Looking to buy a Multi-Family! FHA or 203k?

Question

Hi everyone!

I'm a newbie to Real Estate investing and seeking advice. I'm looking to purchase a duplex or another type of multi-family home, not sure if I should us a FHA loan or a 203k. I would also like to know if any of these loans work for foreclosures? Any suggestions?

James C. · Answer

Daryl,

Using a FHA or 203k depends on the condition of the property.  The standard FHA is known as a 203B. The 203B is for homes that are mostly "move in ready". The 203k allows you to wrap in repairs to the property. From a borrower point of view the underwriting criteria are identical between the two.

Assuming the seller of the foreclosure is willing to deal with the process that comes with the 203 B/K loans then yes, you can use them for purchasing foreclosures.

The major issues with using them for foreclosures center around the utilities being on (most property preservation companies turn them off and winterize the house) as well as repairs needing to be done (the foreclosing entity usually won't allow work to be done prior to closing for liability reasons ). Having points and closing costs paid for by the seller can also be an issue.

Hope that helps.

Good luck,

Jim

Daryl Martin · Answer

Thanks a lot Jim. I appreciate the advice.