DATE: Saturday, August 30, 1997             TAG: 9708290497

SECTION: REAL ESTATE WEEKLY      PAGE: 04   EDITION: FINAL 

SOURCE: BY MARY ELLEN MILES, SPECIAL TO REAL ESTATE WEEKLY 

                                            LENGTH:  126 lines

COVER STORY: BUY IT AND FIX IT UP, ALL IN ONE LOAN DEAL

Ted Yoder, senior vice president with First Coastal Mortgage Corp., sings accolades about a loan program that's recently blown through the area quickly, like occasional summer breezes.

The program, known as the renovation/repair mortgage loan, came out through First Coastal last year and is becoming increasingly popular, especially in Virginia Beach and Norfolk, says Yoder. An outgrowth of the construction-to-permanent loan, borrowers can significantly upgrade their current residence with improvements or purchase a new home and renovate.

Many borrowers are using their loans to buy older houses on waterfront property, says Yoder. The loan works better for larger, older, expensive properties than the 203(k) loan, which typically handles loans up to about $155,000.

``It's really for the upper end borrower,'' he says. ``Virginia Beach is a great area for it because there're a lot of beautiful lots out there with older houses on them.''

They just need updating. This ``one-time'' loan encompasses what used to take two trips to the bank. In the past, borrowers had to purchase a dwelling with one loan and one closing, then borrow more money with another loan and another closing for the renovations.

The second loan was usually acquired after the homeowner had lived in the home. It was a more expensive and troublesome process. The new loan wraps it all into one package when clients purchase the house, says Yoder.

With this loan, applicants can already own their home, but don't have to; they just need to have a contract on it. If the loan is used for the existing house, borrowers can obtain financing for up to 90 percent of the appraised value with improvements.

If it's used with a new house, financing can be obtained for the lower amount of either 95 percent of the purchase price with improvements or 95 percent of the appraised value with improvements. Borrowers don't have to lock into an interest rate until the end of the project.

Loan officers at First Coastal have noticed that whatever money borrowers have put into the house, they're getting more than that in return on their appraised value, said Richard Core, assistant vice president and senior loan officer at First Coastal, who used the loan last year to rehab his own Virginia Beach house, originally built in 1951.

He spent $50,000 on improvements and the appraisal increased by $100,000. ``It's really a win-win situation,`` he said. It's also good for someone who has a higher interest rate on their existing loan. If he is able to refinance with this loan, he may be able to do the entire thing with a lower interest rate, sometimes even reducing the mortgage payments.

During the renovation process, borrowers make monthly payments of the interest due on the amount of the loan proceeds that have been disbursed. The amount borrowers pay will increase as additional disbursements are made on the loan.

Core's house, on Princess Anne Golf Course in Linkhorn Park, needed updating, he says. Since he already owned the home, he took out a loan based on the value of what the property would be after it was renovated. The kitchen was totally fixed up, with some walls being knocked out.

What the bank is doing more of now is lending to people who want to renovate a house they're in the process of purchasing, says Core. ``We're doing tons of them now,'' he says.

Probably because ``most of the really desirable neighborhoods are already totally built up,'' he says, ``there's no land left.'' Your options are limited. People are either buying and renovating or tearing down, he said.

Ron Foresta, one of the principal owners of Womble Realty and president-elect of Tidewater Association of Realtors, likes the renovation/repair loan so much he's used it twice in the last six months. The first loan he received, he used for extensive Dryvit rehab work on the four-year-old, 3,300 square foot oceanfront condo he shared with his wife and dog. They originally built the contemporary Dryvit, two-unit condo that sat on a 60-by-60-foot lot.

Through the renovation, they changed the modern exterior to a New England cottage look. ``We fixed it up because we thought we were going to live there forever,`` he said. But, when the work was completed, they ended up selling the place. ``Everything looked brand new and wonderful, but when my wife and dog got up in the morning, they both started whining about a yard; they both wanted more yard.``

More yard is what everyone got. The condo sold in about an hour-and-a-half, he said. They'd had their eyes on a two-bedroom, 2 1/2-bathroom, 4,500 square foot house with a pool, but didn't have a contract on it when their condo sold. So they moved into temporary quarters before purchasing the dwelling they were looking at.

It sits on a quarter-acre lot and is a wonderful piece of property, said Foresta. But the house, a waterfront dwelling in Birdneck Point, built about 1950, needed changes. Foresta knew the renovation/repair loan could come in handy for this situation.

``We felt we could make the house very enjoyable for us by renovating,`` he said. ``I knew the value was in the land,`` said Foresta. ``All we had to do was modernize the house.``

After a few weeks, the Forestas had to find temporary quarters again. ``I've been in the real estate business for 18 years,`` says Foresta. ``I now understand more of what people go through during a move. My empathy level has risen.''

They're used to moving now, he said, and haven't found it too inconvenient to be living elsewhere as their new house is being renovated. The house is on its way to be completed and they plan to be moving in any time now.

An amusing aspect they didn't anticipate during the move to a larger home is just how much bigger the new house is. They didn't want to store their furniture, so they decided to put it in the parts of the house that weren't being renovated. What they didn't expect was that all of their furniture fits in one room, says Foresta. The previous owner used the 900-square-foot room as a billiards room; the Forestas are turning it into a master suite.

Among the renovations, they'll be adding two bedrooms and a bathroom, and painting and changing the outside of the house a bit. An old Florida room has an interesting fireplace sculpture that they'll cover up (it's not to their taste), and they'll be raising the ceiling.

``The unique thing about this loan is that a lot of people are using it to acquire properties,`` he said. Foresta owned the house he previously sold, but acquired the house they're currently renovating with the loan. ``It's got a tremendous amount of flexibility,`` he says. It's a terrific program.``

``You're not just locked into finding a wonderful piece of land with a wonderful house on it.'' This program allows people to find their dream piece of property and turn the house into their dream home.

Foresta, whose renovated condo was increased in value more than double the amount of his loan, says it's much more cost effective than the older process. ``For a dollar-to-dollar investment for fixing it up, for every dollar I spend, I think I add $2 in value,'' he said.

This loan enables people to purchase these wonderful pieces of property, particularly big lots and waterfront property in Virginia Beach, that have been there for a long, long time and to have the money to renovate them to today's standards, says Foresta.

There are really no new subdivisions that can offer such lots, he says. ``I think this program's been a real boost in the market because it has little twists to it that are in the favor of the borrower. It's a very user-friendly loan.''

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