Listen to Rob. FHA Loans are in no way predatory. There are bad loan officers, bad contractors and bad lenders everywhere just like there are bad mechanics, bad plumbers and bad accountants.. Research and learn before attempt any loan transaction. Do your homework, don't base your decision on rate solely. 203K loans require skill and knowledge, choose your LO wisely.

It's interesting how one bad experience makes a product or a group of people predators...

The previous poster obviously had a bad experience but to say that the 203k and the 203b are predatory, is analagous to saying the government agency that allows borrowers such as the previous poster, yourself or myself to close with 3.5% down or a non-occupying co-borrower or to be able to buy with a 620 credit score putting 3.5% down without paying numerous points for credit hits (such as you might have to do on a conventional loan) is predatory -- which is just not true (I think most people in those situations would also defend HUD/FHA. Is it true that there are lenders out there who botch these deals, loan officers who don't have a clue, contractors who are working on a shoe-string budget and HUD consultants that give the good ones a bad rap, yes, that's all true. On the other hand, there are good lenders, good loan officers, good HUD consultants and good contractors out there. Due your due diligence on your lender, your contractor, your loan officer, etc.

I just did a presentation last Thursday for ninety people on 203(k) financing and I couldn't stress enough for people to do their due diligence. One guest shared his story about due diligence about how he had a bad experience with his lender and how he could have done it better after-the-fact (he specifically said to use a lender who has a strong history with the program as his didn't and he said he knew more than his Loan Officer by the end). The lesson learned from him will save possibly the other 89 people in the room from those issues (assuming no one did their due diligence prior to that).

Getting back on topic, a best practice I do with my clients is to share wit them how to interview the contractor (as we do background checks at my company on them to avoid the issue below) to determine upfront if they'll have any issues. Most of the problems can be resolved upfront by telling them what things we may look at/be looking for and give them the option to back out. Some lenders don't do background checks and just let you use whoever you want... That's a disaster waiting to happen.

DO NOT recommend this product to anyone. The contractors and even the assigned FHA consultant take the control away from the homeowner, and the result is often negative. If the contractor becomes a bad actor and doesn't comply with the established contract, the lender will place all responsibility on the borrower. This means that legal fees, the mortgage and anyother resulting cost will all fall on the home owner. Even with all this, the lender will still hold the borrower accountable for getting the work complete.

The FHA 203K or 203B loans are simply PREDATORY LOANS.

Borrower Beware!

Experience with the product is huge. There are a number of caveats to the product that will trip up loan officers inexperienced with 203K's. I have plenty of 203k info for consumers, loan officers and real estate agents on my blog:

http://www.jonathanblackwell.com/

You can also get plenty of info on the website linked below. Good luck!

Additionally, for anyone looking for a mortgage consultant to do a 203K with, I would suggest asking about their recent experiences with them, some challenges they encountered and how they were handled. Anyone who doesn't tell you there were any issues is either a) lying or b) has not done one. Even the smoothest transactions can have a hang-up or two. Another way is to read up about them on HUD's website. I've spoke with clients who know more about the program than most mortgage consultants. These are complex loans that are very similar to a construction loan, it pays to have expertise and experience on your side.

Happy Hunting!

The 203K uses many of the same guidelines but qualifying for a 203K is not limited to just standard FHA guidelines, there is a contractor piece, the repairs to be made need to be reviewed AND approved and a subject-to appraisal is required. It doesn't matter if it's in Florida, California, Alaska, Illinois or Georgia, the guidelines are the same everywhere "possibly" with some localized differences depending on a city or county requirements to issue the certificate of occupancy.

The FHA 203k loan program is nothing more than a specialized FHA home loan designed to help homeowners make home improvements. It is especially popular in neighborhoods with properties in need of rehabilitation.

The Miami, FHA 203k loans work in Miami, Florida communities in much the same way as Construction loans for home improvement. Eligible borrowers can use the proceeds from this mortgage to renovate and improve their primary residences.

Qualifying for a 203k FHA mortgage uses the same guidelines as a standard FHA mortgage for the purchase of a Florida home

Andrew,

I'm a Renovation Specialist with Wells Fargo, let me correct several inaccuracies that I noticed in this thread.

