Alexander Flores
Rental Property Investor · Beachwood, NJ · Member since 2015 · 132 posts · 50 votes
7y
@Julius Johnson
Are you buying a multi-family to house hack or if it is a single family, will you live in it for about a year before renting out the property? If not, the biggest con would be mortgage fraud.
If you have the cash to purchase, use another way to purchase the property if possible. PMI during the length of your loan and the upfront PMI can eat into your profits.
1 Reply
Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
7y
Yes , there is a lot of paperwork for the contractor to fill out before they are contracted for the job . I charge to fill it out now
3 Reply
Dan WeberBusiness Member
Realtor · Portland, ME · Member since 2015 · 655 posts · 552 votes
7y
The length of a project with a 203k loan is 6 months. There is a lot of paperwork required to get a 203k loan so make sure your contractor understands that and is on board. The biggest con that I experienced was that after receiving the initial check at closing to fund the construction, I had to put up the money to continue construction after that. The bank will then do inspections of construction and issue draws of the construction once it is complete. However, after your contractors complete work, they want to get paid. Make sure you have some funds to pay your contractors until the bank reimburses you.
1 Reply
Julius Johnson
OP
Minneapolis, MN · Member since 2017 · 4 posts · 1 vote
7y
We plan to live in the property of course for the 1-year time frame and house hack a room in property to a friend.
After the the time and money allotted, Matthew and Daniel was the 203k loan worth it?
We've been certain about using the FHA loan but as of this week I'm looking through information on the 203k Loan.
0 Reply
John Woodrich
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Julius Johnson I haven't used one but the downsides I have heard are that you have to use a contractor for repairs, takes longer to close on the deal, and because of them taking longer it may be harder to get a seller to accept an offer with this financing. You should talk to your lender, if they can't guide you you should consider finding another lender. Let me know if you want a referral. Another product you may want to look into is a conventional rehab loan, they can also be used for rehabs.
1 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
If you are in a competitive market, a 203k loan puts you at a sever disadvantage to almost every other buyer.
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2 Reply
Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
7y
@Julius Johnson I dont bother bidding when a 203 K is involved . It was a paperwork nightmare for me the contractor . Getting paid was like pulling teeth , and I dont take well to taking orders from a bank load officer . And I will leave it at that
0 Reply
Jerry Padilla
Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
7y
@Julius Johnson
If you have good credit I would recommend going the route of Homestyle which is a renovation conventional product. As a first time home buyer you can go as low as 3% down. You will avoid the need for HUD consultant which is required by the FHA 203k. Mortgage insurance premium doesn't go for FHA and with good credit will be higher than with conventional.
0 Reply
Jerry Padilla
Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
7y
@Julius Johnson
I just wanted to clarify that the low 3% down payment is designed for a SFR, not a MFR. A 2 unit with HomeStyle is 85% LTV and 3-4 Units is 75% LTV.
0 Reply
Bill Rich
Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
7y
@Dan Weber I hate to say but what you experienced is not the norm, at least from my perspective. As the lender we do not want you funding any of the project yourself and will due as many draws as necessary to keep the project liquid for the GC. That is for both the 203K and the HomeStyle.
@Julius Johnson with every loan there are pros and cons. The loan is the best fit for your situation is how you should approach it. If you have a lower credit score the 203K would be a better option. As an example we require a 620 FICO for the HomeStyle where as for the 203K we go down to a 580. In terms of the DTI (debt to income ratio) FHA is more friendly for a higher DTI borrower. If you are looking at multi-family homes the 203K is only going to require 3.5% down but the HomeStyle requires at least 15% down (2 family) and higher if its a 3 or 4 family. I close roughly 75-90 203Ks and HomeStyles per year and would be happy to answer any questions you have.
Thank you and good luck!!
0 Reply
Jeremy A.
Rental Property Investor · ME · Member since 2018 · 179 posts · 59 votes
7y
Originally posted by @Jerry Padilla:

@Julius Johnson
If you have good credit I would recommend going the route of Homestyle which is a renovation conventional product. As a first time home buyer you can go as low as 3% down. You will avoid the need for HUD consultant which is required by the FHA 203k. Mortgage insurance premium doesn't go for FHA and with good credit will be higher than with conventional.
how strict on repairs and utilities is homewise program?
can retired moms qualify for camps that need work?
0 Reply
Ronnetha Darrett
Rental Property Investor · IN · Member since 2019 · 22 posts · 9 votes
7y
@Daniel Weber Didn’t realize you possibly would have to pay the GC due to the bank being slow in payment. Seems to go against the basics of the loan.
0 Reply
Effram Barrett
Real Estate Agent · Houston, TX · Member since 2017 · 159 posts · 161 votes
7y
@Bill Rich I actually have a few questions. My wife and I are looking to do a 203k but the kicker is that we have owned the house for 2 years already. How do lenders treat individuals who have owned the property?
2nd question is would it be possible to use the 203k to add value and would that value add play into the appraisal at all? TIA
0 Reply
Bill Rich
Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
7y
Originally posted by @Ronnetha Darrett:

