All Forum Posts by: Paul Welden

@Jeremiah Ellard IV

This appears to be a financial strategy question and not really related to the FHA 203k.

Why are you calculating the monthly rent from the ADU if you will live in it for your own use?

If you refi to a renovation loan by including the ADU costs + paying off the existing mortgage, would your total monthly payment be financially comfortable and agreeable to you?
If yes, then go for it. If no, then do not do it.

But perhaps I have misunderstood the intent of your post. 

@Lulu Lue

HUD has 2 online databases of lenders showing which ones have the most experience with 203k's.

But, the self-sufficiency test for FHA loans can be really difficult in SF, meaning that the market rent from units you will not occupy must be sufficient to pay for the mortgage payment.

Maybe consider a conventional reno loan like the Homestyle or CHOICERenovation. 

@Eli Moore

HUD has 2 database of FHA 203k Lenders.

The FHA Lender list allows you to search for bank branch office locations that have done at least 1 203k in the past year. 

The 203k Endorsement Summary Report shows how many 203k's each lender has done in different geographical areas of the country. 

The lender selection is vital to a successful 203k and they area also required to select the 203k Consultant. Because there is no HUD education/training of 203k Consultants, HUD states that the lender is responsible for everything the 203k Consultant does and this is why HUD requires the lender to select the 203k Consultant.

Regarding contractors ... it's best to use one that has been properly educated on the 203k and financially vetted ensuring their financials can support the requirements of the 203k. There's a database of contractors who are Certified 203k Contractors. 

You're only as strong as your weakest link ... select your partners wisely. 

Hope this helps! 

@Tom Server

I think that the 203k is not a good fit for your scenario because you are buying the property with cash and the 203k is a mortgage loan that includes the purchase price + the rehab costs. So technically, a 203k will not work for your situation unless you do a refi AFTER you buy it or do not pay cash but do a 203k from the onset. 

Alternatively, you could do an FHA Title I Home Improvement Loan up to $25k.

Hope this helps! 

@Meg Melody

converting 5 units down to 4 is simple ... combine 2 of the units into 1 and VOILA! You now have a 4-plex. (same process for a 6-unit you want to convert to a 4-plex) 

You'll need plans drawn and a scope of work showing the finished project, but quite simple 

The stress test will be based on the 4 units and not the 5-6 units bc the 5-6 units will not exist when the project is completed. 

Hope this helps! 

 @Josh Ricord

Your strategy may be tight financially, but if you can be strict with minimizing your extra curricular spending and keep saving money, you should be ok. 

You'll need to interview lenders to ensure they are well-versed with the 203k and work well with your personality. There are 2 databases of these 203k lenders called the FHA Lender List and the 203k Endorsement Summary Report.

There are also contractors who have earned the accreditation as a Certified 203k Contractor that are not only educated on the 203k but also financially vetted. 

Go out there, find your "diamond in the rough" and start creating your generational wealth! 

Hope this helps

@Josh Ricord

How much of your 20k savings will you use for the down payment + closing costs? 

When you want to buy another property, your income must be sufficient to cover both mortgage payments (the new property mortgage + the higher balance on your cashout refi mortgage).

@Marko Bukva

As long as you be living in 1 of the units as your primary residence, then you can do an FHA 203k.

If this property will be a flip or you will not live in it as your primary, then you can do a conventional rehab loan like the Homestyle or the CHOICERenovation. 

All these rehab loans are easy to do with the right lender and Certified 203k Contractor. 

Hope this helps! 

Before your loan closed, did you roll into the mortgage 6 months of your mortgage payments? 

I don’t know any bank that will pause/freeze your mortgage payments for a situation like yours.