What is the 203k Loan Process... in Detail!

Question

My fiance and I are moving to Atlanta this fall and are going to use a 203k loan to rehab a multi-family (duplex, triplex, quadplex) and kickstart our real estate investing career. We have found a lender that we would like to use. He has answered all of our questions about the process and the steps that need to happen, however, we would like to speak with investors who have been through the 203k loan process and have used these loans to fund deals. We want to know the pros and cons; what was easy or hard; were there any bottlenecks or major complications; Do we find 2 or 3 lenders and get prequalified with all of them?

Billy Amberg · Answer

Hey there everyone! I’m not sure how far into the weeds any of you have gotten on the 203K Loan, but in the spirit of sharing knowledge, I started a discussion on the subject here: The 203K Loan - Open Discussion. Lots of great stories from people who succeeded and had nightmares with this type of financing. Many pros, but also many cons if you are not prepared.

Wayne Brooks · Answer

@Daniel Caraway I did one, as an agent, for my ex.  The streamline, under $35k, was pretty simple.  It allows for the gc to get 50% up front....appealing to the gc but I'd be concerned about a gc I didn't know getting that much up front....I'd rather smaller amounts as they go along.  The loan itself is about 1/2% higher than a normal fha loan.

Over $35 k requires a consultant which adds another wheel to the cog, but probably good for most buyers.

Both loans add a10% contingency factor on to the rehab budget.  Any money left over from the rehab  goes to reduce your loan balance.

Victor S. · Answer

Look into Fannie Mae Homestyle instead. It's also investor-friendly (1 unit only).

https://www.fanniemae.com/content/fact_sheet/homes...

Elvis Vasquez · Answer

@Wayne BrooksCare to create a thread going over the 203k streamline process in detail?

I would honestly pay to learn this...

Taylar Caraway · Answer

@Wayne Brooks Fantastic info! We did not know about the 10% contingency factor or that a 203k loan is typically 0.5% higher in the interest rate. Thank you for your time!

Taylar Caraway · Answer

@Elvis Vasquez @Wayne Brooks . Thank you for the reply. We are looking for local GC's and plan to have a short list in the next couple of weeks. We're now interested in the dirty details that people have gone through using the 203k loan. As for the question about recommended cash reserves, I'm not sure I quite understand. Cash reserves in case of what for example? My first thoughts would be what if the rehab costs more to which I would think the risk there is limited by the 203k loan process, i.e., the lender won't lend if there is a gaping hole in the rehab plan/budget. If something did come up we have other methods to come up with the cash if necessary as our other cash on hand is for personal emergencies if necessary. The other methods being personal loans and credit cards. What other reasons do you think cash reserves are necessary for?

Elvis Vasquez · Answer

Its a pain to find out the full process... havent met anyone in person who's done it.

What is the reccomended amount of cash reserves required outside your closing costs and deposit?

What is the 203k Loan Process... in Detail!

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