Financing in 96150>Question Details

Ryon S Gray, Real Estate Pro in South Lake Tahoe, CA

Are 203k loans hard to qualify for?

Asked by Ryon S Gray, South Lake Tahoe, CA Tue Mar 20, 2012

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The 203K or 203K Streamline are more difficult than a standard 203b. General rule of thumb is you should be able to qualify for 4 x Annual Income as your estimated sales price. Credit-wise you should be somewhere around 620+, but we can go down to 600 for a 203K. If you are lower than that,I recommend contacting me and start the process of getting your scores a little higher. For further information, click on the link below.


Best of Luck!
1 vote Thank Flag Link Tue Mar 20, 2012
203k loans are FHA loans...so with or without the renovation funds the guidelines for qualifying are similar in respect to the borrower qualifications.

Here are more details on that:

http://www.203kmortgagelender.com/blog/fha-203k-loan-guideli…
2 votes Thank Flag Link Tue Mar 20, 2012
The loans were introduced to push up home ownership sales by curtailing down payment requirements on mortgage loans. The purchasers are required to pay an upfront insurance premium at the time of closing. They are also required to pay monthly insurance premium to guard the lender from loss in case of foreclosure and default. The maximum and the minimum amounts required to utilize these loans are $35000 and $5000 respectively. These are applicable for single family homes or multiple family homes of up to 4 units. In other words, these loans can be utilized to rehabilitate or repair single family detached properties, condominiums, town homes or small apartment facilities. This loan can also be used for the up-gradation and modernization of the existing home.

This program can be utilized for accomplishing rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways: http://fha203kloan.org/203k-eligible

>By purchasing a house and the land on which the house is located and rehabilitate it.
>By purchasing a house on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
>To refinance existing indebtedness and rehabilitate a house.
1 vote Thank Flag Link Mon May 4, 2015
From my experience with 203k loans, the best advice is to use a lender that offers assistance via third party with 203k processing.
This shortens the closing time by weeks. Try http://www.cfs-mortgage.com/203k for more information.
1 vote Thank Flag Link Sat May 25, 2013
As a realtor, I have worked with clients taking advantage of an FHA 203K loan. As long as the client is working with a professional mortgage company that has excellent contractor/vendor contact the process typically goes fairly smoothly. Plan on more time than a typical FHA loan.
1 vote Thank Flag Link Tue Mar 20, 2012
Getting a 203k loan is not always hassle-free. At times, the process can be lengthy. Get a feasibility report to see if you can afford the repairs. You will get a report that tells you how much money will be needed to bring the home up to FHA guidelines.Check out http://www.cfs203k.com for more details.
0 votes Thank Flag Link Sun Sep 8, 2013
Not really much difference than a regular FHA loan. However, we seek a local lender that is experienced with this type of loan.
0 votes Thank Flag Link Tue May 28, 2013
The question of are they harder to qualify for is a difficult one to answer. On the one hand, the credit standards for FHA loans are the same for 201(k) loans as they are for the standard 203(b) loans. On the other, there are two issues that 203(k) loans have that 203(b) loans don’t have. The first one is there are a lot fewer investors interested in buying rehab-type loans, so it the ones that do them can be more strict. The other one has to do with the transaction itself.

With a 203(k) loan not only does the borrower need to be qualified, the contractor must also be approved. Then after that, the plans need to be approved, and if the scope of work is large or over about $30,000 in rehab cost you will usually need to use the full 203(k) loan (as opposed to the streamline version that is more widely offered) and that involves a special consultant approved by FHA. This is where I see the most problems during the transaction. I really don’t recommend having that relative with a contractor’s license do this unless they are familiar with the loan product. I have a couple of contractors that are very good contractors, but more importantly they understand this loan program so the process goers very smooth.

I really like the 203(k) loan; I believe more people should be taking advantage of it. The one thing I would really stress though is make sure you don’t pay too much for the as-is property. When I see these deals go bad it’s almost always because the math doesn’t work. If you pay $100,000 for a property in as-is condition and then spend $30,000 on repairs, it should now be worth $130,000 or more. It’s very frustrating to pay for an appraisal and more only to find that the property will only be worth $120,000 after the repairs are complete.

Best of luck with your home search up at Tahoe.
Web Reference: http://www.SacRELender.com
0 votes Thank Flag Link Wed Mar 21, 2012
203k loans and not necessarily hard to qualify for, but the process can be very complicated and it can take an extended period to close the loans.
0 votes Thank Flag Link Wed Mar 21, 2012
Depending on what work needs to be done, an energy efficient mortgage might be the answer when the renovations are energy related: windows, insulation, HVAC, water heating, lighting.
All loans require justification these days. Remember, there are no investor 203K loans anymore. FHA borrowers must be owner occupants.
0 votes Thank Flag Link Wed Mar 21, 2012
Jim Walker, Real Estate Pro in Carmichael, CA
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