While shopping for a mortgage, we discovered the Regions Bank Affordable 100 Program. The juxt of the program is that if you purchase a home that you intend to live in and it is in a low to moderate income area- they will extend you a mortgage with no down payment, low closing costs and NO PMI. Many down payment assistance programs have income limits but this one does not. As long as you are buying a home in a low income Census tract area and you meet all conventional criteria ( credit , reserves, job history , etc) -you can take advantage of this option.
The first hiccup we experienced was during the appraisal . The home had been vacant for about two years so it was not in the best condition. The house appraised at 45k. The appraisal was approved with conditions. You cannot buy a run down home with this program. The house must be in live-in ready condition at the time of closing. Our plans were to purchase the home and then complete renovations but Regions would not allow us to close with the house in the condition it was in. The front window was boarded up. Some of the door knobs were missing. The major issue was that the sub flooring needed to be repaired. They required us to obtain an inspection to verify the condition of the floors and the inspection was not favorable. They told us we would not be cleared to close with the floors in that condition.
The AC condenser had also been stolen while the house sat vacant. I didn’t want to put a new unit in there until we were moving in. Regions required the HVAC to be functional. The HVAC company told us we could get a used unit and and repair our current system for less — but since we were purchasing this house for our personal use– we decided to go with a brand new unit altogether. Since we had to fix the flooring, we decided to go ahead and renovate the bathrooms since they were in poor condition.
Repair Subflooring : Cost $ 3500
Renovate/Gut Two Small Bathrooms Cost $ 10k
Brand New Heating and Air & Wrought Iron Gate to enclose the condenser: Cost $5300
Even though we did not have to provide a down payment, we had to spend $20k just to get the house in acceptable condition to close.
What I learned:
- Home-ownership is a responsibility. Stay up to date on house repairs. If you have elderly parents or grandparents and you expect to inherit their home — be concerned with the physical condition of the property. Plan to spend money on preventive maintenance every year. We spent a lot of money on the renovation because we literally had to replace EVERYTHING. Likewise, homeowners keep up with your repairs. You don’t have to wait until something breaks down completely or is irreparable to replace it.
- It would have been much easier for us to purchase a home that was move in ready. HGTV makes it look easy but it is a challenge to finance a fixer upper. If I did not have emotional ties to this home- I don’t believe I would have stayed the course.
- Nevertheless, I am glad we stayed the course. I was able to close in December. I sat across the closing table from my mother. We shared laughs with Attorney Ursula Woods at Preferred Title and Escrow. We were able to keep and successfully transfer this property within the family.
The biggest icing on the cake is that our new mortgage is less than $400. I may not be a die-hard follower but I am a big fan of and try to follow a lot of Dave Ramsey’s advice. He says your mortgage should be 25% percent of your take home pay. This mortgage is less than 5% of our income. We plan to pay this house off in less than ten years and allow our children to live here while in college and/or working so they will not have to rent– except from us. Lol
Stay tuned for part three : Completing the renovations