Mortgage Broker FHA 203k

[Connor Wingfield]

Looking to buy a duplex with a FHA 203k loan in Los Angeles. Is it better to use a mortgage broker to shop for different FHA lenders, or will it be pretty even across the board. Anybody have experience with a similar loan?

[Chris Mason]

@Connor Wingfield,

Do you already have the property identified, or are you still early in the process?

203k is appealing and can make magic happen, but in hot markets (LA in the summer...) the house and the situation of the seller really needs to be a perfect match.

In general you don't go find a house to 203k, you go look for any old house, coincidentally find a house that happens to coincidentally be a perfect fit for 203k, and then you start talking about 203k stuff.

Typical characteristics:

• Too crummy for cosmetic flipper types to want.
• Seller more motivated by sales price than by closing quickly. 
• Seller is either impervious to, or immune from, guidance from her/his realtor. Realtors HATE 203k, so just know going into it that as soon as someone says "203k" most realtors will auto-respond by telling their sellers "oh no don't take this offer, take any other offer."
• Been sitting on the market for a while.

So the house has been sitting on the market for 75 days in a hot market, no one is in a rush to get paid, foundation issues, roof imploding, smells like cat urine (the smellier the better), so beat up that all the local flippers are scared of it and/or make insultingly lowball offers that the seller has just been round-binning, but hey it's got a great location. Boom, 203k it.

You've got an edge on the hard money flippers in these scenarios: your financing is substantively cheaper than their hard money. So you can offer more for the house, and still come out ahead.