Financing

First of all, I used an FHA loan to buy my house, which required 3.5% of the sale price in downpayment. Since my credit is good, I qualified for their best interest rate and ended up getting 4.75% on a 30-year fixed rate loan. I highly recommend my mortgage broker: Sonja Pechal with Prime Lending. 512-947-2702. She does a "float-down" deal, where you can lock in your interest rate but it will "float down" if the interest rates go down before you close on the loan. If they go up, you get the lower rate that you locked in - so you can go down but not up. Furthermore, she gave me the best deal of all the other banks/mortgage brokers I compared her too. On top of all that, she's a really nice lady and will come to your closing to make sure all goes OK with the financing.

Alright, so my realtor and I have estimated that it will take somewhere between $20K and $30K to complete the renovation of my house. It needs new floors, drywall work, interior paint, all new appliances, an electrical service upgrade, a kitchen renovation, bathroom updates, exterior aesthetics, window frame replacement, and generally just a lot of TLC. So where to get the fixer money?

Well, I got $5K built into the loan for repairs. That is, once we had agreed on the sale price, I requested that the sale price be increased by $5K and for a check for that amoung to be cut to the contractor of my choosing. With an FHA loan, you can increase the sale price by as much as you want, but the total sale price of the house can not exceed the appraised value of the home. In my case, the appraised value was $219K, and I purchased it for $214K, so I could only get $5K out of the deal. So I have that check sitting in my wallet, ready to provide to my contractor once the work is all done.

Next up, I am a first-time home buyer, so I am eligible for the $8K tax credit from Obama's stimulus plan. FYI you do not have to wait til the end of the year to claim this tax credit. You may submit an amendment to your 2008 taxes and request the tax credit right away. I have already done this and expect to receive the tax credit money in the next month or so.

I looked into construction loans and home equity loans, but I have no equity in my house because I just bought it. I also can't afford a construction loan because they want something like 20% down (different ways to front the money but it requires a lot up-front) and I'm broke because I just bought a house and had some credit card debt. I did find an energy improvements loan through the City of Austin that is up to $8,500 for energy improvements (A/C, insulation, low-E windows, etc.). The deal is you have an energy audit done by a City-approved contractor, they inspect your home and let you know what you need to do for energy improvements, they do the work, the City inspects the work once it's complete, then the City will pay up to $8,500 to the contractor. After that, you are on the hook to repay the City at 0% interest over 5 years (or I think 10 years if you want to pay 2% interest). Anyway, so I am signed up for the 0% over 5 years deal and was approved. So that money is there when I am ready for the energy audit. I am waiting on that for now because I am trying to keep the City out of the process because I hear they can really slow things down and you have to purchase permits, etc. Contractors DREAD the City and try to do as much as they can under the radar and without permits / City interference. I've heard that the City does drive-by patrolling and will mail you a letter if they see you are renovating without a permit.

Other than these sources of money, the rest is going on a credit card or two (right after I had them paid off!!). I'm hoping that once I get the place renovated and get a roommate or two, I'll be able to pay off my credit cards. My balances are pretty high at the moment but I should be able to pay them down once I get the $8K first-time homeowner tax credit.