Need some help with 203k loan process. Getting started!

11 Replies

First off, I wasn't exactly sure where to post. I felt this category was the best option since it will be people from my area who have already been through FHA 203k loan processes. Anyways...

We have finally decided to go with an FHA 203k loan to buy and renovate after strenuous eliminations of other loan options. I know there must be folks on BP who have gone through the FHA process (hopefully recently) which is why I'm reaching out to the community. I'm looking for recommendations, suggestions, advice, etc. in this area. We have our loan officer that we will be working with, and will be going through the pre-qualifying application process this week. We also have narrowed our property leads down to a handful that we would like to look at (most of them foreclosures or flooded because of Harvey), so we are going to schedule tours as soon as we can. We need to first know our steps to getting our (3) bids on the property we want to purchase.

Several questions:

1) How does the bidding process work? 

2) Any recommendations for contractors in the Southeast Houston area who have experience in working with 203k loans?

3) Do we pay out of pocket for a 203k Consultant?

4) Do we pay out of pocket for appraisals and inspections?

5) Are there any other out of pocket expenses besides down payment?

6) Should we have the GC, Consultant, LO and/or inspector with us when we walk-through potential properties?

Any and all information is welcome. Thank you BP community. 

Ashley,

I am a Realtor in South Carolina.  I had buyers get a 203k loan years ago.  My only advice is to make sure that your lender has done a 203k loan before, and knows the process very well.  Our biggest issue was our lender advertised that they offered 203k loans, but when we got started we quickly realized our loan office was clueless.  They will require you to get bids from licensed and insured contractors for the repairs.  Most contractors i know are very busy in this market, and it might be difficult to get them to come out and quote you (considering the extra work involved on their part from the lender).  Best of luck.

Adam


Originally posted by @Ashley Huff :

First off, I wasn't exactly sure where to post. I felt this category was the best option since it will be people from my area who have already been through FHA 203k loan processes. Anyways...

We have finally decided to go with an FHA 203k loan to buy and renovate after strenuous eliminations of other loan options. I know there must be folks on BP who have gone through the FHA process (hopefully recently) which is why I'm reaching out to the community. I'm looking for recommendations, suggestions, advice, etc. in this area. We have our loan officer that we will be working with, and will be going through the pre-qualifying application process this week. We also have narrowed our property leads down to a handful that we would like to look at (most of them foreclosures or flooded because of Harvey), so we are going to schedule tours as soon as we can. We need to first know our steps to getting our (3) bids on the property we want to purchase.

Several questions:

1) How does the bidding process work? 

2) Any recommendations for contractors in the Southeast Houston area who have experience in working with 203k loans?

3) Do we pay out of pocket for a 203k Consultant?

4) Do we pay out of pocket for appraisals and inspections?

5) Are there any other out of pocket expenses besides down payment?

6) Should we have the GC, Consultant, LO and/or inspector with us when we walk-through potential properties?

Any and all information is welcome. Thank you BP community. 

@Adam Drummond , Thank you! Fortunately, our loan officer specializes in 203k loans. Her team is actually sought out for 203k loans and trusted. They have been very helpful so far with getting started. This post is intended for us to feel surrounded and connected with others who are or have been in the same boat. Maybe there are those who have a "I wish I did this, instead of this" kind of lessons to bestow on us LOL

Also, I've learned that GC's in Texas do not need a state-level license. I will however be very sure to get a bonded and insured GC who also has experience in doing 203k homes. I'll try my best to find someone. Hopefully there's one available to us, otherwise it'd throw our moving out plans out the window. 

Thanks! I appreciate the well wishes!

You don’t really need a gc experienced with 203k’s, the paperwork is not much different than typical commercial projects. Your lender should have a list of previously used contractors since it is the lender who approved the gc. And again, getting a gc approved is fairly simple....just like a 3 page questionnaire, references, license and insurance.
As for costs other than your down payment, probably 5-6% or so including pre paid taxes/insurance. Your lender should be giving you an estimate on this

@Wayne Brooks I've asked the Loan Officer Assistant for a list of approved GCs, but she said they don't have a list. Its whoever we want to use, and warned me of using someone who has previously worked on 203k homes. 

Thank you for the estimate. We should definitely be covered in that case. Didn't want it to be whopping, unforeseen fees or miscellaneous costs.  

So far we have our LO and the application completed. We are seeking an inspector, GC and 203k consultant. 

Just curious, what lender are you using? I’m in your area and I’m looking for a real estate friendly lender.

@Jordan Johnson  

We got pre-approved with Academy Mortgage, Sally Redmon. Her and the team have been incredibly helpful so far. They're in the Woodlands, but Academy Mortgage has other branches/teams in the Houston area. But I think Sally's team is one of the only teams that specialize in 203k's.

Our main problem right now is finding the assets/reserve funds to show to our lender to get a loan. We make money, but we don't have 17k in our checkings/savings to buy a house. You can be gifted money if you're lucky enough to use as down payment. You cannot use personal loans to fund closing or down payment costs. Just a little lesson I learned over the week. 

My Wife is a loan officer and manager of a mortgage company, and has been doing a lot of these loans.    dm me for phone number.

@Dave K. Hello Dave, we are actually taking a different route now and going with a hard money lender. For the amount and how we can acquire assets is a better bet than a 203k. There are other appealing factors of the HML as well, but its definitely easier and more short-term for us to use an HML. Thank you for the kind gesture.

Update on our current situation: Now using a hard money lender because they allow us to use lines of credit and personal loans to show proof of our funds (reserves). We will only use a partial amount of our personal loan to cover closing costs/fees. All borrowed will be returned ASAP and we will make monthly payments on HML interest with our own income. If anyone is in the same boat as Tyler and I (sorting out the hard money loan process + finding the perfect deal to jump on), please keep in touch with us! We want to hear your experience and be each others' support and motivation. :)

Thanks!

Originally posted by @Ashley Huff :

@Dave K. Hello Dave, we are actually taking a different route now and going with a hard money lender. For the amount and how we can acquire assets is a better bet than a 203k. There are other appealing factors of the HML as well, but its definitely easier and more short-term for us to use an HML. Thank you for the kind gesture.

Update on our current situation: Now using a hard money lender because they allow us to use lines of credit and personal loans to show proof of our funds (reserves). We will only use a partial amount of our personal loan to cover closing costs/fees. All borrowed will be returned ASAP and we will make monthly payments on HML interest with our own income. If anyone is in the same boat as Tyler and I (sorting out the hard money loan process + finding the perfect deal to jump on), please keep in touch with us! We want to hear your experience and be each others' support and motivation. :)

Thanks!

Hello Ashley, can you PM me the HML you are going with? I am in a similar position, I contacted two HML and they both wont consider credit lines so would love to talk to your HML as they considered your lines of credit.

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