Anyone Completed Or Been Involved With An FHA 203K Purchase?

5 Replies | Phoenix, Arizona

I am a buyer looking to purchase a primary SFR in PHX (Tempe - Chandler - Mesa). I have already been pre-approved for a conventional loan at $275K although most homes are going for a significant amount over asking, or cash offers etc. so it's very competitive to get an SFR.

Wondering if anyone has actual experience as a buyer/GC/Lender/Agent for a 203K purchase?  If so please share your experience? Pros - Cons?  

@Jay P. I've been involved on the buyer side of a couple of them. It's an excellent mechanism to get started investing. My main tip would be to get a contractor you feel very confident in. Don't jump at the lowest bid - interrogate why the contractor came to that price and be sure to get additional bids.

I'd also recommend attempting to refinance as soon as you're able to to help drop the MIP (like PMI but for 203ks). Good luck!

Rehab loans (like FHA 203k) can be a blessing or a nightmare, just depends on who you use. I've done them as the lender, and I can tell from experience that the 2 components that will make or break the deal are 1. The contractor and 2. the lender.

Need to find a contractor that has experience with these loans, because they have to jump through a lot of hoops, and the bids have to be done a certain way. I've been involved in deals where the contractor just got fed up and went dark. No bueno for the deal.

Also, need a lender that does these loans, and has departments dedicated to doing them. They usually have an experienced point person that guides you through the process.

I have a couple great rehab lenders that I work with. Let me know if I can help.

@Jay P.

I've been a part of many successful 203k's. They are a great option and have their use in any market. 

I have an entire 203k Team set up. 203k's can be tough, even with the right team, but it's better than the alternative which is usually not buying a home. 

In your desired criteria, there are only 14 properties available and except for the micro homes (600sf in Tempe), you'll probably need to use the 203k to buy the others, if the seller would even consider accepting a 203k in this market. 

Hi @Jay P. - I have been involved in hundreds (probably over a 1000 if I really look into the numbers) of 203k’s from the lending side.  I have 2 closing this upcoming week that are purchases.  I am going to totally agree with the comments above the most important parts of this type of deal are contractors who get it and a lender with a team to help get them done.  Without these two pieces of the puzzle you are setup for failure.  With that being said grill the contractors and lenders.  It can be tough right now as contractors are super busy and so are lenders for that matter but do not rush it.  Ask questions and get things in writing.  203k’s when done right are the ultimate investor startup key.  Where else can you buy and renovate with so little out of pocket and create instant equity and cash flow based on the scenario?  

We are just finishing up a 203k (first real investment). Patience and having a good strategy in place is key. Rehabs generally take longer than expected and with all the additional steps of a 203k you can expect it take 2-3x longer.. My advice would be to consistently submit offers. In this competitive market, the more you submit the better odds are that one will eventually get accepted. Be sure and have discussions with your realtor about having your offer as back up. Our offer got accepted as a back up. Good Luck!