How to Refinance With Foundation Problems

Refinancing requires a commitment between the homeowners and mortgage company.

Refinancing requires a commitment between the homeowners and mortgage company.

A home with foundation problems can quickly turn into a nightmare for the owners. The cost of repairs are generally high and many individuals will struggle to find the necessary money to complete repairs. Refinancing the home, if you have enough equity, would allow you to use extra money for necessary repairs. Refinancing is beneficial when interest rates are low. The low rates will decrease monthly payments or allow individuals to switch to a shorter-term mortgage. Refinancing is possible on a home that has foundation problems.

Items you will need

  • Loan application
  • Income tax statements
  • W2
  • Bank statements
  • Bills

Order an engineer's inspection of your home. The engineer will come to your home and evaluate all aspects of the home that can be visualized. Point out any issues such as plumbing problems, electric shorts, standing water, heat inconsistencies, leaks, cracks, crumbling foundation, damaged wood, or mold. The inspector will help you determine the extent of your foundation damage.

Contact contractors who specialize in home restoration or home repair. Provide the contractors with a copy of the engineer's inspection and allow the contractors to walk through your home to see the damage first-hand. Obtain quotes from the contractors to restore your home to code. Review the quotes, investigate references of the contractors, and choose a contractor.

Order an appraisal. An appraiser will come to your house, take pictures, measure the living spaces, draw a simplified map of the home and property, and evaluate the general condition of the property. Provide the appraiser with a copy of the engineer's report. The appraiser will return to their office and compare your house to similar properties in the area. Based on the similar properties, the appraiser will award your home with a determined value or appraisal. Ask the appraiser to create two appraisals. The first appraisal will value your home in the as-is condition. The second appraisal will value your home in fully restored condition.

Review the appraisals. Add the cost of repairs to the total you owe on your current mortgage. Lenders will not consider refinancing a home if this value exceeds the restored appraisal value.

Obtain an application for a mortgage refinance from a lending institution. This form may be the same as a general mortgage application. Complete the application using information from your income tax statements, W2s, bank statements and bills. Submit your application, engineer's report, contractor quote, and appraisals with the documents required by the lender. Examples of documents include income tax statements, pay stubs, and W2s.

Review the application and credit score with the lender in person, via phone, or email. The lender will review your application and discuss your financial situation to include assets, income, debts, current value of property, and the goals of your refinancing process. The lender will discuss the loan-to-value ratio and your credit score to determine whether you qualify for a loan.

Discuss the goals of refinancing your home. The bank will need to know that you intend to complete repairs with money obtained from the refinance. The lender may offer you less money, a higher interest rate or require a special condition in the refinance contract that sets aside a portion of the money in a trust account to be used strictly for repairs.

Order a survey of your property. A surveyor will come to your home, take photos of the property, note the position of any structures on your property, and submit the completed map to the lender.

Contact insurance companies who offer homeowner's insurance. Provide the insurance company with the address, square footage, building type, and answer questions about the surrounding area. Disclose the information about current condition and expected repairs. Get quotes for yearly coverage. Choose the insurance company that offers the best coverage for you. Request an insurance binder be sent to the lender.

Complete the closing documents. The lender will explain all closing documents and request your signature on all the necessary forms. The host will also request payment for any fees that were incurred during the refinance process that will not be rolled into the loan. Fees can be paid via check, cashier's check, money order, or bank transfer. Ask your lender to provide details on payment prior to closing to meet payment deadlines.


  • The type of loan program you choose will dictate how much you can borrow during your refinance. Loan programs will typically finance up to 100 percent of the appraised value, but will require a set amount for a down payment.

About the Author

Jennifer Young has worked as a writer, editor and book publisher for professional life coaches and business entrepreneurs since 2007. She has specialized training and experience in project management and procurement, as well as contracting services. Young earned Bachelor of Arts degrees in both history and Japanese studies.

Photo Credits

  • Thinkstock/Comstock/Getty Images