House Hack

2 Replies

Hello all,

Along with my short term goals, I have the goal of getting started with rental properties here in Chicago and was hoping some who have gone through this could provide some insight.

My goal is to use a FHA 203k loan and ideally I would also love to use the welcome home IL $5000 down payment assistance for first time home buyers if anyone knows a lender who will do a 203k with the D.P.A. that would be incredible.

I recently contacted a lender who to avoid naming names sounds similar to bells bargo and was left with more questions and hesitations.

The questions I presented to them were:

1) Is my down payment calculated off of the purchase price plus repairs or just the purchase price?

they stated it is off the total

2) Is my closing costs based off of the purchase price or the purchase plus rehab and they stated total.

3) The LO I spoke with stated finding my own contractors would be recommended

4) I asked if there were restrictions on how much $$ could be allocated for rehab, he didn't have a firm answer but implied as long as the appraisal supported the work that I would be okay.

5) When I asked if I could also use the down payment assistance of $5000, they stated no.

6) As I would be looking at a gut rehab project so that I can find something within my price range and asked him how the 6months of mortgage payment deferral would work (HUD allows you to defer 6 months of mortgage payments into escrow in case you are not able to complete rehab and need to rent) he stated he was unsure but I would need to make all payments and they don't defer.

7) I have a line of credit with a credit union, as I know from my mortgage experience they are going to underwrite me as if the entire LOC is drawn I asked him if I can just apply that to the down payment and closing costs and again didn't get the best answer.

in my experience i would typically just go to a different lender but unfortunately with 203k loans, even a bank as big as bells bargo their regular LO's defer you to a FHA 203k specialist and i contacted two different LO's one near Rockford and one downtown and ended up getting the same guy for FHA 203k.

Any insight or advice would be sincerely appreciated! 

PS advice for areas in which to best look for my property will get you a Private Message containing a personal thank you!

Thanks in advance,

Rob Krach

Originally posted by @Rob Krach :

Hello all,

Along with my short term goals, I have the goal of getting started with rental properties here in Chicago and was hoping some who have gone through this could provide some insight.

My goal is to use a FHA 203k loan and ideally I would also love to use the welcome home IL $5000 down payment assistance for first time home buyers if anyone knows a lender who will do a 203k with the D.P.A. that would be incredible.

I recently contacted a lender who to avoid naming names sounds similar to bells bargo and was left with more questions and hesitations.

The questions I presented to them were:

1) Is my down payment calculated off of the purchase price plus repairs or just the purchase price?

they stated it is off the total

2) Is my closing costs based off of the purchase price or the purchase plus rehab and they stated total.

3) The LO I spoke with stated finding my own contractors would be recommended

4) I asked if there were restrictions on how much $$ could be allocated for rehab, he didn't have a firm answer but implied as long as the appraisal supported the work that I would be okay.

5) When I asked if I could also use the down payment assistance of $5000, they stated no.

6) As I would be looking at a gut rehab project so that I can find something within my price range and asked him how the 6months of mortgage payment deferral would work (HUD allows you to defer 6 months of mortgage payments into escrow in case you are not able to complete rehab and need to rent) he stated he was unsure but I would need to make all payments and they don't defer.

7) I have a line of credit with a credit union, as I know from my mortgage experience they are going to underwrite me as if the entire LOC is drawn I asked him if I can just apply that to the down payment and closing costs and again didn't get the best answer.

in my experience i would typically just go to a different lender but unfortunately with 203k loans, even a bank as big as bells bargo their regular LO's defer you to a FHA 203k specialist and i contacted two different LO's one near Rockford and one downtown and ended up getting the same guy for FHA 203k.

Any insight or advice would be sincerely appreciated! 

PS advice for areas in which to best look for my property will get you a Private Message containing a personal thank you!

Thanks in advance,

Rob Krach

 Rob, you can contact my mortgage broker. He is familiar with 203k loans.

 I don't want the BP moderators to be upset if I share my mortgage broker's phone number and email here in the forums.

Originally posted by @Rob Krach :

The questions I presented to them were:

1) Is my down payment calculated off of the purchase price plus repairs or just the purchase price?

down payment based on total amount of loan

2) Is my closing costs based off of the purchase price or the purchase plus rehab and

closing costs based on total amount of loan

3) The LO I spoke with stated finding my own contractors would be recommended

it is not the responsibility of the LO to find you a contractor. Lenders with 203k experience should have good contractors that they have worked with in the past. i found my EXCELLENT contractor on 203kcontractors.com. definitely get quotes from multiple contractors.  

4) I asked if there were restrictions on how much $$ could be allocated for rehab, he didn't have a firm answer but implied as long as the appraisal supported the work that I would be okay.

the amount you can borrow should be based on what you qualify for and typically 110% of the ARV.

5) When I asked if I could also use the down payment assistance of $5000, they stated no.

l would double check this. I started down this path and abandoned it when the lender told me they would grant me $5000 for downpayment assistance (long story)

6) As I would be looking at a gut rehab project so that I can find something within my price range and asked him how the 6months of mortgage payment deferral would work (HUD allows you to defer 6 months of mortgage payments into escrow in case you are not able to complete rehab and need to rent) he stated he was unsure but I would need to make all payments and they don't defer.

your LO is starting to sound like he has zero experience with 203k. i would start looking at other lenders. I financed 6 months of mortgage payments in my 203k.

7) I have a line of credit with a credit union, as I know from my mortgage experience they are going to underwrite me as if the entire LOC is drawn I asked him if I can just apply that to the down payment and closing costs and again didn't get the best answer.

in order to close on the property, underwritter will be very mindful of what money you have in your bank account and how long its been there. they might not approve if you are trying to use a LOC as the down payment. 

let me know if you have any other questions!