All Forum Posts by: Noreen Eddy

Good advice above, Chris and Andy!  I definitely agree with the paper trail idea - your occupancy will be proven by things like bills being sent there (God forbid it really came to something serious), rather than if your toothbrush was used that morning in the bathroom, you know?  I personally think if you wait two weeks you'll be fine, especially if there are unlivable conditions.  

And yes, there are no little elves checking on owner occupants every day - we live in our HUD home, and never once received a follow up once we completed our 203k. :) congrats on the purchase!

"I ain't afraid of no ghost."

I personally wouldn't mess with the owner occupant rules.  Read the paperwork carefully; if an orange jumpsuit isn't your color, you might want to obey the law.  

I do believe you could live there for the required time, and then rent it out after.  How about a storage space for your toys and vehicles?  

Hi Zach, welcome!!  I second what John Errico said - the trains and buses of NJT (while possibly run by a spawn of the devil) are actually a big factor for tenants and owners alike.  A nearby train station to NYC does a lot of good for property value as well, I do believe.  

My hubby and I are owner occupants of a 2-family HUD FHA 203k in Bergen County. While NJ is competitive, especially in places like Essex or Bergen County, most HUD houses have an owner-occupant-only bidding time - often the first 5-7 days. We were fortunate because while our house was very popular, we got first crack at bidding before the contractors (piranhas?) had the chance to bid.

FHA 203k is not for the faint of heart - be advised that a good credit score and proof of income are essential, as the banks do NOT PLAY on their forms and applications. Make sure your realtor knows your plan because the realtors have to have a certain approval from HUD in order to place your bid for you.

All THAT being said, 3.5% is not a lot to put down on a house, and a FANTASTIC way to get started.  We've renovated our way from 10k down into earning 70k in value on our house and re-fi'd into a conventional loan.  Not bad start if you can swing it!!  

Ask us anything, we'd be happy to help you along!  

Hi @Devon Martin!

Jumping in here on the late bus. My hubby and I survived a 203k streamline about a year and a half ago. Bear in mind that a 203k property becomes eligible for the program because it would be otherwise uninsurable on a regular mortgage-- houses end up in HUD's possession for a reason, and they're often ugly ducklings. That's great news for you-- you'll likely find a house with potential for improvement, and it seems like you'll be an owner occupant, which is an advantage in the bidding process on many (not all) of their properties.

However, the bank will REQUIRE certain items to be fixed before you can live there.  They have a long, long list of items that must be up to a certain standard-- obvious things like mold, leaks, asbestos, lead paint, etc. will all have to be fixed by an insured and licensed contractor.  When it comes to lead paint or asbestos, the EPA has a lot to say about who should touch it and who shouldn't.  203k = doing a deal with Uncle Sam.  Licensed people are absolutely required ... and honestly, faster.  

HOWEVER, a finished 203k means the bank is satisfied, not that the house is nicely live-able.  There will likely be plennnnnnty of work left-- a streamline (<$35k in repairs) budget disappears quickly, and the nice-nice "wants" will likely have taken a backseat to the "needs".  For example, we were able to move into our home with the 203k work completed, and still have 4 dysfunctional sinks, 2 dysfunctional toilets, and zero appliances.  The roof leak wasn't actually fixed, there were still leaking pipes, but the bank was satisfied and done with our 203k.  Amazing, right?   We still had miles of painting, flooring, and kitchen/bath to repair in order to improve the house to where we wanted it.  

To answer the contractor vs. not query -- I say it depends on the job.  Paint?  Learn how to paint well for Heaven's sake.  But updating electric in a 100 year old house?  Plumbing, sidewalks, window replacement on the 2nd floor (picture: big scary ladder), and roof repair?  Hire it out.  Saves time so you can do other things.  Also - it's not just time spent doing these tasks, but also the tools you need-- that cost adds up too.  

My advice - find skilled friends.  Learn from them.  Offer to assist a contractor if they're cool and do all the gross work for 'em like tearing down plaster or carrying sheetrock.  We happened to have a fantastic carpenter and taper in our lives, and we learned 1000% more than we thought possible on the basics of how a house works.  That knowledge has no price tag.  

Best of luck!

