If you opt to go 203K, you might find something in this article helpful.

I think hard money loans is the answer.

Look at this blog it will help you to learn more about your situation.
I've got most of my answers there as well.

Good Luck.

Hello,
In this current market, since refis are not consuming the resources at the banks right now, most loans, FHA included, are taking only 30 days to fund. At my company, we absolutely can certainly fund an FHA lan in 30 days.

There are numerous benefits to an FHA loan.
1) High loan amonts: With the current stimulas plan, an FHA loan can be as high as $729, 750, and the interest rates are extremely competitive...often better than conventional rates. If you have a high credit score, even better.
2) Cash preservation: Certainly, FHA loans have mortgage insurance, but that is a cheap price to pay in order to preserve your precious cash. On your $800,000 purchae, you can put 20% down, or $160,000. Or, you can put $71,000 down, and pay about $335 a month in mortgage insurance, and have money left over to do your renovations.
3) Streamline refinances: Typically for $1000 or less, if interest rates improve, you can refi your FHA loan without a new appraisal, and with minimal documentation.

Mortgage insurance on an FHA loan is not forever. You must hold on to it for a minimum of 5 years, and after 5 years, if you have been able to pay your mortgage balance down to 20% equity (in your case, down to a $640,000 loan balance), you can have it removed. Or, you can refinance out of the FHA loan at anytime that it makes sense, into a conventional loan without MI.

Many of my clinets have the cash to put 20% down, and after I review the benefits of FHA loans, they opt to put less down and save their cash...assuming they can afford a larger mortgage payment (which is sounds like you can). Especially in this market, and this economy, cash is king! And once you give money to your lender, you can never get it back without paying interest to pull it out, or selling your property.

My recommendaiton to you is seriously consider an FHA loan. It sound perfect for your situation!
Good Luck,
Julie Thall
jthall@rpm-mtg.com

Cali:

Thanks for the clarification, my suggestion is that you speak with a mortgage broker about a construction loan. FHA loans are actually quite expensive and intended for those with little down payment and even smaller FICO scores. Since you have both an excellent credit rating and the required 20 percent down, use the conventional loan and save yourself both money in interest, upfront fees, closing costs, and mortgage insurance (which never goes away under an FHA loan). A 203K loan, as I understand it, is for those homes that are so distressed that they need money to be "livable" and, again, in this case, it sounds like the home is perfectly livable, just in need of some polish.

If you cannot find a construction loan now, do what I did, and improve the home a little at a time as you have money. There are plenty of quality, skilled construction workers available now that developers have stopped building in many areas who can do this work for you at a later date and after you move in. Whenever possible, a lower interest rate will, in my opinion, trump a loan that gives you money back for construction, but at higher costs.

Good luck!!

Sincerely,
Grace Morioka
Area Pro

Let me clarify my original post. I wrote "repairs" and shouldn't have. The home itself is in good condition and doesn't have any required work -- we simply want to freshen its facade and add a family room.

Hello Cali and thanks for your question.

I was just speaking with my trusty loan broker pal, Jay Deimling, today and there are construction loans, but they are very hard to get, and, to be frank, the interest rates are not good. The emphasis right now, as you know, is for banks to provide purchase money loans.

Yes, you can apply for a 203K loan, but you are also correct that all FHA loans including the 203K are taking between 45-60 days to fund and close due to the volume of loan applications coming through their system. Also, keep in mind that if the home is in really bad shape, aside from the 203K, the regular FHA loan will require that you make repairs to the home BEFORE you close escrow, which means you'd have to have money to make those repairs now.

Unfortunately, it sounds as if you're already in contract, but had you used a facilitator (like me) because we charge only 1 percent on the purchase contract, you might have been able to use as much as $16K from the sales commission at the end of the transaction toward home improvements.

At this time, my suggestion is to speak with a qualified mortgage broker who specializes in FHA loans to assist you. Jim and Jay from Lighthouse Lending are FHA experts in San Ramon if you're interested in contacting them, drop me an email at the address below and I'll be happy to provide you with the names and contact information for mortgage brokers who are knowledgeable and well connnected in the lending field.

Sincerely,
Grace Morioka, SRES, e-Pro, Facilitator
Area Pro Realty
Sunnyvale, CA