I'm looking into purchasing an older multi-unit house in Indiana that would also be my primary residence. Everything has checked out to be good and nearly new so far(roof, ac, water heater, hvac, sub metered etc.) but we would like to paint, new carpet, update kitchen and bath etc.
Therefore we're looking at the 203k loan option, paired with a mortgage for the home and then refinance them into one loan 6-12 months down the road. I've never had a mortgage before so I'd appreciate all of the help and input possible on this form of lending, especially the 203k load side of it all.
If you're also a lender who has done these before/does them actively, I'd love to talk and better understand the process.
@Braden Coleman Not sure what you mean by "paired with another mortgage". I assume the 203k loan would be a 1st position mortgage, and if you already have a mortgage that's 1st position, it couldn't be done. Maybe get the new 203k loan and it pays off your existing mortgage?
@Tom S. Yeah good question. Due to my inexperience with this product I wasn't how to explain it. I understand it that it's a construction loan + a home loan and then they're rolled into one mortgage loan later on. Is that correct?
I don't already have a loan on this house, looking to buy it with the 203k loan. I appreciate you clarifying, helps me understand the in's and out's of it.
From my understanding, the 203k is loaned based on what the post-rehab value is. This allows part of the rehab to be wrapped into the loan.
@Braden Coleman Yes, it should be purchase + rehab funds all in one loan. My understanding is that they're for owner occupied homes only, and the paperwork can be fairly extensive. That said, because you mentioned it would be your primary residence, it probably would be the good fit for a loan.
The FHA 203k loan includes the purchase price + rehab costs in ONE LOAN. Some borrowers do refi into a conventional loan after 1 year to eliminate the MI associated with FHA loans.
@Braden Coleman The items you mentioned you'd like to update don't seem to be super pricey, nor urgent projects. It might make sense to use a regular FHA or conventional loan and update the units overtime as you have funds. Or, find an alternative way to fund to projects through a personal loan or store cc if you can pay it off before accruing interest. Do you have a rough idea what you'd plan to spend on those projects?