Hi friends!  Good for you, @Carol C.!  We had a similar come-to-Jesus moment in spring 2016 and realized the same thing (even more motivation - my line of work doesn't even boast a steady W-2).  We almost started with a condo, but then realized what we really wanted was a duplex.  So, we sought out our unicorn - ahem - our 2-family house in NNJ commutable distance to NYC.  

We eventually found a 2-family on the MLS-- turned out it was a foreclosed HUD property. We're also in Garfield (hi @Sunny Burns!). I joke that we found the ugliest house in the nicest neighborhood we could afford. We put 3.5% down through an FHA 203k. 14 months later, we've gut-renovated the 2nd unit, replaced a staircase, put renters in place upstairs, and reappraised + refinanced into a conventional loan with a BRRRRRRRish (how many r's?) strategy. Taxes here are high, but so are average rents compared to other markets.

Every investment is a little different!  I encourage you to analyze your target market for ten minutes a day, every day, for a month.  You'll figure out what strategy best works for you!  Please reach out if there's anything we can do to help!  We have some great resources (lender, contractors, etc) to recommend.  

Hi Keith!  I'm in NNJ also!  Good for you on having a clear goal + deadline!  Also, your habit of analyzing will serve you well.  We loved redfin for our area - often finding properties before our realtor did.  

Hubby and I closed on a 203k here October 2016. I'm not familiar with the rules of VA loans, but 203k properties are not usually "move-in" or "habitable." It seems that 203k was created (at least in our case, it was applied) because the property was otherwise uninsurable on a regular mortgage.

Example: Our house had plumbing issues and was winterized, having been a foreclosure.  We could not turn on the water during the inspection.  Your average bank won't mortgage a property like that.  203k allows you to buy a property with a laundry list of work to do yet still get a mortgage.  Perk: only 3.5% down and a construction loan wrapped into your low-interest rate mortgage.  (Construction loans otherwise cost a lot more than the 4% average of a mortgage).  

I agree with @Ro Maga - 203k breathes a big fat hassle, inevitable delays (ask me about lead paint...), and red tape... but it's worth it. We were able to refi into a conventional loan this summer (goodbye, ugly PMI), and our appraisal reflected a $70k increase in value to our home. Not bad for $10k down and $25k on rehab (add'tl to 203k rehabs).

Other considerations for your number crunching:

1.  Interest rate on a 203k - if you have a good lender - should be comparable to any other conventional loan.  

2. 203k FHA loans have a credit score requirement. Make sure your reports are neat and tidy!

3. PMI - mortgage insurance - is a p.i.t.a. and will never go away unless you re-fi. This might affect your math! Ours was approx. $200 extra per month on top of mortgage and taxes. We made it our mission to be rid of PMI in less than a year. We were successful thanks to a lot of sweat equity.

Hope this helps!  Happy hunting!  

PS if you need a mortgage guy who has experience with 203k, send me a message!

Hi!  We closed on our 203k in Oct. of 2016 in northern NJ, and finished up with the contractor about a year ago this month.  You do NOT need a 203k "approved" GC.  All that means is he/she went through the requirements to get that after their name.  I second @Cara Lonsdale - they simply have to prove license, insurance, and be game for a BOATLOAD of paperwork on time limits.  

Regarding their payment - at the time we did our 203k, they could either wait until full completion/inspection, or they could file another form and write a letter stating they don't have the $$ to put up front, and therefore get 50% of costs needed from the bank to start the required work.  Our guy did that, not a huge deal.  He got his balance from the bank at the end of it all.  

I definitely recommend finding a lender who knows this sort of info off the top of their heads.  203k is no joke when it comes to paperwork!!  Also - contractors who have admin staff might be a good idea--  our guy did not have this, but it would have been helpful.  

Hey! Not sure if anyone's still interested in this conversation, but we just bought a 2-fam in Garfield, NJ. We searched for several months and eventually found a foreclosed FHA 203k property.

My best advice is to not go near Paterson unless you're taking advantage of lower sales tax at Lowe's.  Paterson has had a terrible reputation for a long, long time.  If a D- or C-class neighborhood complete with gang violence is what you desire, though, shop away...!  Elizabeth doesn't seem much better, Newark has areas that are improving... NYC vicinity is tough but worth it - many folks are fleeing Manhattan due to the outrageous costs of living there.