I am new to real estate investing and feel am testing the idea of using a FHA or 203k loan to purchase my first property. One problem I see is that due to the red tape involved with these loans I may miss out on a deal while waiting for approval on one of these loans.
I would appreciate any tips on using these loans effectively to purchase a property that might want to close quickly.
Rental Property Investor · Cincinnati, OH · Member since 2020 · 869 posts · 823 votes
5y
@Edward Encinas Contact a lender that specializes in 203k loans. They should be able to get you some sort of pre-approval letter (of course it will still depend on inspection and appraisal from them). I've been involved in a few 203ks and from my experience, as long as the current owner walks away confident in the deal and the offer is solid, they aren't as concerned with the 203k side of things.
Real Estate Agent · Chicago & NWI · Member since 2015 · 860 posts · 521 votes
5y
Hi Edward,
You will have to wait for each loan regardless of the type of loan. There is an FHA 203k loan that is more streamlined that shouldn't take too long where the bank give you 110% of the purchase price, so 10% above the loan amount rather than it being a FULL rehab loan which can take longer.
But agree, that you find a lender the only specialized in these types of loans, not every lender does them or has a high success rate.
I'm a lender and have to say 203K loans take time and are not for the faint at heart. I agree with the two comments above. Find a lender that is proficient in doing them. The appeal with 203K's is the initial purchase price but if you are a first time buyer I personally would recommend going with FHA or Conv. if you can.
Lender · Long Beach, CA · Member since 2013 · 496 posts · 296 votes
5y
If you're going to do a FHA 203k loan, make sure you have a good contractor, that is familiar with the paperwork needed. I've had contractors go dark on us, just because they were too busy and didn't want to do the detailed bids that are required.
And like the others have mentioned, go with a lender that know these loans. The 2 lenders I use for rehab loans have departments that specialize in them, and have concierges to help us every step of the way.