Home Buying in Powhatan>Question Details

Pattydunavant, Home Buyer in Powhatan, VA

What are the specifics of a 203K renovation loan; and, why do most local banks not offer them?

Asked by Pattydunavant, Powhatan, VA Wed Feb 22, 2012

Property I want to downsize to is up for a "short sale". The house is termite ridden and needs tons of work, so I feel I might be able to afford it, if someone will lend me the money. I have more than they want for this property in equity in my current home and land.

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Patty, the 203k loan is the single biggest missed opportunities in the market today. And, it sounds like it is exactly what you need to purchase the home you are looking at. There are too many specifics to give you in this space but the bottom line is this - it isn't hard to do. You include all the costs of renovations in with your mortgage and the work gets completed after closing. The contractor will take draws as the work is completed. For the work you are doing, you'll also need an FHA 203k consultant who will do your home inspection and guide you through the process somewhat. Half of my business is 203k loans - rather than hunt around in the market to find my clients the home they want, I just create it for them with the 203k. You can do anything you need to a house with this loan - even knock it down and a rebuild or move it to another lot.

Check out my website and you can get more information on how the program works and also see some before and after pictures of my clients homes. You can call or email me anytime and I can talk to you one on one about it and answer any questions you have. You can also have your agent call or email me and I'll help both of you make it a smooth transaction. Also, I'm only about an hour away so I might be able to connect you with my 203k contractor to handle all the work for you.

Most local banks and credit unions do not do 203k loans. Give Ray Roeske a call at 571-238-6468 or email raymond.w.roeske@wellsfargo.com. He is one of Wells Fargo's leading 203k expert loan officers and he is right here in Virginia. The loan officer can make or break your entire deal - they have to know what they are doing with 203ks - don't use a loan officer that has never done one before, especially if there is termite damage.

Good luck and let me know if you have any questions.
1 vote Thank Flag Link Thu Feb 23, 2012
The FHA 203k renovation loan program provides funds for both the purchase and renovation of a home packaged into one mortgage loan. Once the purchase of the home is closed, renovation funds are held in escrow to pay for pre-determined renovation work done by approved renovation contractors. The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.
HUD's 203(k) program can help you overcome this obstacle by enabling you to borrow funds for the purchase or refinance of a property plus the cost of making the repairs and improvements in one mortgage. The FHA-insured 203(k) loan is provided through approved lenders like us and is available to owners who will occupy the home themselves.

Down payment, credit qualification, loan limits and other requirements are the same as standard FHA loans. Additional guidelines are set forth specific to 203k loans to provide for renovation of the home.

FHA 203k loans are available in two types:
1. The Standard 203k is intended for more complicated projects that involve structural changes, such as room additions, exterior grading and landscaping, or renovation that would prohibit you from occupying the residence. A Standard 203k is also used if your project requires engineering or architectural drawings and inspections.
2. The Streamlined 203k is designed for less extensive improvements and for projects that will not exceed a total of $35,000 in renovation and related expenses. This version does not require the use of a consultant, architect, and engineer or as many inspections as the Standard 203k. As a result, when applicable, the Streamlined 203k generally becomes the simpler, less costly option.

What improvements are eligible under the Streamlined 203k?
The Streamlined 203k program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. This program allows discretionary improvements and/or repairs shown below:

• Repair/Replacement of roofs, gutters and downspouts
• Repair/Replacement/upgrade of existing HVAC systems
• Repair/Replacement/upgrade of plumbing and electrical systems
• Repair/Replacement of flooring
• Minor remodeling, such as kitchens, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/replace/add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement

What items are ineligible for the Streamlined 203k?
Properties that require the following work items are not eligible for financing under the Streamlined 203k:
• Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall;
• New construction (including room additions);
• Repair of structural damage;
• Repairs requiring detailed drawings or architectural exhibits;
• Landscaping or similar site amenity improvements;
• Any repair or improvement requiring a work schedule longer than six (6) months; or
• Rehabilitation activities that require more than two (2) payments per specialized contractor.

This is definitely a great program for situations like yours and if you would like more details on getting pre-approved please contact me at your convenience. Thank you and best wishes.

Elliott R. Oliva
Stearns Lending, Inc.
202.681.1636 direct
0 votes Thank Flag Link Thu Feb 23, 2012
Then perhaps a line of credit on your current property would be a way for you to make a cash offer on the property? Will you be able to fund the repairs with cash, too?

Otherwise, many banks offer renovation loans. If you have cash available to you and are not restricted to the 3.5% down then you are not restricted to a 203K.
0 votes Thank Flag Link Thu Feb 23, 2012
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