Lender · Nashville TN - Licensed in AL AR DC FL GA LA MD TN, TX and VA · Member since 2021 · 583 posts · 338 votes
House hacking is viewed by many to be the best way to get involved in RE investing. You are eligible to put less money down and benefit from a lower interest rate than you are in financing as an investment property. Not to mention the money saved with self-managing. The challenge has been the lack of inventory that we're all experiencing, and newer investors are having to think outside the box to get in the game. One consideration that I haven't seen on the forums as much as I'd expect is using a renovation loan to finance a fixer-upper house hack.
Expanding your property search beyond just the 'move-in ready' inventory and considering homes in need of repair, (that are otherwise really only being considered by cash buyer's, i.e., less competition), seems like a good way to increase your chances of finding a home. With loan products out there like the FHA 203k and the Freddie Mac Choice that allow you to finance acquisition + renovation costs with as little as 3% down, I'm curious why I'm not seeing many posts about them. I'd also be interested to hear thoughts and experiences with these type products for those who have used them.
I've been wondering the same thing!!! I have been needing answers to this for days now! The more I educate myself, the more I find out how much is out there! I have been pre-approved as a first time home buyer for an FHA loan of 200K. That's it! No mention of all the other programs that are avail the could benefit me more than an FHA. I would have been done tried to buy a multi-family fixer upper but know FHA wont allow.... I feel like I'm missing out! I don't know how to go about getting the funds either I were able to buy one. You mention a renovation loan in the topic... How do you go about getting one of those? I've been wanting to know the process to that as well.
Lender · Nashville TN - Licensed in AL AR DC FL GA LA MD TN, TX and VA · Member since 2021 · 583 posts · 338 votes
4y
Hi @Shera Ewing - there is both an FHA and a conventional renovation loan product. Qualification for the FHA 203k is similar to qualification for a standard FHA loan. If you qualify for a $200k FHA loan, then you would also qualify for a $200k FHA 203k loan. This loan includes financing of the purchase of the property and the rehab of the property, all in one. This might look like purchase of $150k home with $50k worth of repairs or purchase of a $50k home with $150k worth of repairs. You would be required to put 3.5% down of the acquisition cost + rehab cost.
You are required to use a licensed and insured contractor to perform the rehab work. Before you close on the purchase of the home/the loan, you will have obtained a bid from the contractor detailing what work will be done on the home and how much it will cost.
You may not have heard of these programs because these loan products are fairly nuance and not every mortgage lender offers them.
@Reid Chauvin do I go through the same company that gave me the pre-approval to get the FHA 203k? Or can / do I need to go elsewhere for it? If else where, can you point me in the right direction please?
Lender · Nashville TN - Licensed in AL AR DC FL GA LA MD TN, TX and VA · Member since 2021 · 583 posts · 338 votes
4y
@Shera Ewing - You'll have to ask them if they offer renovation loan products. If they don't, they may have another solution for you, like using a construction loan from a local bank to purchase and rehab, and then refinancing with the FHA loan, (you have two closings in this situation so it may not be ideal for your with more closing costs). Otherwise, you will need to call around to find another lender who does offer these type products. What market are you trying to buy in?