Starting out Time to make a change! People in CT would be great

8 Replies

Hello all My name is Chris I'm 24 I have a great full time job in law enforcement.  Real estate has alway peaked my interest and I have really been trying to find my niche.  I don't have huge capital to start with but I was hoping this could give me an idea on where to go.  My market is going to be Connecticut and I've been researching the following:

Rehab and flip
Buying a Multi or condo and renting out

What I have learned so far
I could get a FHA 203k loan to fund the project and either flip the rehab or rent out and hopefully not pay outta pocket for the house expenses.

What are the 
requirements for the 203k from your experiences? Ive found different lenders to shop around with and I expect the 3.5 down.

Say I get approved what else am I going to be paying out of pocket?

How do I find a good real estate Attorney? 

Welcome! I purchased my multi in CT in 2012 using an FHA 203k loan. They required me to live in the house for at least one year, and they put a limitation on the number of contractors I used. I ended up hiring a GC and he used subs to get by that part, which was encouraged by the bank. You will need to have reserves which will be based on the house you choose, and if you use someone else's money you must have them sign a gift letter stating that they do not expect anything in return. Of course being FHA the house must pass their inspection, or the renovations you do must bring the house up to that standard. An auditor comes to the property at the end of the rehab and will make sure of this.

As far as what you pay out of pocket, that probably depends on the deal (closing costs, lawyer fees, inspection, etc).  Let me know if you have more questions.

@Chris Agun ,

Welcome to the Best Real Estate Site on the Net.

It is always nice to see another Ct., resident in the Forums.

Click on the “learn tab” at the top of this page, and you could be spending many hours on the Information that is available..

Raymond

Originally posted by @Kim Giannola :

Welcome! I purchased my multi in CT in 2012 using an FHA 203k loan. They required me to live in the house for at least one year, and they put a limitation on the number of contractors I used. I ended up hiring a GC and he used subs to get by that part, which was encouraged by the bank. You will need to have reserves which will be based on the house you choose, and if you use someone else's money you must have them sign a gift letter stating that they do not expect anything in return. Of course being FHA the house must pass their inspection, or the renovations you do must bring the house up to that standard. An auditor comes to the property at the end of the rehab and will make sure of this.

As far as what you pay out of pocket, that probably depends on the deal (closing costs, lawyer fees, inspection, etc).  Let me know if you have more questions.

 Hey Kim thanks for the great advice !

What would my first step be ? Start talking to lenders?

hi Chris! I'm in a very similar position you're in. I'm currently looking for a multifamily in Bridgeport to live in and rent out using FHA. Connecticut also has a special down payment assistance (DAP) program that I plan on taking advantage of. My mortgage broker is very knowledgeable about FHA. Please PM me if you want his contact info.

@Chris Agun  Yes just talk to a broker, they will have all the details for you.  I suggest finding one that is familiar with the 203k process.  Mine did alright but there were a lot of bumps along the way because he had never done one before, however I know there are lenders that specialize.

If things haven't changed since that time, I believe there are different types of loans where there are rehab cost limits.  I think with the 3.5% down the limit was $30k, but if you put down 20% you can borrow more. 

Another thing to consider in CT is the Connecticut Housing Investment Fund (CHIF).  They give 3% interest loans on energy efficiency improvements like doors, windows, insulation, furnaces, hot water heaters, etc.

Like others who have posted before me, yes, I'd say the first step is to get in touch with some mortgage brokers to sort out what your options are. 

You'll also want to get pre-qualified / pre-approved for a loan so you know what your price range is going to be. This will prevent you from spending time research properties priced out of your range. Also, some agents may not want to show you properties unless you have the pre-approval letter. In their minds, without this letter, you could be wasting their time if you later don't qualify for financing and the deal falls through because of it. 

I went the FHA route for my first property, a triplex, and was also very concerned about out of pocket costs. There is the 3.5% down payment, of course. Typically, the home inspection, pest inspection, roof inspection, etc. are paid for out of pocket—but you might be able to negotiate to have the various providers paid through escrow (closing time). Prices for these reports vary. Here in California, I think I paid around $300 for the home inspection, around $200 for the pest inspection and around $100 for the roof inspection.

The appraisal process for FHA is a real bear. FHA appraisers are very concerned about (perceived) health and safety issues, and will "fail" a property if there are broken windows, mold, unsafe living conditions, etc. etc. Since you are wanting to do a 203k where these issues might exist, I'm not sure what the protocol is. (I didn't do a 203k.) But for straight FHA, if any of these issues are found, the seller has to fix them and then the appraiser comes back to the property—and you have to pay for the re-inspection! I was told initially that the appraisal would be $750. The appraiser ended up having to come back TWICE at a cost of $100 each additional time. So it cost me nearly $1,000. Argh. I was lucky enough to have this expense paid by the mortgage company, but I had to reimburse them at the close of escrow. In other cases, this could be an out-of-pocket expense, which is why I mention it here. Ask your lender who pays for the appraisal.

Lastly, for a 3- or 4-unit property purchased with FHA, you are required to have 3-4 months of reserve funds. This means that you take your monthly PITI payment (principal, interest, property taxes and insurance) and multiply it by 3 or 4, depending on what your lender requires. For example, my monthly PITI payment is $1,133, so I had to put up around $3,500 in reserves.

That's all I've got! If you have more questions or want to talk about FHA, please send me a message. Best of luck to you!

Erin

Chris, since you are also in Law Enforcement you should qualify for HUD's good neighbor next door program. This could be a nice opportunity for you.

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