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I am a realtor and I am currently in process of purchasing a home with this loan. It is horrible. There are so many fees attached. My closing costs are about $12k for a $104K home. I am not happy with this at all. The consultant I have is going to up some of my repair costs so I am going to have an increased loan and closing costs. They go by what the consultant says so I am really pissed. All contractors have to be liscensed and insured. So what he is saying is going to be $35K worth of work, I could have got a few handy men I know to complete the job for about $20-25K.
I am a realtor and I am currently in process of purchasing a home with this loan. It is horrible. There are so many fees attached. My closing costs are about $12k for a $104K home. I am not happy with this at all. The consultant I have is going to up some of my repair costs so I am going to have an increased loan and closing costs. They go by what the consultant says so I am really pissed. All contractors have to be liscensed and insured. So what he is saying is going to be $35K worth of work, I could have got a few handy men I know to complete the job for about $20-25K.
The idea behind this loan was a good idea but as you say
they go by what the fha consultant says as far as repair costs go, The reason they up the repair cost is simple, take a look at the rate schedule and you will see that the more they write the more they make in their fee. I will see if i can find the fee chart and post it for you
I am interested in purchasing a home that needs total renovation using a 203k loan, but I am concerned about how much money I will need after closing. I was told that I will have to have money for initial renovations before any money will be released. Does that include dispersements for labor and materials or just labor? Is any money dispersed for materials to complete the initial renovations?
A problem I discovered with FHA loans is that you need to pay PMI for the entire length of the mortgage. This can add no small amount to your monthly mortgage payments.
I didnt discover this until I had 20% equity and asked to have the PMI removed. I felt like a boobie.
A HUD/FHA 203(k) mortgage can work if:
(a) Your lender is familiar with the program, and
(b) Your lender is willing to work with you (a Buyer) with this type of program.
I've found that lenders who are unfamiliar with the program can be dismissive about it and try to convince a Buyer to go with a straight FHA loan.
First of all, there are only certain lenders who participate in this program. The website at hud.gov lists who they are. However, the list is sometimes not helpful as you may get a wrong or nonworking number. Yes, it is confusing and frustrating when this happens.
Second, I was looking at properties recently that would qualify for the 203(k) program (this is in VA though, not NJ). A big advantage was that my Realtor knew a lender and this lender worked with us closely so we didn't go through any nightmarish things. In fact, I didn't realize how easy it actually was. The lender, BTW, is Wells Fargo.
A problem with the 203(k) is that you have to remedy the problems before going to Closing. For example, if you need some kitchen and bathwork done, the Lender has "approved contractors" who they work with (i.e., Lowes, Home Depot, Sears). This group will provide an estimate and complete the work in a timely manner BEFORE the Closing date. I think a Buyer can hire their own contractor but I'm not sure how that works. I believe the Lender has to approve the contractor, whoever that is.
Another problem is that the cost of repairs has to be built into the loan or paid out-of-pocket by the Buyer. This can be problematic for first-time FHA-approved buyers since cash is an issue as well on the limits on borrowing.
Another problem is the Seller. Some Sellers don't want to be bothered with the timelines and requirements of this type of loan from a Buyer. For example, if a Seller is trying to decide between a Buyer with conventional financing and more money down and an FHA 203(k) Buyer, then guess who they'll probably pick? With real estate prices down, we now see investors coming in who can buy fixer-uppers faster and with more cash than a first-time FHA 203(k) Buyer.
There are also some peculiarities with this loan. For example, it is not restricted to a first-time buyer. Someone can qualify who has previously owned a home as long as they have not owned a home within the last 3 years.
Another peculiarity is that everything that needs to be remedied does not need to be remedied --okay, for example, a house with 3 bathrooms needs renovations for all 3. The FHA 203(k) can be used to repair 1 bathroom and still "pass" as the loan requires that only 1 bathroom needs to be in usable/functional order. IOW, you can buy the house and get the other 2 bathrooms renovated AFTER you buy the house and on your own time and money. At least that's what my experience was.
A problem I discovered with FHA loans is that you need to pay PMI for the entire length of the mortgage. This can add no small amount to your monthly mortgage payments.
I didnt discover this until I had 20% equity and asked to have the PMI removed. I felt like a boobie.
Can you do a conventional refinance to get out of it?
A HUD/FHA 203(k) mortgage can work if:
...
There are also some peculiarities with this loan. For example, it is not restricted to a first-time buyer. Someone can qualify who has previously owned a home as long as they have not owned a home within the last 3 years.
...
Is this still true? I was thinking of selling my coop in NYC and looking for a single family in NJ in need of work. Would I not qualify for the 203K?
Can you do a conventional refinance to get out of it?
You can refinance out of it into a conventional loan, but I believe you have to wait 6 months.
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Old Thread, Follow-up question...
