Thinking of doing a FHA 203K loan, any tips? (short sale, real estate)

[Nightowls]

I saw a property I really liked but the house isn't ideal. So now I am suddenly thinking of doing a 203K.

Would someone with experience in using 203K mind sharing some tips? And what is/isn't included? And any general remodel/repair tips?

[Elke Mariotti]

A quick overview (not all inclusive! )

• A 203(k) loan allows you to borrow money for both, the purchase and the improvements, in one loan
• Minimum amount for improvements is $5,000
• Your project must be completed within six months
• You must use licensed contractors only; they should be familiar with how 203(k)s work. Certain rules need to be followed and there is paperwork to deal with, both for the borrower and the contractor(s)
• No do-it-yourselfers!
• Funds over the purchase price amount are held in an escrow account and paid out to contractors as the work is completed - no advance payments to contractors!
• For homeowners only, not for investors
• You must qualify for the entire loan amount (purchase price plus improvements)
• Because it's an FHA loan, you don't need perfect credit
• You can put down as little as 3 1/2% (not necessarily advisable)
• It's an FHA loan, so there will be MIP (mortgage insurance premium, the equivalent of PMI in conventional loans)
• Beware of extra fees, especially from lenders who don't do a lot of 203(k) loans

A few of my buyers have used this loan successfully - it can be a good thing, but it's not for everyone. An experienced loan officer can guide you as to whether or not it makes sense for your situation.

[Elke Mariotti]

Originally Posted by Elke Mariotti

A quick overview (not all inclusive! )

• A 203(k) loan allows you to borrow money for both, the purchase and the improvements, in one loan
• Minimum amount for improvements is $5,000
• Your project must be completed within six months
• You must use licensed contractors only; they should be familiar with how 203(k)s work. Certain rules need to be followed and there is paperwork to deal with, both for the borrower and the contractor(s)
• No do-it-yourselfers!
• Funds over the purchase price amount are held in an escrow account and paid out to contractors as the work is completed - no advance payments to contractors!
• For homeowners only, not for investors
• You must qualify for the entire loan amount (purchase price plus improvements)
• Because it's an FHA loan, you don't need perfect credit
• You can put down as little as 3 1/2% (not necessarily advisable)
• It's an FHA loan, so there will be MIP (mortgage insurance premium, the equivalent of PMI in conventional loans)
• Beware of extra fees, especially from lenders who don't do a lot of 203(k) loans

A few of my buyers have used this loan successfully - it can be a good thing, but it's not for everyone. An experienced loan officer can guide you as to whether or not it makes sense for your situation.

Forgot to mention for the first item, that the total amount the buyer can borrow is based on the anticipated new market value after improvements.

[AJS Alex]

Expect a higher price from the contractor also...

The regular paperwork is a pain in the ass, change orders make it more difficult. I have to work with my own money on your project which I generally object to... Im not a bank and dont particularly like to fund homeowner projects.

Most other legit contractors I know expect a higher profit off 203K projects.

[Nightowls]

203K is the max of the loan correct?

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My real estate agent did mention that downside - finding contractors willing to deal with it.

[Elke Mariotti]

Originally Posted by Nightowls

203K is the max of the loan correct?

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.

203(k) is a type of rehab loan, not an indication of the loan amount.

[ANM1982]

We went for a 203k loan for a short sale and had much difficulty finding contractors who were willing to do the scope of work needed. The folks offering regular 203k loans were far and few between as well (most lenders were only willing to do streamlined 203k loans, which only offer you $35k above the purchase price. We needed at least $150k to bring the house to livable condition). United Northern Mortgage Bankers' George Ockovic was the most responsive and held our hand throughout the process, securing us the loan amount needed.

Sadly, the short sale purchase fell through because the seller's bank was dragging its feet, and the house is still vacant 5+ years later. So we lost some money in having a contractor write up a scope of work that allowed the 203k to be granted.

[Kbinspections]

Rarely done on LI....

[TomMoser]

There are very few contractors who are willing to deal with the headache.

[Nightowls]

How did the rehab loan gets it's '203k' name?


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Does anyone have names of contractors that will do 203k work in Suffolk?