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Do Banks Finance As-Is Homes?

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So, you want to buy an as-is home. Perhaps you’re looking at an investment property, or maybe you just want something you can customize and change up to fit your own personal wants and needs. As-is homes are typically more budget-friendly — the term “as-is” usually implies that the home will come to you in whatever condition the owner has left it in, meaning no major repairs or renovations are going to be made before you buy it: What you see is what you get.

But let’s say you don’t have the cash in-hand for an investment property, and are wondering what your options are for financing. The good news is, there are options, and quite a few of them actually. But which one is going to work best for your needs? Continue reading to find out.

Traditional Loans? Think Outside The Box

Unfortunately, securing a loan for an as-is home is much more difficult and complicated than getting a loan for a home that has gone through the traditional process of repairs, renovations, and an appraisal. Most homeowners will at least make any significant and costly repairs before selling a home, but if the home has been foreclosed on or the seller has decided to put it on the market “as-is,” then the value of the home will be significantly decreased. This also means that the loan you will be able to get for the home will also be low to match the value of the home, and it won’t take into account any repairs that you’ll be responsible for. Generally, most home buyers will go for a fixed-rate mortgage to finance their home, but with an as-is home, you’ll be hard pressed to secure any traditional loans. “So then what are my options? You said I had quite a few, what’s the deal?” you might be asking. First, let’s touch on what an “As-Is” home actually is, and explain a bit about why traditional loans won’t typically work for these types of houses.

What does “As-Is” Mean?

For the uninitiated, an “as-is” home is a home that has been put on the market in the condition it was in prior to the seller deciding to sell. This means the homeowner has done little to no renovations, repairs, or updates to prepare the house for success on the market. These homes can be anything from foreclosures in dreadful, decaying conditions to perfectly good homes in great condition that perhaps the seller just wanted off their hands as quickly as possible.

What many people don’t know is that “as-is” is actually a legal term that is used to absolve something of any implied warranty. Basically, what you see is what you get, and the previous owner cannot be held accountable for any flaws in the product after its been sold. The responsibility falls on the buyer in that regard to thoroughly inspect the product or property so that they know of any faults in advance. This is why if you intend to purchase an as-is home, it is highly suggested that you have a professional come out and do a thorough inspection of the property, which we’ll discuss in detail later.

Why Buy an As-Is Home?

Most people who would be interested in an as-is home are those that are looking to flip the house, either for themselves to eventually live in or to sell for a profit. They seek out these low value homes to buy for cash so that they can make the investment for the repairs and renovations themselves. As we’ve learned from the definition above, as-is homes are perfect for those with an eye for design who are handy with carpentry. But if you’re just an average homebuyer looking for a deal, it’s unlikely you’ll find one in an as-is home unless it is a case of an owner death or someone needing to sell quickly for reasons other than lack of funds.

Before You Apply For a Loan

So you’ve poured over the details, made a list of pros and cons, shopped around a bit, and you’ve decided: You want to buy a home, as-is. You’re going all in, what’s your next move?

  1. Have an inspection done.

No matter what kind of property you’re investing in, it is absolutely crucial that you have a professional inspection done. David Tammy, owner of Professional Property Inspection and featured expert on says that the inspector should be chosen through a referral from someone other than the real estate agents who have a stake in the sale. He suggests you choose someone who is a “straight shooter,” who is aware of which issues are the most important. A home inspection can cost anywhere from $300 – $500, but can end up saving you hundreds or even thousands of dollars in the long run, in the event that the inspector unearths something major that isn’t apparent to the untrained eye.

Check out this comprehensive home inspection guide and checklist from Forbes for more info.

  1. Negotiate a home warranty.

As per Investopedia, a home warranty is “a residential service contract that covers the cost of maintaining household systems or appliances for a set period.” A typical home warranty plan covers major appliances such as water heaters, stoves, and refrigerators, but may also include HVAC, plumbing, and electrical. Having a home warranty in place can help take some of the pressure off and give you some much-needed peace of mind.

  1. Hire a good real estate agent.

Having a real estate agent to help you navigate the process of buying an as-is home will be your saving grace. It helps to have someone on your side who is knowledgeable enough to provide advice, and help you know when to back out of a deal if they believe it will lose you a lot of money in the long run. A real estate agent can also help with the process of securing a loan, as well as figuring out an estimate of the budget you will need for repairs.

Financing Options for As-Is Homes

As we mentioned earlier in the article, unfortunately lenders will typically not lend to you if the repairs on the home will affect the livability, even if you are opting for a flexible loan through the Federal Housing Association (FHA). An FHA loan is federally insured by the government, therefore owner occupants can buy homes with little to no money down. But, in a quote pulled from Zing! By Quicken Loans, Denise Supplee, a Pennsylvania real estate agent says, “FHA mortgages are very on-point about safety issues concerning plumbing, electric, lead paint, etc. Though you may believe you are getting the ‘deal of a lifetime,’ your mortgage company may not agree.” Nearly any type of home will qualify for an FHA loan, but your lender will want to order a fee appraisal in order to make sure the home meets FHA standards. However, this appraisal cannot take the place of a home inspection, so make sure you cover all of your bases.

If the house you want to purchase will require significant repairs, this doesn’t mean you’re guaranteed not to get a loan. The Department of Housing and Urban Development (HUD) offers a program for FHA buyers that allows them to escrow for repairs and add them to the buyer’s loan. This program is called the FHA 203b loan, and can only be used for repairs that will amount to less than $5,000. Unfortunately, it can only be used on FHA loans (excluding VA or conventional loans). If the house you are looking at purchasing will require more than $5,000 to cover repairs, there is an FHA 203k loan that can be used on any house. The downside to this is that even though you can cover an unlimited amount of repairs, it will take more time to close and you’ll get slapped with more fees.

Another option is Fannie Mae’s HomeStyle Renovation mortgage. This loan is designed specifically for homeowners who want to buy an as-is home to customize to their liking. This mortgage allows you to finance improvements and renovations for up to 75% of the property’s appraised value post-completion. According to Fannie Mae’s website, “With standard pricing and conventional execution, loan funds can be delivered even before the project starts (subject to lender approval).” Even landscaping costs can be covered, provided the improvements are attached to the property.

This is why we highly recommend that before you even go looking for a home, you should talk to a lender to see what requirements they have for offering a loan. That way, you know exactly what you can and can’t fund, saving you time and money.


Hopefully this gives you a good idea of what kind of financing options are available to you should you choose to purchase a home as-is. The final decision is ultimately up to you and your needs, so make sure you do any further research if needed.

And remember, there is a lot of responsibility that comes along with buying an as-is home. You never quite fully know what you’re getting into, so it helps to gather as much information as possible so that you have knowledge on your side when going into a deal. You need to really consider whether it is worth it to take out a loan for such a risky, time-consuming process. You could end up sinking a lot of money into something that may potentially lose value. However, if you truly believe you can pull it off, you’ll garner a huge sense of accomplishment and reward that a traditional home sale just cannot provide.


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