One poster said that a 203(b) was new, that's incorrect. A 203(b) is the standard FHA name for a loan on a single family residence or a townhome. A 203(c) is for Condos and a 203(k) is for Renovation loans. I'll guess that poster meant 203k and their lender is trying to roll out their renovation loan product.

Another poster stated the product is only for loans of 35k and below which is not entirely correct. There are actually THREE types of 203k loans. There is a 203k Limited Repair (this is for loans of 15k and below), a 203k Streamline (35k and under) and a Standard 203k (35k and up). Additionally, a 203k allows for just about any type of repair (this will vary by lender) as long as it doesn't require replacing the foundation (repairing it is ok) and the structure must not be compromised (remodeling is ok). A gut rehab can be done with a standard 203k (this may vary by lender). Most lenders do not offer the standard 203k loan due to the overhead required to maintain the product (203k streamline and limited repair are much easier to implement)

There was a dispute about how the money is dispersed. Neither of the posters is incorrect, both are correct. Depending on how the draw process is setup by the lender, this answer will change. Money can be dispersed as a two party check, a wire or a check solely to one party (this varies by lender). Some lenders disperse in two draws on a streamline, one upfront and one after the final inspection or disperse funds all at closing depending on who the contractor is or it can be released in draws like a construction loan on the standard 203k.

Luxury items can be included as well.

I've wrote many posts on this, please see my other posts by clicking on my picture. Click on "My Q & A --> View All".

I can also be reached via my website or via phone (cell is on office # an my website. I lend in all fifty states.

On a side note, we have a product like a the 203k that INVESTORS can use (it's not a FHA loan). It works very similar to the 203k. Most of the above applies to this product as well. Contact me for more details on it.

Rob Weber
Wells Fargo
w) 312.274.4136
c) 847.404.7006
rob.weber@wellsfargo.com

You can get over $35,000 on the FULL FHA 203K loan. The loan under $35,000 (cosmetic repair ONLY) is the FHA 203K Streamline.

The Full FHA 203K requires a HUD Consultant to manage the draw process and do the initial inspection. The fee they charge is based on the amount in the repair escrow and set by HUD. I believe that $1000 is the fee for a $75,000 repair amount ($82,500 escrow amount with the 10% contingency added on top as required by HUD).

I noticed someone said the buyer gets the money, the checks are cut to the contractor, not the buyer. The best way to get your renovation done fast is to get a contractor with a line of credit who can start work immediately so they don't have to wait for the first draw.

FHA 203K renovation loans are about 80% of my business. It is a great loan and can be closed quickly, efficiently and at a great rate in the hands of an experienced loan officer.

You may also look to this website for more information: http://www.gpxconnect.com/fha-203k-rehab-loans

I have worked with many buyers who worked with rehab financing and the FHA203(k) program is my personal favorite. There are two forms of the program, including the 203(k) Streamline program with reduced paperwork requirements.

Many HUD homes are offered with this type of financing, and repair costs are built right into the mortgage.

Not all FHA lenders work with the 203(k) product. Use a lender who has EXPERIENCE!

Rhonda, you said you can get up to $35000. What if we own the property free and clear, but need more money to rehab it? We would need about $75000.

Hey Andrew. My loan officer just called me today going over the details of the 203k loan. The details I were given is that the buyer can get up to $35,000 to renovate the property. The property has to be owner-occupied and at least here in the middle TN area, the purchase price has been to no more than $226,000. The buyer gets half of the money upfront and the other half when all of the work is completed. The work has to be completed within six months. The money can be used for renovations such as a new roof, paint, carpet, appliances, etc. but you cannot knock down any walls or add-on square footage such as with an addition. The buyer will need the customary 3% down on this FHA loan and the loan can be used to buy HUD and non-HUD foreclosures. Hope this helps.

I haven't had one that has closed; however, one of my buyers is using this loan to buy a foreclosed property. One of my loan officers at Regions Bank has just recommended the FHA 203B program. Apparantly, it's something new that they have unleashed to get foreclosed properties moving.

I'd be interested to read what others have experienced with a rehab loan.