FHA 203K loan for BRRRR?

[Zhi Li]

Hi all,

I am looking into BRRRRRing a property in SD, and I am not sure what loan I can use. Without a lot of down payment in hand I want to explore the options of FHA Loan. Primary residence should not be a problem, but I seem to have a lot of difficulties finding a lender that does FHA 203K. Anyone used FHA 203k loan before?

[Brenden Mitchum]

Hey @Zhi Li, welcome to the BP community!

SD is one of many hothothot markets in the U.S. right now. I don't know of any lenders doing them here in Atlanta either. So, the reason lenders are not doing 203k loans right now is they don't have to. These loans are a tonnn of work (for everyone involved) and lenders get paid based on the loan value, not the amount of work they put in. So, why do a ton of work when you can do relatively little and get paid the same, if not more since most 203k loans are generally smaller than average loans. 

If it makes you feel any better, you likely won't winning any on-market contracts with a 203k loan offer right now anyways since closing is around 60 days. Your best bet would likely be to get a hard money loan for purchase. This will make your offers much more competitive and is an easier product to find right now than 203k.

BTW this advice also goes for conventional rehab loans. 

Hope this helps a bit. Please, feel free to reach out anytime if you have other questions or just want to chat!