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Mortgage  Question?
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Can I use sweat equity to get a mortgage to buy a home?

I am renting a home and fixing it up with my own money and sweat equity. Is there a way I can use the equity I have contributed to get a mortgage to buy the property. My credit score is low but I do not want an FHA Mortgage because of the mortgage insurance premium. What is my best option?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Based on the information you provided the mortgage program that may be most applicable to you is the Fannie Mae HomeReady Program. This program is designed for individuals with lower credit scores and allows borrowers to purchase properties with a down payment as low as 3%. We provide a comprehensive overview of the HomeReady Program as well as a summary of other low / no down payment mortgage programs on FREEandCLEAR. Lenders should consider the money and sweat equity you have invested in the property as part of your down payment. Please note that most lenders require receipts or other records to verify the money and time you have invested to renovate the property. Fannie Mae also offers the HomeStyle Renovation Program for borrowers who are looking to do extensive renovations on a property they are buying. We also provide a thorough overview of the HomeStye Renovation Program on FREEandCLEAR. Neither program requires you to pay an up-front mortgage insurance premium like the FHA Mortgage Programs, but both the HomeReady and HomeStyle Renovation programs typically require the borrower to pay private mortgage insurance (PMI), depending on your down payment and loan-to-value (LTV) ratio.

The HomeReady and HomeStyle Renovation Programs are offered through local lenders. We recommend that you use our INTEREST RATES feature contact three-to-four lenders to understand what programs they offer and how they would handle your unique situation. 

You mentioned that you are less interested in the FHA Mortgage Programs but you may want to consider the FHA 203(k) Program for borrowers who are buying "fixer-uppers." We provide an overview of the FHA 203(k) Program on FREEandCLEAR. FHA Mortgage Programs are also offered by approved lenders in your area.

The final mortgage program you should review is the NACA Purchase Mortgage Program which is also designed for individuals with lower credit scores and limited funds. We provide an overview of the NACA Program on FREEandCLEAR. The NACA Program application process can be time-consuming and challenging so please keep that in mind when you review your mortgage options. If you are interested in the NACA Program you should contact NACA directly by visiting the NACA web site.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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