Purchase Plus Improvements Program
The Purchase Plus Improvements program offers a great opportunity for clients looking to upgrade various aspects of a property like the kitchen, flooring, or bathrooms. It's designed for moderate enhancements rather than extensive structural changes, typically totaling between $40,000 to $50,000. Here's how it works:
Financing is available for improvements up to 95% of the 'as improved' value of the home.
Improvement expenses should not exceed 10% of the 'as improved' home value.
The 'as is value' is determined post-improvements by an appraiser, representing the property's market value.
This program is available for homes priced under $1,000,000 and is insured.
Before the property closing, the client obtains a contractor firm quote, submitted to the bank.
The bank adjusts the purchase price based on the current value plus improvement costs, then adjusts the loan amount accordingly.
Initially, the bank disburses funds to cover the property purchase, reserving improvement funds until work completion.
Upon renovation completion, the client submits evidence like paid invoices and appraisals to the bank.
Requirements vary based on the specific project and lender.
For instance, consider a client buying a $700,000 house with 10% down and planning $50,000 in improvements. The effective purchase price becomes $750,000. At closing, the client pays $75,000 (10% of $750,000) as the down payment. The bank disburses $625,000 initially and holds the remaining $50,000 until renovations are confirmed complete. Once done, the bank releases the withheld $50,000 to reimburse the client for the improvement costs.
It's crucial to understand that this program cannot be applied to properties currently deemed uninhabitable. The bank sets a requirement that a property must be at least 97% complete and considered "marketable" to be eligible for lending. "Marketable" essentially refers to being free from major structural issues, mold problems, or significant leaks. While cosmetic issues like shag rugs or outdated wallpaper are acceptable, properties undergoing renovation or deemed unsafe for occupancy are unlikely to qualify for lending.