FHA 203k Pro's & Con's
Given can only afford wrecks, am encountering most of these wrecks are either all-cash or FHA 203k loans which I have no idea what it is hence asking for some pro’s & con’s, FHA banks, FHA contractors, recent experiences (good or bad)
Given can only afford wrecks, am encountering most of these wrecks are either all-cash or FHA 203k loans which I have no idea what it is hence asking for some pro’s & con’s, FHA banks, FHA contractors, recent experiences (good or bad)
I am looking to do a 203K program also and are looking for contractors. Does anyone have good recommendations?
Thanks!
Equt, could you please describe what type of work you are having done and are you happy with your general contractor? If so, what is his name and number? Thank you.
2.25%??!!!!!!!!! ouch. the upfront cost tally is really going higher & higher.
I stopped doing them awhile back but one thing m4l you need to update is that the UFMIP is now 2.25% not 1.75%
I bought a borderline habitable property and decided against 203k because the FHA would have required certain things that I didnt want to do like add cabinets in the kitchen (the house has a nearly original kitchen with no built-in cabinets), and I couldnt get a straight answer on what specifically they meant by “lead abatement”. I had visions of them requiring either that I pay someone to strip all painted surfaces down to bare wood or coat the entire house in “encapsulating” paint. Also the 6 month deadline seemed like cutting it close, and in hindsight it would have been insanely stressful on top of the normal stress of renovation. I got lucky and the mortgage company considered it habitable but it took much discussion with the sellers and a return visit by the appraiser.
mopar, some wrecks do NOT qualify for conventional mortgage hence it’s either all-cash or 203k loans. that’s where I’m at. Am not considering 203k loans because it allows small down payment or that it provides some or all the renovation $$$ in the loan but rather I dont have enough cash to do an all-cash offer on such a wreck.
We looked into 203K loans, but ended up not doing it.
My biggest question was: Would we be able to find a good, reputable contractor at a reasonable price we wanted to work with who would be willing to put up with all the 203K loan red tape & hoops the government requires? Or would we be stuck with shady dudes? Or would they charge us more than we could afford?
We just closed on a property using a 203k loan–also w/ Barry Koven at Wells Fargo. Barry was great and very up front about all the ins and outs of the loan.
-I’m not sure if you can avoid the extra fees by putting more down.
-renovation costs, the bank won’t let you borrow more $$ than the house is worth post-renovation. That’s what the appraisal is based on–post-renovation
-the rate might be a little different, but they’re pretty low right now. It’s not bad. The closing costs for us were more of a bugger.
-If you get a lot of your planning done before you close, it will help you can hit the ground running with the renovation. Permits do take time.
-The bank will definitely vet your contractor, but that’s a good thing. They need to be financially stable, insured, and legit. The contractor will be paid by the bank 3-4 times over the course of the reno and after the work is done. The contractor needs to be able to start on the renovation with their own money. An FHA guy/gal will check the work to make sure it’s done right before paying the contractor. There’s some paperwork involved in getting everything to work.
We’re finding that we just need to keep on top of the situation. It’s only been a month so far, but for us, the reno. and the loan are working out well. Good luck!
some random thoughts / questions (post doing some reading last night):
– there’s some stiff upfront (1.75% of loan) and on-going Mortgage insurance fees (.5 – .55% of loan) – could one avoid it if putting down 20%?
– is there a cap on the renovation bucket of $$$ in the loan and how is that determined?
– is the renovation bucket of $$$ just to get the ppty up to “habitable” condition (ie reason why it was previously not qualified for conventional loan) or could it cover a tricked out expensive renovation too?
– what’s usually the rate diff btwn this and conventional loans – half a pt?
– does it make sense to try to re-fi to a conventional loan once the ppty is renovated/repaired to “habitable” condition?
– I’ve seen fixers that’ve closed for a while already and they appear to have little to no work done (ie wondering if gettng landmark approval, permits,…. is taking forever) so I wondering is the 6 month renovation time enough time
– is it true that these loans basically box one into the premium expensive general contractors cause banks have tough requirements on the licensed GC’s?