If you’re considering buying an “as-is” property, you’re probably already aware of the potential challenges and rewards. These properties, often sold in their current condition without any promise of repairs, can be a great deal for savvy buyers. But what about financing? Many traditional lenders are hesitant to finance these types of homes due to the potential risks. Fortunately, there are several financing options available that can help you snag that fixer-upper of your dreams without having to pay cash upfront.

Government Assisted Loan Programs

One popular option for financing as-is properties is the FHA 203(k) loan. This government-backed mortgage allows you to borrow money for both the purchase of the property and the cost of necessary repairs. The FHA 203(k) loan is particularly appealing because it typically requires a lower down payment than conventional loans, and it’s available to buyers with less-than-perfect credit. With this loan, you can roll the cost of repairs into your mortgage, making it a convenient way to finance an as-is property.

Another option to consider is a HomeStyle Renovation loan, offered by Fannie Mae. Like the FHA 203(k) loan, this type of financing allows you to combine the cost of the home and the cost of renovations into a single mortgage. However, the HomeStyle loan is available for a wider range of properties, including investment properties and second homes. This loan requires a slightly higher credit score and down payment than the FHA 203(k) loan, but it offers more flexibility in terms of the types of repairs and improvements you can make.

For more information on government loan programs, see our article Can I Sell a Home with a USDA, VA, or FHA Mortgage?

Use Equity Your Home

For those with access to significant home equity or looking to buy an as-is property as an investment, a home equity line of credit (HELOC) might be a good fit. A HELOC allows you to borrow against the equity you have in your current home, giving you a line of credit that you can use for various purposes, including purchasing and renovating an as-is property. This can be a more flexible and affordable option, especially if you have substantial equity built up and favorable credit terms.

Investor Loans

If you’re not looking to live in the property and are instead considering it as a flip or rental, hard money loans are another viable option. These short-term loans are provided by private lenders and are based on the value of the property rather than your creditworthiness. While hard money loans typically come with higher interest rates and shorter repayment terms, they can be a great way to secure quick financing for an as-is property that you plan to renovate and sell or rent out.

When working with cash home buyers, a lot of times they are utilizing some sort of hard money loan or credit line. Cash doesn’t always mean cash, it can mean credit also. If you decide to sell to a cash home buyer who can close fast, you may want to vet their financial condition and if they are using financing or if they have the cash. For more information on finding reputable cash home buyers, see our article How to Find Reputable Cash Home Buyers in Your Area

Seller Financing

Finally, don’t overlook the possibility of seller financing. In some cases, the seller might be willing to finance the purchase themselves, especially if the property has been on the market for a while. Seller financing can be more flexible in terms of credit requirements and down payment, and it often involves negotiating directly with the seller to come up with terms that work for both parties. This can be a win-win situation, allowing you to purchase the property without going through traditional lending channels and giving the seller a way to move the property quickly.

So, while financing an as-is property might seem daunting at first, there are several options available to help you make that purchase. Whether you go with a government-backed loan, a renovation-specific mortgage, a HELOC, a hard money loan, or seller financing, there’s likely a solution that fits your needs and financial situation. With a bit of research and planning, you can find the right financing to turn that as-is property into your dream home or next great investment.