203k renovation loans

So I’m thinking about taking on a gut reno and maybe applying for a 203k, but I’m only just beginning to do the research. I’ve read through the eligibility requirements but I’ve heard it’s really tough to qualify. It seems like the toughest thing is that you need enough cash to cover the materials and labor until they are reimbursed, but how much exactly? Do they mean that you would need enough money to do the entire project?

I also see that this is bundled in with an FHA mortgage. Initially I had thought it would be a second loan. I would prefer a conventional mortgage because of the low interest rates. Usually, the advantage of FHA is the 3-5% down payment, but I don’t want to put down that little because it would raise the monthly payments. But is it smarter to save my cash if I’m embarking on a major reno?

To put my situation bluntly, I have enough cash to make a full 20% down payment and maybe have a little bit leftover OR pay for the entire renovation. But I don’t have enough cash to cover both. Would I be a good candidate for this type of loan?

I’d love to hear any experiences…what the process was like, what the very first step is, etc. (Obvi, I’m a first-timer here so feel free to scare me off) Thanks.

workerb

in Brownstoner Renovation 13 years and 8 months ago

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anonymous | 13 years and 7 months ago

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This is Barry Koven from Wells Fargo and we do have a conventional Purchase and Renovation Loan whereas you do not have to pay mortgage insurance if you are putting down 20 percent or more. It is similar to the 203K loan except no mortgage insurance. In some cases with a multi family high balance loan 25 percent down may be required. Please call or email me for the details and to go over your scenario. 718-780-9103 – Barry.Koven@wellsfargo.com – www.BrooklynLending.com

callalily | 13 years and 8 months ago

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We were in the same situation and chose to pay for the renovation ourselves. We put down ten percent. The cost of borrowing for a 203K is higher, there are additional associated fees, and we were afraid we would not be able to find the contractor of our choice.

I’ve since heard there are architects who will work with you on a 203K and they can bid out to any contractor or at least to many contractors. I think this may be the way to go, if you do decide to do a 203K.

We acted as our own contractor. Flooring, plumbing, and electric were great, but some other stuff we have to do over plus there was some stuff we didn’t realize had to be done until it was already too late. We probably could have avoided that had we started with someone experienced with restoring old houses. Possibly we could have gotten more done for less (or not, hard to say). 

I recommend you talk to an architect as well as Wells Fargo, then make up your mind. A lot also depends on what you want and need to have done.

bullfrog | 13 years and 8 months ago

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A 203k loan is not a standalone mortgage and therefore cannot be bundled. The 203k is the actual purchase mortgage that allows the cost of the renovations to be included in the purchase mortgage.

slopette | 13 years and 8 months ago

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Does anyone have an answer on the bundling? I’m in the same position as the OP, would like to be able to take out a conventional mortgage and then the 203k.

shahnandersen

in Brownstoner Renovation 13 years and 8 months ago

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Step 1 is to sit down with Barry Koven at Wells Fargo. He is phenomenal at what he does and will walk you through the entire process. You don’t front the money on the reno, the contractor does. This is why many contractors shy away from this process, they are essentially giving you an interest free bridge loan as there is no up-front money with a 203K. I used Bullfrog Builders on my 203K reno and they are rapidly becoming the goto contractor for 203Ks in NYC.