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Nick Noon
Pro Member
  • Chelmsford, MA
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Questions on 203K loan that I Can't Find On Previous Threads

Nick Noon
Pro Member
  • Chelmsford, MA
Posted Mar 30 2015, 12:41

Hello all BP members!

I am hoping I can find some information on 203k loans that I can't seem to get from looking at some previous posts from other members.  I am familiar with the rules and regulations of the loans and the two different types, but I am hoping a 203k loan veteran can explain a couple questions that I had.

First off, I am looking for either a multi family property to house hack (around $250,000 or less) or a single family home that I can buy for cheap (under $100,000) and do a full rehab and owner occupy.  One strategy being to get passive income, and the other to hopefully get enough equity in the single family to be able to pull money out at a later date to invest.

I am worried about how much money I am going to need on hand to be able to pull this off. I have $5,000 in savings to invest plus another $5,000 in my 401k I'm going to pull out as a loan that I pay back to myself.  So I have about $10,000 total for down payment and such.  I'd be looking for seller to pay closing.

Question #1:  Plans.   I have spoken with my mortgage lender who is very familiar with 203k loans and she said that I need to have a set of plans that the mortgage company will review.  Am I going to need to hire an architect to design the plans?  I am obviously talking about a major renovation.  I feel like this would eat up most of my capital alone.  Do I hire the architect after I get an accepted offer?  Can this cost be rolled into the 203k loan?  I do construction management for a living and I can read and draw plans very well.  I am wondering if I can draw up my own plans on smaller reno's (under $35,000 for example)

Question #2: Payment on Loan.   When do I have to start paying for the loan?  I am currently renting and would not want to be paying the nut on both properties.  I have heard on the streamline loan your payments start 30 days after loan acceptance, while the conventional 203K starts getting paid after renovation.  Is this true?

Question #3: Contingency Cash.  My lender says that I should keep $5k on hand for other closing items...second appraisals and such. I was hoping to be able to get the seller to pay the closing costs if I paid a little extra for the property. I think FHA allows up to 6% by seller. Do I need to keep some contingency money for other additional costs?

Question #4:  Permitting.  I am also a little worried about the building department having to review the plans and obtain a permit.  Should I start getting the plans to the building department while I am seeking the financing?  My son is due to be born in October and I would like to be able to get the loan closed and work completed by then.  Does this seam feasible?  

I know it's a lot to answer, but I want to get a feel for when I should start looking into these items.  After I make the offer?  Properties are going fast in my area.  

I also have a few GC friends in the area I was planning on using for the work, but i was going to do a lot of the finish work so I should be able to get some extra income from that from the loan. 

Does $10k in capital seem like enough...it seems like I could get caught in a bind.

I appreciate any recommendations.

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