203k loans....

[BJewels79]

Has anyone ever used a 203K loan? Can you tell me about it?

[seeing_stars]

We did! Our house was a foreclosure that would not have been habitable without a lot of work. We found a broker that had a lot of experience with 203ks and also a contractor that was familiar with the extra paperwork and wait times on payment. The process would not have been pleasant without people who knew how to navigate the 203k process. Our interest rate was slightly higher than a regular FHA loan would have been, but it was worth it to us to get such a great house. 7 months later we are in the process of a refi with our original broker who is taking us from 5.5% to 4.875 with no closing fees, so the higher interest was not an issue. Also, unlike many buyers at the same time we bought, we are not upside down, our house is valued much higher than it was before the renovation (obviously) , about 25k more than we paid after the reno was factored in.

If you have specific questions I am happy to answer if I can!

[BJewels79]

I do have a couple of questions How did you go about finding someone who is familiar with this sort of loan? Was it a fairly quick and easy process? Did you have $$ to put down? The home the loan would be on has no loans on it (never has), so this would be the only one on the house and only one for us. Is it a pretty strict process as far as what you can and can't do to the house? We aren't looking into doing things we consider "luxury" items, but the house needs plenty of cosmetic work (all flooring, new walls, ceiling work in some rooms, paint, has a gutted kitchen and bath, etc etc), a central heat/air unit, new wood heater, new appliances...Plus the back addition is basically falling apart. We'd love to just rip it off (small small area that includes a porch, 2nd bath and laundry room) and add on to the entire backside of the house instead which would increase the kitchen sq footage, plus more storage space and such. However, not sure if this program would allow for that.

And we only own a mobile home, so never been through a home loan process at all! Currently have no down payment (would once we sell our current home), but I went through the SHIP classes years ago and hopefully that may work to help with a down payment. Any advice or information would be helpful I'm thinking about calling our local bank this week to see about setting up a time to come and discuss all this with them

[seeing_stars]

We actually found our broker through facebook. He randomly added me and I accepted since we were looking for a home at that time. I'd see him post status updates about closing 203k loans and when we decided on our house we contacted him. He already knew some 203k contractors but I googled "203K Contractor+ my state" and found my contractor that way.

There are two different kinds of 203k- one is a 203k streamline, which is what we did and the repairs need to stay under $40k. The appraisal (assuming the work to be done) must be higher than the loan amount. A standard 203k required more paperwork, but allows more money for the repairs.

There are rules about what you can and can't do with the money. We did drywall repair, paint, flooring, granite counter tops and new fixtures. You can also do windows, AC, appliances, etc, but I don't think that you can move around interior walls or do additions.

We did have to pay a 3.5% down payment, there are not really programs that have no down payment aside from USDA loans in rural areas and a USDA loan would not give you rehab $$. As far as I know, most if not all 203K loans are done by Bank of America. We were sold to BOA immediately.

HTH!

[BJewels79]

Thanks! We are in a rural area and would qualify for most loan programs I think. The house has no drywall (has old panelling that has buckled and has holes in it in some places) so that is definitely a HUGE thing we'll be doing. Definitely have no plans to move walls around inside though. Sounds like we could at least rehab the existing addition for now. I thought additions would be an okay thing based on this:

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

Luxury items and improvements are not eligible as a cost rehabilitation. However, the homeowner can use the 203(k) program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements. All health, safety and energy conservation items must be addressed prior to completing general home improvements.

I'm hoping we can use the SHIP program in addition to a 203K loan....it would cover down payment and closing costs (at least it would when I took the class). Need to look into that also!

[BJewels79]

Oh! And I have no idea what it would appraise for, but on local tax rolls the "market value" including the land is $90K currently. We definitely will be staying well under that as far as what we can afford.

And thank you again for all this information! I don't know anyone IRL who has done this. I'm hoping to talk DH into us going and getting much more indepth with someone in the coming week

[seeing_stars]

I hope it works out for you!We had several people discourage us from taking on a big project, especially since we closed, had the remodel done, I had major knee surgery, we moved, had 2 birthdays, Christmas and an anniversary in about 6 weeks. It was intense, but so worth it- we got an awesome house with lots of room and a big yard with tile/carpet/countertops that I chose, it was ideal!

[gabbyraja]

We want to do this, too. We don't have a house in mind yet, not planning until next spring or so. But we'll have probably 10% to put down at the time. We think we'd rather go for a big house that's not pretty than a small house that's "move-in ready". After-all, we'll have 5 kids... And a small budget... But I've never been through renovations before. (well, not by a professional. Dh once reno'd our tiny bathroom. Took him 3 years to get it finished! NEVER again!) Were you able to live in the house while this major work was going on? Or did you plan to stay in your old home/apt while the reno was being done? How long did it take you?

[BJewels79]

We're lucky....we currently live in a mobile home...that we own outright...next door!All of our reno will be done befor we move in. I still have yet to get DH to move on this though I had hoped we'd be far enough long already that we could take advantage of a few of the tax rebates that end this year (updated ac system, etc etc)

[seeing_stars]

Originally Posted by gabbyraja

We want to do this, too. We don't have a house in mind yet, not planning until next spring or so. But we'll have probably 10% to put down at the time. We think we'd rather go for a big house that's not pretty than a small house that's "move-in ready". After-all, we'll have 5 kids... And a small budget... But I've never been through renovations before. (well, not by a professional. Dh once reno'd our tiny bathroom. Took him 3 years to get it finished! NEVER again!) Were you able to live in the house while this major work was going on? Or did you plan to stay in your old home/apt while the reno was being done? How long did it take you?

We stayed in our rental until the reno was done, which took less than 2 weeks because of a very organized general contractor who was ready to start just as soon as the closing happened. If you get a 203k you can elect to do some of the work yourself, but you have to sign an agreement that it will be done in a certain amount of time and that you have the knowledge and skill to get it done.

[gabbyraja]

2 weeks! Holy cow, that sounds awesome! I have to find somebody good like that. You've given me hope. Thanks for the answers.

[BJewels79]

Well, we won't be able to use the SHIP program It's strictly for someone who is buying a home And I'm having a hard time finding a local bank that is familiar with 203K loans. I called the HUD 800 # and the websites they sent I haad used already....no lenders here that deal with FHA loans apparently. I find it hard to believe...we have 5 banks....all big banks except one local one.