Home Buying in Parkland>Question Details

Eager Home B…, Home Buyer in Palm Beach County, FL

Using a 203K loan to purchase home with chinese drywall. How do I avoid getting screwed?

Asked by Eager Home Buyer, Palm Beach County, FL Mon Dec 20, 2010

I am in the process of securing an FHA 203K loan to purchase a home known to have chinese drywall in Parkland. It seems like a perfect match; I don't have enough money to purchase the property outright *and* pony up for the remediation costs. The 203K loan can be used specifically for chinese drywall, and the costs for remediation can be rolled into the loan.

However, during my research, I've read quite a few horror stories online about this type of loan. Firstly, it seems that it is not possible to avoid PMI, even if I put down 20%. The lender is telling me that it will be mandatory for the first 5 years, regardless of the loan-to-value. What are my options here?

Secondly, I am also being told that the rate will be approximately .5% higher that a traditional 30 year fixed rate. I was just issued a pre-qual letter that stated 5.5%. If this is normal on 203k, maybe I can mitigate this by paying down the loan.

Finally, how do I make sure I don't get screwed on closing costs?

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The rate for a 203K loan is generally a little higher than normal. If, after the repairs are completed, there is equity in the home, and the rates have stayed the same or gone down, you can refinance and potentially lower the interest rate. I did a 203K loan when I purchased my home and that is exactly what I did. 5.5% is a good rate right now, still historically very low. I am not completely familiar with the PMI issue, however, again, refinancing may take care of that issue as well if the loan-to-value ratio permits, ask your lender. As far as closing costs, go over your Truth in Lending statement carefully, ask your realtor to help, and raise any issues with the lender. There is a lot of competition for home loans right now, if you feel you are being charged exorbitant fees, look for another bank. I always tell my buyers to get three quotes and then take the best one. Works like a charm, competition is the key.
0 votes Thank Flag Link Tue Dec 21, 2010
IF you are buying the property using the services of a Realtor, why isn't your agent finding out the answers to your questions/concerns? IF you didn't use the services of a Realtor, maybe now you understand why you should have....
0 votes Thank Flag Link Sun Oct 21, 2012
Dear Eager Home Buyer,

I am guessing that you may be looking at a property in Parkland Golf and Country Club where there was a huge Chinese drywall problem. I had a client purchase a property in the community and did the remediation and the lender and contractor seemed to work very well together through the entire process. No doubt it was not inexpensive but adding up the purchase price, remediation expense, length of process they ended up with a magnificent home.

If you are interested please feel free to contact me and I will be happy to provide you the lender and contractor information as in the end the entire process was a success

The very best of luck to you and I hope this information is helpful but if you need anything additional please do not hesitate to give me a call.



Always at Your Service,


Tom Priester e-PRO
"Results Driven Real Estate"

Keller Williams Realty
561 308-0175
tom@tompriester.com
0 votes Thank Flag Link Mon Jul 16, 2012
The Chinese drywall comes back even after remediation. My poor neighbors have discovered this the hard way. Read the Sun-sentinel. Stay away from Chinese Drywall.
0 votes Thank Flag Link Sun Jul 15, 2012
I know this is an old post but The Defective Drywall problem is an ongoing one and I happen to be working with a situation at the moment. It's true that you should first check by testing to see if you actually have defective drywall. Yes the do sell home test kits, but just like the home pregnancy test kits, they aren't always accurate. My suggestion is that you should go to a professional. Besides, If you get a positive result from a professional, you may have some Legal Remediation that you can seek that you won't be able to go to if you only do a home test kit because the results won't be documented by a licensed professional. If your test comes back negative you have no problem, but if it is positive you do. If you are buying, you have to decide do I want to go through with the sale, Figure out about hou much it would cost to strip the house down basically to bare bones, and the last time I checked about 6 months ago, in my area lower priced (but still good) contractors were charging $20 - $25 per sq ft of home. ... If you are paying cash, you can always go back and renegotiate your offer for that amount less to covedr your cost to remediate the problem, ... That is unless the home was priced accordingly meaning normally it would be a $300,000 home but you're getting it for $100,000 because of the drywall. Then that was already taken into account.

If you are financing and qualify for an FHA loan, then Yes, a 203K would be the way to go. Keep in mind that yoou need to know exactly hown much it will cost to remediate the problem and you will have a limited time frame to complete the job which can only be done by licensed contractors. Usually 6 months. And it is a good way to get a bargain on a home and if you have the payment for the repair rolled into the loan it won't hurt as much as if you came out of pocket with $20 or $30 thousand. ... And I'm not sure but I think some of it can be written off, ask your tax accountant.

now, If you already purchased a home that you did not know had Defective drywall, Well, That's the issue I'm researching now for someone. What I've found out so far is that there is help from the Gov't in the form of a tax write off for part, .... big help, and There is also money in the form of Grants that you can apply for. There are also Class action suits and local law suits. I Highly recommend seeking an attorney's advice, especially if it was not disclosed to you prior to closing. And If you have had no experience with this drywall and did not get an inspection, because you were led to believe that you were buying as is, seek legal advice.

My issue and problem now is that I have a guy who bought one from Fannie Mae, and I know it was known that the house had bad drywall whan they sold it to him. Can't proove it except by my nose.... He wan'ts to re-sell but I know he'll have a problem because of the drywall. I feel for the guy. I feel like he was taken advantage of by fnma. So now I'm researching ways to help him. If you know any, please contact me thru my website. thanks.

Some Drywall reading: http://www.cpsc.gov/info/drywall/remediation091511.pdf
0 votes Thank Flag Link Sat Dec 3, 2011
hi Eager,

You gotta have it inspected to figure out if it is just the drywall or electrical and other systems that the chinese drywall corroded

Also there are tax issue with chinese drywall.

I write about ALL this stuff in my chinese drywall blog, here's the link... http://www.trulia.com/blog/monirmamoun/2010/10/chinese_drywa…
0 votes Thank Flag Link Thu May 5, 2011
Have you compared this mortgage broker with other loan officers statements to you therefore you evaluate .

Closing costs can vary all is estimated till an executed sales offer is presented to mortgage broker.

Without reading doc's provided to you all based on hear say PERHAPS in your comparison shopping have other loan officer explain why their rates are different than other competitor

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Tue Dec 21, 2010
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