Rehab Loan with bank vs. BRRRR
Investor · Windham, ME · Member since 2016 · 180 posts · 37 votes
Is it better to purchase a rental with hard money and BRRRRing it or just buying with rehab loan from bank, right out of the gate? You'd think save a lot on hard money costs by just acquiring with bank rehab loan instead. And your not running the risk of being stuck with hard money, because for whatever reason the bank wont fund your deal. Less stress.
Yes, all in it was 18%. I'm sure there are better deals out there in the HML world but probably no real bargains.
Just jumping in here to amicably adjust some common misconceptions - FHA loans, including 203k's, are not first-time buyer loans. FHA stands for Federal Housing Administration, it has nothing to do with first-timers, it was a program created in the 30's to help people avoid defaulting after the Great Depression, and later to help soldiers returning from war. That said, it's often the loan of choice for first-timers nowadays, and it's a cool loan at that.
It is also completely possible to get an FHA loan even if you already have an existing conventional loan.
Furthermore, it's actually possible to have more than one FHA loan under your name - however, it's only under extremely specific conditions, especially in the past two years or so, as the program is intended to be one-at-a-time.
Hope that helps anyone curious about FHA specifically.
Nick Its amazing how much bad information is given by inexperienced lenders. You are 100% correct in everything you said above.
When I applied for my 203k loan, the lender I went through told me I had to be a first time home buyer. One of my clients (I am a Realtor®) is using a Fannie Mae loan and their lender told them they had to be a first time home buyer as well. I asked him to clarify on this for me, and he stated that, "you must not have purchased a home in the past 3 years to be considered a 'first time buyer'".- So technically? At the same time, I have clients who used a VA loan to purchase an owner-occupied duplex and are now using a VA loan to purchase a single family home while keeping the loan on the 'now investment' property- duplex. SO- I really do think it depends on the specific loan and the lender you go through. Find a good lender that is willing to work with you and can get creative!!! lol.
Another thing to keep in mind about the 203k is that the work must be done through a contractor. So if you are hoping to save money by doing all the work yourself with your handyman pals- it may not be an option. If you have a good, reliable licensed contractor- it is a wonderful option!
Danielle
By definition a first time buyer is a buyer who has not owned a home in the past 3 years but neither the FHA 203K nor the Fannie Mae HomeStyle require a buyer to be a 1st time buyer. Unfortunately there are a lot of lenders out there who do not fully understand the products. I hate to say it but this lack of knowledge on the part of the lending industry is one of the things that gives a black eye to these programs.
Is it better to purchase a rental with hard money and BRRRRing it or just buying with rehab loan from bank, right out of the gate? You'd think save a lot on hard money costs by just acquiring with bank rehab loan instead. And your not running the risk of being stuck with hard money, because for whatever reason the bank wont fund your deal. Less stress.
Matthew-
(3) Secrets Everyone Needs to Know about using a 203k Loan - Its Easy!
Next, do you currently own a home in your name with a mortgage, if yes, you cannot use a 203k. If no, you can use a 203k. If yes, you can use a conventional investor renovation loan, 20% down and low market rate. You have options, those options referenced will require a qualified credit score and DTI otherwise you are good to go, read the link, seriously 203k loans they are simple so is the process, its only difficult if you do not follow the instructions.
@Steven Gesis - just an FYI what you posted above is not correct. You can 100% own another home and do a 203K. I have done many 203Ks in this scenario.
Thank Bill for the clarification you are correct you can own another home:
Perhaps you know updated rules that I am not familiar with, but if you are using an FHA203k loan, you can only have (1) FHA loan in your name, unless it is a conventional FHA, I think then you can double dip. Bottom line the FHA203k dictates that you have to be the owner occupant, so unless the other properties are secondary homes and not your primary residence where you are you not the owner occupant :)
Is it better to purchase a rental with hard money and BRRRRing it or just buying with rehab loan from bank, right out of the gate? You'd think save a lot on hard money costs by just acquiring with bank rehab loan instead. And your not running the risk of being stuck with hard money, because for whatever reason the bank wont fund your deal. Less stress.
If "for whatever reason the bank wont fund your deal" - then why would they give you a Rehab Loan?
HML usually implies that you've already tried EVERY avenue before going to them to beg, right? Cheers...