Thinking about buying a fixer in Lebanon and wrapping repairs into your mortgage instead of draining your savings? You have options that can make this practical. Many homes here are older and need updates, and that can be a smart value play if you plan ahead. In this guide, you will learn how the Pennsylvania Housing Finance Agency’s Purchase & Improvement option typically works, what projects are eligible, and the steps to close with repair funds set aside. Let’s dive in.
What Purchase & Improvement is
Purchase & Improvement, often called P&I, lets you combine the purchase price and eligible renovation costs into one mortgage. The lender evaluates the home based on its after-repair value, or ARV, using your approved scope of work.
The big benefit is one loan and one closing. You can buy a lower-priced home that needs work and fund the repairs without a separate rehab loan or large cash outlay upfront. Confirm current program details with PHFA and a PHFA-approved lender because product names and limits change.
Who it serves
P&I is designed for owner-occupants buying a primary residence. It commonly pairs with first-time buyer products, which may include homebuyer education. Standard credit, income, and underwriting rules apply based on the mortgage type your lender uses with PHFA.
Eligible property types
- Single-family homes and many 1–4 unit owner-occupied properties are typically allowed.
- Condos or co-ops can have extra rules.
- Older homes are common in Lebanon and can qualify if the improvement plan addresses required repairs.
Eligible projects in Lebanon
Most programs prioritize work that improves safety, code compliance, and habitability. Typical eligible items include:
- Electrical, plumbing, roofing, structural repairs, and heating system work
- Kitchen and bathroom updates tied to repair or function
- Systems replacement such as HVAC, water heater, windows, and siding when needed
- Accessibility upgrades and energy-efficiency improvements like insulation or storm windows
- Cosmetic work, such as flooring and paint, may be allowed when part of the plan
If the home was built before 1978, plan for lead-based paint rules when work disturbs painted surfaces. Safe work practices and clearance testing can be required based on scope and dollar thresholds.
What usually is not covered
Most programs exclude or limit luxury or non-essential work. Commonly restricted items include:
- High-end luxury finishes or additions that exceed reasonable repair standards
- Pools, many detached outbuildings, extensive landscaping, or new fences unless required for code or site stability
- Any work that conflicts with zoning or turns into a full teardown or rebuild outside program intent
How the money is structured
The lender orders an appraisal that reflects the after-repair value based on your approved scope and contractor bids. Your combined financing is compared to that value to determine the maximum loan amount and loan-to-value ratio. Exact limits vary by product and lender, so verify specifics.
At closing, the repair funds go into an escrow holdback. The lender releases money to the contractor in draws after inspections confirm milestones. Expect a contingency reserve of about 10 to 20 percent of the rehab budget to cover surprises. If your mortgage type requires mortgage insurance, your lender will include that cost in your payment estimate.
Step-by-step process
1) Pre-offer preparation
- Speak with a PHFA-approved lender early to confirm eligibility for you and the property.
- Outline a realistic scope with an experienced contractor who understands rehab loans and draw inspections.
2) Offer and contract
- Write an offer that includes financing and scope approval contingencies.
- Plan for time to finalize contractor bids and the ARV appraisal.
3) Scope and contractor bids
- Provide a detailed work write-up with itemized bids.
- Lenders often require licensed, insured contractors and may limit self-performed work.
4) Appraisal and underwriting
- The appraisal reflects the ARV using the approved scope.
- Underwriting reviews the combined loan amount, your debt-to-income, and reserves.
5) Closing and escrow holdback
- You close once on the purchase and the repair escrow.
- The holdback account and draw schedule are set before work begins.
6) Construction and draws
- The contractor follows the scope and schedule.
- Lender or third-party inspections verify progress before each draw. Lien waivers accompany payments.
7) Completion and final release
- Final inspection confirms the scope is complete. Any required certificates of occupancy and permits must be closed.
- The lender releases remaining funds and closes the draw account.
Contractors, permits, and inspections
Work with licensed contractors who have rehab-loan experience. Lenders typically ask for licenses, insurance, references, and signed contracts. Owner-performed work is often restricted.
Permits are issued by Lebanon City or the relevant township building department. Get permits approved early and keep inspections on schedule, because unpermitted work can delay or block the final draw. If the home sits in a historic district, expect a review for exterior changes and plan the timeline accordingly.
Timelines, risks, and planning
P&I loans take more time than a standard purchase because you must finalize the scope and order an ARV appraisal. Construction is usually expected to finish within a defined period, commonly 60 to 180 days. Confirm current timeframes with your lender and PHFA.
Plan for common risks and build in protections:
- Underestimated costs. Use multiple bids and include a contingency reserve.
- ARV shortfall. If the appraisal comes in low, be ready to adjust scope or consider alternatives.
- Contractor delays. Vet contractors, require insurance and lien waivers, and document progress.
- Lead-based paint or code surprises. Budget time and money for remediation if needed.
Practical buyer checklist
- Speak with a PHFA-approved lender before making an offer.
- Get 2 to 3 contractor bids and a detailed work write-up.
- Confirm that purchase price plus rehab fits the lender’s ARV limits.
- Budget a contingency of about 10 to 20 percent for surprises.
- Verify contractor licensing, insurance, and draw process experience.
- Contact the municipal building department early for permits and inspection timelines.
- Plan for lead-safe practices if the home was built before 1978.
- Expect escrow holdback, periodic inspections, and lien waivers for each draw.
Is P&I right for your Lebanon fixer?
If you want to buy an older Lebanon home that needs work, P&I can help you secure the house and fund essential repairs with one mortgage. Success comes from accurate ARV expectations, realistic bids, and a clean permitting plan. Start early with a PHFA-approved lender and a contractor who knows the draw process.
If you are weighing properties in Lebanon City or nearby townships and want help finding homes that fit this path, let’s talk. Schedule a quick strategy session to review your goals and map the steps to closing with repair funds in place. Connect with Unknown Company to schedule a consultation.
FAQs
How PHFA Purchase & Improvement financing works
- It lets you combine the purchase and eligible renovation costs into one mortgage, with repair funds held in escrow and released in draws after inspections.
What projects are eligible under P&I
- Typical items include safety, code, and habitability repairs, plus energy and accessibility upgrades. Cosmetic work may be allowed when part of the plan.
Whether you need a contractor before making an offer
- You should line up contractor proposals early, since lenders need a detailed scope and itemized bids to order the after-repair value appraisal.
How long renovations can take on a P&I loan
- Lenders often require completion within a set period, commonly 60 to 180 days. Confirm current timelines and any extension options with your lender.
Who holds and releases the rehab funds
- The lender holds funds in an escrow holdback and releases money to the contractor in draws after inspections and lien waivers.
What to expect with pre-1978 Lebanon homes
- If work disturbs painted surfaces, follow lead-safe practices and any required testing or clearance. Budget time and costs for compliance.
How historic or HOA rules affect your project
- Exterior changes in historic districts or HOA communities may require approvals. Get these early to avoid delays and scope changes.
