Financing Vintage and Historic Homes 101

By: Nicholas Hanna


Financing a vintage home can be trickier than one would expect. It's just another house, right? Well, not exactly. Here are a few tips:

CONDITION OF PROPERTY - Most houses built prior to 1940 are going to have issues; some small, others large. It's up to each individual homeowner to decide what needs to be repaired prior to an appraisal and what doesn't. Rules differ from lender to lender, but MOST lenders will require major repairs be completed prior to funding. The reason is this: as a lender, you have to base your decisions on the marketability of a property if you were to take that home back. This isn't a reflection on the homeowner personally, but just sound business practice. So, if you have a bathroom with exposed walls, that is pretty major. Most buyers aren't going to want that property in that condition, hence the lender's reluctance to lend on it.

So how does one determine what needs fixing? A good rule of thumb is this: If the repair costs under $1000 to fix then most lenders will overlook it. Some exceptions may be cosmetic repairs such as missing tile or exterior painting. Keep in mind that the lender is going by the 'cost to cure' the appraisal lists, so make sure to use a lender whose appraisers are knowledgeable about costs to cure.

And as a reminder, it is important to CLEAN YOUR HOUSE prior to an appraiser inspecting it. This may sound like common sense, but you'd be surprised how many folks overlook it. Not only will you get the benefit of the doubt when it comes time for valuation, but it's also a reflection on you as a homeowner. And you want to give the lender the impression that you have serious pride of ownership.

COMPARABLE SALES - As opposed to cookie cutter subdivisions, most old neighborhoods have a diverse mix of housing sizes and styles. I highly recommend you use a local lender who knows your neighborhood and has appraisers who know your neighborhood. That way, they aren't pulling comparable sales from a mile away in a completely different neighborhood. A lot of really upscale neighborhoods in large cities are in close proximity to less expensive neighborhoods and it can really hurt your value if an appraiser chooses a comparable from one of these.

SELLING A VINTAGE HOME - This treads into territory that an expert realtor may be more equipped to handle, but I'd like to throw in my two cents. Most buyers looking at vintage homes want as much of the 'original charm and character' these homes had when they were built. This isn't always possible or cost effective, but the closer you can get your home to looking like the original product, the more offers you will get. I've seen companies come into old neighborhoods and rehab homes with all new products and these homes are nice, but sit on the market forever. Why? Because the people who want these homes are not the same people who want new construction. Again, character, charm and charisma.

All in all, the financing options available for vintage homes are the same for newer properties, but if you focus on the property itself, it will help you whether refinancing or selling.

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