Financing in Chicago>Question Details

Sara Buyer, Both Buyer and Seller in 60622

If pre-approved for a certain amount for a loan, is it possible to get some of that amount as a lump sum at closing to perform repairs before move-in?

Asked by Sara Buyer, 60622 Mon May 9, 2011

We're looking at fixer-uppers, and have great credit (approved for more than the cost of a house we are looking at), but probably not enough cash on hand after the down payment.

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Sara,

An FHA 203k loan would be perfect for what you're looking to do. You are able to roll the cost of repairs into the mortgage, so you won't have to pay for the repairs out of your pocket. For example... lets say you want to buy a house for $100,000, and the house needs $20,000 in repairs. You would take out a mortgage for $120,000 and the extra $20k for repairs would be held in an escrow account to be used for material & labor, and payable to the contractor(s). It's a bit more complex than that, I'm just keeping it simple for this post. Not all lenders/banks offer the FHA 203k loan, so ask around. If you'd like more info or help, feel free to email or call. Thanks.

Good luck,
Mike 708-257-7058
mcline@waterstonemortgage.com
1 vote Thank Flag Link Mon May 9, 2011
You have 3 different options depending on the specific circumstances.
1. 203K FHA loan program. (all same rules as an FHA loan)
2. Fannie Mae Homestyle (Conventional loan program)
3. Homepath renovation (Conventional loan program but only allowed on certain properties)

If you have any questions do not hesitate to contact me...
Sincerely,

Steve Smither
Midwest Equity Mortgage
Senior Loan Originator
847-942-5151
ssmither@ardain.com
1 vote Thank Flag Link Mon Oct 17, 2011
hey S, i assure you that going in now and getting all the details about a 203 loan is essential- they are processed in a manner that does not have room for in accuracy.. a sit down about the benefits of a streamline vs. full 203 are essential.. DO THE EASY ONE!.. Also your contract will require a license and other credentials- handymen do not always get the money.. get the details from the loan officer- this is your next step. as always.. it will cost you 2 times as much money and take 50% longer than you think to do most projects. doing anything in 1/2 measure is a 100% waste of time- people have no tolerance for low quality work.. the most expensive part is the labor- always use high end material, call an agent in to discuss your vision- we know what people want- I would call me in as I have a lot of experience but maybe you got someone. please mark as helpful if so!
Web Reference: http://www.joeschiller.net
1 vote Thank Flag Link Tue May 10, 2011
One of my good friends just called me up wanting to make an offer on a condo downtown that had a recently-flooded basement. At first he wanted to do conventional financing but realized he didn't want to be house rich and cash-poor after closing.

At first I was going to do a 203k for him but the unit he was trying to buy isn't in an eligible building (or association) and his property wasn't a Fannie Mae REO so HomePath wasn't an option for him. (As a single family or 2-4 unit this would have been a 203k for the 3.5% down payment scenario)

Luckily, HomeStyle was still an option and we're using this loan to purchase+rehab his condo. He decided to redo the entire basement since there was standing water before they drained it but it sat for days as it was an REO and there is definitely mold behind the walls. He decided on only doing ~25k in work instead of the 40-50k the whole house needs but the best part is that he'll still have a bank account when it's all said and done and he will only have to put 5% down with current guidelines.

If you're looking for more information on this product, you can browse through my previous Q&A.
Web Reference: http://RobWeber.com
0 votes Thank Flag Link Mon Oct 24, 2011
Keep in mind also that FHA loan limits are lower now in Chicago. If you were looking at a higher price point (purchase+rehab), keep the following figures in mind now for our area for your maximum financing:

1 to 4 units respectively.
$365,700 / $468,150 / $565,900 / $703,250
Web Reference: http://Robweber.com
0 votes Thank Flag Link Mon Oct 24, 2011
Hi, Sara. Short answer: No. Best way to finance enough money to handle needed repairs or desired rnovations are through the following loan programs; FHA 203K. Homepath Renovation. Check with the lender to see whether they do these loans and if you qualify. Good luck!
0 votes Thank Flag Link Mon Oct 24, 2011
The 203k or streamline 203K is a smart way to keep a house payment affordable and minimize unexpected repairs in the future. These two rehab programs could have saved the Real Estate industry, if people would have utilized these programs vs buying a new home. The streamline 203K has a limit of 35,000, but it is limited in the type of repairs you can do with simple processing and no major structural repairs can be done. The standard 203K will do major repairs to rebuild the home, but there is a long process with a plan review write up. The most important feature of the 203K is that it may save your deal from being denied, because of the appraisal. There are other precautions you should consider when securing a credit pre-approval. I would recommend that you sign up for continuous credit monitoring,so you are aware of any errors pulling down the credit score and protect yourself from the 5 FIVE areas of Identity theft. Do everything you can to keep a good credit score will shopping for a loan, the Fair Credit Reporting Act of 1971 can help increase your credit score!! Check money back credit repair fast . com for low cost, but fast results to maximize your credit score!
0 votes Thank Flag Link Mon Oct 17, 2011
Hey Sara,

This post was in May, I'm interested in how things are working out for you. Are you investing in properties?
0 votes Thank Flag Link Fri Oct 14, 2011
Hi, Sara!

