All mortgage loans are not created equal. If you are looking for a loan, you have probably discovered the array of loan types and options. It can be confusingand are easier to qualify for than conventional loans. They are also guaranteed to the lender, which allows the borrower to obtain more favorable loan terms.

The amount of a loan is determined by the value of the home, minus what you put down as a down payment.

For example, let’s assume youre putting down 20% in cash (or getting a 20% second). 20% of $150,000 is $30,000. So, the loan will be for $120,000, regardless of how much you’ve been preapproved for.

One option you could have is, after purchasing the home, taking out a construction or rehab loan. This is where the loan company lends you the money required for the repairs, assuming the value of the home increases by at least that much (when the repairs are complete, it would appraise at $160,000). When the repairs are complete, the house is reappraised at the higher value and that $10,000 is then rolled into the original amount of the mortgage.

But, now you have a first mortgage that is more than 80% loan-to-value. So, you may end up having to pay mortgage insurance (not required for an LTV that’s 80% or less, and not tax deductible).

My advice would be to buy the home as-is, and then take out a signature loan (high interest rates, though) or come up with the cash to do the repairs.

Only if the appraisal came in that high, and your lender qualified your for that amount.