FHA 203k for first rental property in Houston TX

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I am currently out shopping for lenders to purchase my first rental property (looking to house hacking in a multifamily) in the Houston area. I have been researching on loan types that fit my financial state and found that the FHA 203B or the FHA 203k are my best fit. The FHA 203K sounds amazing in concept with being able to add the renovations cost to your actual mortgage. Through out my lender shopping experience I found that a lot of lenders have no experience doing FHA 203k loans or that they strongly discourage it due to the long hard process that takes place in processing one (mostly on qualifying contractors).

I really want to go after the 203k option, so I am asking the group for first hand experience stories with either loan option to see if its worth pursuing. Looking forward to the discussions! :)

Hey Alexandre,

My first purchase was a 2012/2013 house-hack of a duplex in Connecticut, which I purchased with a 203k loan because it needed a lot of work. It is a great option because it can make a purchase possible on a property that other potential buyers just walk past, but it is a lot of paperwork and headache. From contract to close, that property took something like 6 months from offer to close. Luckily I had a patient seller...

If you are able to find a property that need less than $35k in repairs, the streamlined 203(k) is a good option and will have more lenders willing to work with you. When I did my full 203(k) the only willing and knowledgeable  lender I could find at the time was Wells Fargo. I haven't checked with their Houston offices, but you may want to start there and see.

You can PM me if you have any other questions about the process. It was a while ago, but I'm happy to answer anything I can remember!

@Alexandre Medrano yes, these 203k loans are talked about with such casualness that many people go through what @Hunter Vigneault was describing.  Not only are these loans labor intensive but they also require a lot of attention to detail from the bank - both areas which the banking world is not known for.  There are some good lenders out there but you'll have to keep calling to try to find them.  Here's some questions I would recommend asking when interviewing a lender:

  • What is the difference between the "Full" and the "Streamline" 203K product?
  • What consultant do you recommend for this type of loan? When is a consultant required?
  • How long is your closing process?
  • Can you describe the draw process and if I have say when the contractor gets paid? What if I am not satisfied with the work?
  • How does your bank approve my contractor?
  • How much in "contingency" funds am I required to have?

If your loan officer can answer those questions without having to go research them all then you will be in a good place.  Tag me if you have any more questions.  Thanks!

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