@Daniel Weber Didn’t realize you possibly would have to pay the GC due to the bank being slow in payment. Seems to go against the basics of the loan.
This isn't the norm at all Ronnetha. This lender sounds like they weren't well versed in the program.
0 Reply
Bill Rich
Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
7y
Originally posted by @Jeremy A.:

Originally posted by @Jerry Padilla:
@Julius Johnson
If you have good credit I would recommend going the route of Homestyle which is a renovation conventional product. As a first time home buyer you can go as low as 3% down. You will avoid the need for HUD consultant which is required by the FHA 203k. Mortgage insurance premium doesn't go for FHA and with good credit will be higher than with conventional.
how strict on repairs and utilities is homewise program?
can retired moms qualify for camps that need work?
Utilities do not need to be on at all for the HomeStyle or 203k. I am not sure what Homewise is but think you meant HomeStyle. Any one can qualify for the programs as long as they meet the credit requirements.
0 Reply
Bill Rich
Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
7y
Originally posted by @Effram Barrett:

@Bill Rich I actually have a few questions. My wife and I are looking to do a 203k but the kicker is that we have owned the house for 2 years already. How do lenders treat individuals who have owned the property?
2nd question is would it be possible to use the 203k to add value and would that value add play into the appraisal at all? TIA
There are no restrictions on ownership for you can do a refinance as a 203k as well. Yes the 203k can be used to add value, in fact, in most cases you are adding value and equity.
In Texas, the one thing you you need to be aware of, is that the contractor will need to be at your closing as well (even for a refinance) for he/she will need to sign some of the mortgage docs as well. That is a Texas law, fyi. I have done many in Texas and can set you up with a HUD consultant as well.
0 Reply
Julius Johnson
OP
Minneapolis, MN · Member since 2017 · 4 posts · 1 vote
7y
Thank you everyone for your help!
@Bill Rich I'll take you up on that actually as I get closer to 5-6month window.
0 Reply
Bill Rich
Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
7y
@Julius Johnson No problem at all.
0 Reply
Amber Gonion
Real Estate Broker · Hugo, MN · Member since 2016 · 688 posts · 596 votes
7y
@Julius Johnson in this market you are better off to purchase, rehab, rent and refinance. Your offer for 203k is viewed as a headache for the seller, the exception is for properties where you are the only offer, I had one accepted with a fha 4-plex because the buyer was a owner occupant and it was a hud property with a 20 day first look. Otherwise you would be looking at properties that are off market or on the market with no offers for a long time.
1 Reply
Tim SwierczekPro Member
Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Julius Johnson @John Woodrich nailed it. The one thing buyers should know is that it does take a lot of effort on their part to coordinate with the contrator. It is not a passive loan. I tell my buyers that it is a part time job for the first 2+ weeks after contract.
0 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
Be patient as it is time consuming and lots of documentation. Good luck.
0 Reply
Brunno Goncalves
Rental Property Investor · Framingham, MA · Member since 2017 · 77 posts · 10 votes
7y
I'm in a 203k loan now, and about a months a half to finish the project. The 6 months timeline that was mentioned here can be extended, which I did with mine. There is lots of paperwork in the beginning, but after that it should be all good.
The big downside is to have to pay for everything upfront, and than have the bank pay you back. @Bill Rich if you have a way that I don't have to do that, I would like to hear about it for sure.
Also my 203k loan only allowed me to have 4 draws, which means you have to make sure you calculate correctly the $$ you have saved to cover the expenses before the draw. Basically if you need $100K you will have 4 draws of $25k lets say. Basically have $25k to pay upfront, to than get that back and move to the next phase.
There is also a fee for every draw, which should be built in to your loan.
HUD consultants, if you get a good one, you are good, if you don't that can make your 203k loan a nightmare.
Also be extremely specific and go over all numbers of the project with the HUD consultant, and the contractor. The HUD consultant will do their estimation of the work, and you need the contractor to do the same for you.
As an example my estimation did not include the dumpsters, and I did not verify, I ended up using 8 dumpsters!!! Out of pocket expense : (
I believe that is it for now. I would do it again now that I learned a ton with my first one. As it was said before make sure you have a company doing your loan who has done at least 100+ of these types of deals to help you navigate it properly.
Good luck.
0 Reply
Bill Rich
Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
7y
@Brunno Goncalves I have to be completely honest, your lender is not being true to the loan. At no time ever should you be paying money upfront as the borrower.....EVER. This is not how the 203K or HomeStyle work. We do not allow the borrower to pay anything upfront for we facilitate a draw when funds are needed.
0 Reply
Brunno Goncalves
Rental Property Investor · Framingham, MA · Member since 2017 · 77 posts · 10 votes
7y
@Bill Rich I have been paying all of it upfront. Than getting the HUD consultant to go in and make sure job was done to than get a check within a week or so. That part is very frustrating.
I will contact them about that for sure.
0 Reply
Mike P.
Rental Property Investor · Butler, NJ · Member since 2018 · 10 posts · 1 vote
7y
@Julius Johnson
Just completed one absolutely ridiculous !!! If you can stay away
0 Reply

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