All Forum Posts by: Jeff Onofrio

@SebastianLee 203k loans cannot be used for new construction, however, if there is an existing foundation on the property, you could utilize that and build your duplex. But it is not to be built from the ground up.

@TimKaminski you are correct, it is not a new construction loan, but there is no limit of $30,000 worth of repairs. 203k loan limits are dictated by the county loan limits for your specific state and those can be found at HUD.gov.

@PhilG The FHA one-time close construction loans are available, however, they're limited to 1-unit single family homes, not duplexes.

@kharmen FHA 203k loans are specialized products. My recommendation would be to find a lender whose sole focus is on the 203k loan as well as the Homestyle renovation products because until you speak with a lender, you may find that one is more applicable to your situation than the other. Congratulations into jumping into investing. Feel free to ask any questions. We are here to help!

@Giang Nguyen @Jose Perez - FHA loans are more expensive for sure and 203k's are even higher because of the added fees for HUD consultant, inspections, title updates, etc. Those fees while high are actually there to make sure your project is done properly by your contractor and that it gets closed out in a timely fashion. If you build the costs of the loan into your projections than there really is no surprises. In the past I would always work up scenario sheets for my clients who were looking at 203k's and Homestyle's so they understood those costs upfront. Once you have a handle on what those costs are you adjust your offer price accordingly.

Good luck! 

@Chandler Smith - if you are not planning to live in the property at all that is an issue.  But you said above that you are planning to live in it during the reno which is fine.  Rule of thumb with a 203k is 1 year.  

FHA has minimum property standards you need to meet so as long as the property does not have any health, safety or marketability issues than you can go normal FHA- unless you want to keep your lipstick money for another investment and use the 203k funds to do all the repairs. Depends on your strategy.

Hope this helps! 

@Robert Lorenz - I totally understand what you are suggesting and I again totally disagree with you.  You sign an occupancy agreement - and that agreement states you are making this property your primary residence.  You basically are representing to this group to commit mortgage fraud.  I am a licensed lender who specializes in renovation loans and I came on this site for 2 reasons. 

1- network with investors as I flip (with cash) on average 6 properties in NJ each year

2- to provide information on renovation loans and dispel myths and show people how to use them both effectively and within the guidelines.  

Not trying to be a jerk in anyway but I have overseen over 400 renovation loans (203k and Homestyle) this year alone so the person giving out the information might have some idea but I am telling you you are not only giving out bad info you are misrepresenting to people and god forbid they get into trouble based upon your information.   

@Chandler Smith Please do not follow the advice of Robert above. He is giving you bad information. FHA 100% expects you to move into the property. You sign an occupancy disclosure stating that you are going to be moving in within a specific time frame. I had a friend who did what Robert said above and FHA did a random spot check and when they found out he rented it out and never moved in they called the note- he had 30 days to come up with the 200K he borrowed originally or they would foreclosure and press fraud charges- needless to say he got a loan from family to avoid what could have been a bad situation.

FHA 203k is your solution. Low down payment and use the "house hack" strategy to get started. Live in it for a year and then refi it out into a conventional loan and repeat. You can purchase multi family properties up to 4 units and even use future rents to qualify for the loan.

Side note- there are many great deal out there so whoever is telling you this is not a good time to start investing is 100% incorrect.  I have deals that come through my office every single day and the buyers are creating instant equity sometimes 5K, sometimes as much as 100K by buying foreclosures and bank owned properties.  Its just about finding the right deal.  

Hope this helps! 

Adam is right about the process on the 203k side.  You will have to live in the property for 1 year after purchasing the home and almost all lenders who allow 203k financing will not allow you to do the work yourself.  There is not an approved contractors list for 203k loans.  Any contractor that is licensed and insured will be allowed to work on a 203k project.  The contractors just need to be made aware of how they are going to get paid throughout the project.     

How many units will be in the property after the renovations are completed? You can go up to 95% LTV on a 1 unit property, 85% LTV on a 2 unit property and 80% LTV on a 3-4 unit property when refinancing the home to a rate & term conventional mortgage. All of this will be dependent upon the value of your home when you decide to refinance. Any additional funds needed to get the loan to values listed above will require you to come out of pocket to complete the refinance.

@Vertical Jones - feel free to give me a buzz and I will be happy to help you! 

@Chris Mason that's funny and so true!  

@Rigo V. as long as you are not flipping the property I would recommend the FannieMae Homestyle renovation loan.  You could do the deal with only 15% down however since you said you have cash I would recommend putting down more money as the loan level price adjustments are very high at 15% down.  Best pricing would be at 25% down.  Sounds like you have it.  I am not getting into the specifics of the deal and whether it is a good one or not just giving you my opinion on the best way to finance the deal.  

Good luck in your investment!