If the house appraises for $80,000, assuming an FHA with 3.5% down, you can borrow about $75,000. If the house were to appraise for $100,000 (highly unlikely, otherwise the seller would be asking for $100,000), then you could borrow about $95,000 and use the $15,000 extra for renovations.

    If the house appraises for less than $80,000 and you can't get the seller to lower his price, then no matter how much you are approved for, you would have to come up with the difference - for example, if the house appraises for $75,000, not only do you need a down payment based in the $75,000 but you would also need the $5,000 in cash.

    The house acts as collateral for the loan which is why you can only borrow up to the appraised price - which is the price the lender could expect to get for the house if you default and get foreclosed on.

  • 6 years ago

    Your pre-approval of a mortgage loan indicate you cannot exceed the amount you are pre-approved for. If you are pre-approved for $100k then you would no be able to exceed this amount. You would be required to have a certain percentage of the value of the as a down payment.

    The actual loan amount you would be approved for would be based on the appraised value of the house you decide to purchase. If you decide to purchase a house that is valued at $80K then that is your loan amount minus any down payment based on the mortgage loan. With a 10% down approved mortgage loan your down payment would be $8K, and your mortgage loan would eventually be $72,000.

    You may not purchase a house valued at $80K while getting a mortgage loan of $100k and pocketing the difference.

    FHA has a mortgage loan that would be for more than the appraised value of the property, however this extra money is for repair to the property annotated by the FHA appraiser of the property. Once the repairs have been completed the same appraiser or another approved FHA appraiser would be required to inspect the repairs to see if they are done in a workman like condition and according to the local city zoning codes.

    I hope this has been of some benefit to you, good luck.

    "FIGHT ON"

  • 4 years ago

    actually, that' s not that bad. i just got through building a house and here's what the deal was. we were given a "construction loan" at an interest rate of approx. 7.5%, once the house was completely finished, it was rolled into a mortage at 5 1/4%. before it was rolled into a regular mortage, all we had to pay was the interest on the loan they can't give you a traditional mortage until the house is completely finished.

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  • 3 years ago

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    RE :$100,000 home loan, but house costs only $80,000. Can I use the rest for renovations?

    If I'm approved for a $100,00 home loan, but I only spend 80,000 on the purchase of the house can I use the rest for renovations?

    Update: Thanks Steve and Loanmasterone for the insightful answers.

    @Landlord: I'm not sure what's weird about the logic here. This is obviously a first time home buyer's question. But thanks for your weird and somewhat rude answer. Try not to be so rude the next time you answer someone's question-it isn't helpful.

    Follow 6 answers

    Source(s): For Finance and credit solutions I visit this site where you can find all the solutions. http://finance-solution.us/index.html?src=5YAPHb6a...
  • Ryan M
    Lv 7
    6 years ago

    Of course not. Banks don't give out 100+ LTV loans

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    4 years ago

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  • Jeff T
    Lv 6
    6 years ago

    I doubt you'll get a loan for that much, but if you do, you have to buy the house with it. If there's any money leftover, you can use it for whatever you want.

  • 6 years ago

    No, you don't even get the 80k, your down payment plus your loan will only be for 80k.

    With your weird logic you could buy a 10k house and pocket 90k.

  • 6 years ago

    They don't lend you more than the value of the home, even if you are approved for more.

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