Need a Mortgage for the House and a Loan for Repairs

Reader Question: If we are buying a house in an auction for $50,0000, but it needs about $40,000 in repairs to make it livable, can we get a mortgage for $90,000? Or do we have to apply for a $50,000 mortgage and a home repair loan for $40,000?

You would have to get a mortgage loan to cover the cost of the house, and then get a separate loan for the repairs. The only time when you can roll other costs into a mortgage is when you have equity built up that you can leverage -- as is the case with a home equity loan or a mortgage refinance.

If I were you, I would talk to the lender who is giving you the mortgage loan. If they offer regular consumer financing (in addition to home loans), they'll be able to give you some good advice. For instance, they can probably tell you how likely you'll be to get approved for the second loan. After all, they'll already know a lot about you -- your credit score, income, debt, etc. So they'll be in a perfect position to give you some advice.

Of course, if your lender only offers mortgage loans, then you'll have to approach another company for the second loan needed for repairs. In either case, I would get some input from somebody before moving forward.

Hope that helps.