Home Buying in Seaford>Question Details

Lori Burgess, Home Buyer in Massapequa, NY

A listing in Seaford reads "Cash or 203K only" Sandy damage. What does 203K mean?

Asked by Lori Burgess, Massapequa, NY Mon May 27, 2013

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Oh, and the entire amount financed, both the price of the house and the repairs will all be in one loan, one monthly payment. It is not 2 seperate loans.

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Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 606-9648 Cell
(631) 659-2011 Office
(516) 918-5383 Fax
1 vote Thank Flag Link Mon May 27, 2013
Simply, 203 k means that the home is in need of repairs that a conventional loan will not allow for. You actually borrow extra money to cover the cost of the repairs. You will need an estimate from a contractor and inspections of work will need to be done. If I can help you find your new home, please contact me at: ginalollorealtor@gmail.com. I am a certified buyers agent. Good luck!
0 votes Thank Flag Link Tue May 28, 2013
A 203K Loan is a rehabilitation loan. If a home is so damaged that it would not qualify for a conventional mortgage, a 203K loan would allow you to buy it and fix it up. Fix up costs are included in the mortgage. I guess we realtors should stop assuming that the public understands terms such as this and should avoid using them in our listings.

Tom Moser
Keystone Realty USA

Long Island's Commission Rebate Realtor
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0 votes Thank Flag Link Mon May 27, 2013
A 203K is a rehabilitation or renovation loan. This is a loan program available for buyers of a property that will not pass FHA or conventional loan guidelines because of its current condition. Some of the issues could be leaking roof, peeling paint, missing or non-working plumbing, non-working heating system, broken windows, etc.

A local loan officer who specializes in 203K can best answer your question.

Best of Luck.
0 votes Thank Flag Link Mon May 27, 2013
So, typically buyers would use a conventional loan or a FHA loan. In either case, the house you'd be buying must be in livable condition. When you're buying a house that has extensive damages, because the house wouldn't approve for either conventional or FHA financing, you would ONLY be able to buy it all cash or with a 203(k) loan.

A 203(k) loan is a type of FHA that is designed to lend you the money you need for the purchase of the house AND the repairs necessary to make the house habitable. So if you're purchasing this particular house for $299,000, your contractor gives you an estimate of say $35,000, your total cost (aside of closing costs) is $334,000. Your 3.5% down payment would be based on the $334,000.

With a 203(k) loan, you'll be required to get an estimate from a licensed and insured contractor. You will not be allowed to do any of the work yourself. Soon after closing, you'll receive part of the $35,000 you need to give to the contractor to begin working and then you have additional draws after that. Your contractor gets 6 months to do the work and the bank does send the appraiser back to re-inspect the work that has been done. The amount you can finance for the repairs does not need to be $35,000, it can be as low as $5,000 and there is no real limit, but the house would need to appraise for the total (in this example $334,000) considering the repairs or upgrades that will be done to the house.

If you have additional questions, I am always available to talk or meet at our Woodbury office. Good luck!

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 606-9648 Cell
(631) 659-2011 Office
(516) 918-5383 Fax
0 votes Thank Flag Link Mon May 27, 2013
When a home is not mortgageable due to damage (Sandy for example), a 203k rehab loan is an option for purchasing. You basically will have to get estimates for all of the work to be done and get a loan for the amount to fix the house into live able conditions.
0 votes Thank Flag Link Mon May 27, 2013
Hi Lori, that means that in it's current state it would not qualify for a normal mortgage. A 203k loan is a rehabilitation mortgage which will build in the cost of the repairs to the mortgage. For example say the house is $300,000 but the cost to fix the damage to make it qualify for a normal mortgage would be $150,000. The resultant 203k loan would be for $450,000 which would include the purchase price and the price of repairs. The home would have to have an appraised value of at least $450,000 to qualify for a rehab loan in this scenarion.
Tom Brady SFR, e-PRO, SRES, GREEN, BPOR
Licensed Real Estate Salesperson
Notary Public, Retired N.Y.P.D. Lt.
631-682-8660
Tom@BradyFamilyRealty.com
http://www.BradyFamilyRealty.com
http://www.SuffolkFreeCMA.com
http://www.NassauFreeCMA.com
#1 Listing & Selling Office on Long Island
Charles Rutenberg Realty, Inc.
255 Executive Drive - Suite 104
Plainview, New York 11803
0 votes Thank Flag Link Mon May 27, 2013
203K is a rehab loan; see link for helpful information
http://portal.hud.gov/hudportal/HUD?src=/program_offices/hou…
0 votes Thank Flag Link Mon May 27, 2013
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