Good for you - for making an effort to take advantage of a market that definitely suits your plan.
It sounds, based on the bit of information provided, that you are interested in a 203k or other type of rehab loan.
Web Reference: http://www.dreamtown.com
0 votes Thank Flag Link Tue May 17, 2011
Great Question.

MANY renovation Loans available to you... some even 100% financing!

Check this out for more information :)

b
Web Reference: http://www.203kworld.com
0 votes Thank Flag Link Tue May 17, 2011
Sara,

The FHA 203k loan is a great loan program that will help you do exactly what you are looking to do. At Midwest Equity, we offer both the full and the streamline 203k. If you need a Realtor, I have worked with a team that specializes in Chicago and we have done a few FHA 203k purchases together. Visit my website for more information or just give me a call to get started on your pre-approval and answer all the questions you have on this program. I really enjoy doing this loan.

Bradley Eggers
Senior Loan Originator
Midwest Equity Mortgage
847-744-0168 (cell)
bradley.eggers@ardain.com
NMLS #: 222407
0 votes Thank Flag Link Tue May 10, 2011
In using the FHA 203k be sure to speak with lenders that provide the full program (over 30k in repairs) in addition to the Streamline. Many lenders push that product and it has restrictions on it's use and is intended for simple repairs.
0 votes Thank Flag Link Tue May 10, 2011
As I said...that was a typo.

I was refering to a 203k.
0 votes Thank Flag Link Mon May 9, 2011
There isn't a 403K only the 203k which is a full rehab up to the loan limits or the Streamline 203k which will give you up to $35,000 for work to be performed.,
Web Reference: http://about.me/markilemons
0 votes Thank Flag Link Mon May 9, 2011
Thanks for all the answers! What is the difference between a 203k loan and a 403k loan?
0 votes Thank Flag Link Mon May 9, 2011
I am a former Lender, now an Agent.

There are no loans that give you cash back, however it is possible to obtain a loan where the lender pays for repairs on you behalf and adds the money to the principal of the loan. To best of my knowledge, now a days the only readily available product is an FHA 403K loan. This loan provides for up to $35,000 to preform repairs. There are certain loan to value qualifications, bidding process for repairs, and strict inspections that coincide with this loan. Any good loan officer can advise you further(the rules change every day and it would be irresponsible of me to advise you).

Hope this helps and feel free to let me know if you need anything further.
0 votes Thank Flag Link Mon May 9, 2011
You can only get money for repairs through a purchase rehab loan. The ideal loan would be a 203k loan. I just used William Harris at Wells Fargo to close on my home and we received $31,500 for rehab: http://www.wfhm.com/wfhm/william-harris1.
Web Reference: http://about.me/markilemons
0 votes Thank Flag Link Mon May 9, 2011
You would need a rehab loan like the 203K, but you do not get any cash at closing. The lender pays the contractor to do the work in the first 6 months after the closing. There are some hoops to jump through however. My web site has a lender reference Bradley Eggers who does them and can give you details.
0 votes Thank Flag Link Mon May 9, 2011
Sara,

You should look into some of the rehab loans to fix the home. You could do a 203K-Fannie Mae Homestyle- and if the property qualifies you could do a Fannie Mae Homepath Renovation. These programs would give you the money to finish the projects that will make your home the way you want it. You can get into these for as little as 3.5% down. Feel free to contact me if you have any questions...
Sincerely,
Steve Smither
Midwest Equity Mortgage
ssmither@ardain.com
847-942-5151 Cell
0 votes Thank Flag Link Mon May 9, 2011
Hi Sara,

I would encourage you to speak with your lender regarding getting cash back for repairs. It depends on the type of loan you are qualified for. You can also ask the Seller to pay for some of your closing costs to free up additional money to get repairs done.

Best of luck,

David Jaffe-SRES, CDPE
Realtor Coldwell Banker
0 votes Thank Flag Link Mon May 9, 2011
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