Home Buying in Philadelphia>Question Details

Kathleen Gil…, Real Estate Pro in Limerick, PA

What do you think the pros and cons of a 203K Mortgage & Construction Loan are for first-time home buyers?

Asked by Kathleen Gilmore, Limerick, PA Thu Apr 14, 2011

A lot of buyers are on a budget, but still want a home they can customize exactly the way they want, so your choices are - buy "as-is" and renovate or customize the home yourself....or get a 203K Loan, which includes the purchase price and the remodeling costs so that buyers can create the home they want. Some disadvantages of this are it will take 1 month or more to have the construction team do the work before you can move in - I'd like to hear others' thoughts about this strategy....

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3
Kathleen,

It's a great strategy for the undercapitalized home buyer that has the desire to improve and customize an existing home into a new. In fact, I wrote a blog about it recently that outlines alot of the perks.

http://www.trulia.com/blog/ScottButcher/2011/04/need_a_purch…

The drawbacks as I see it involve the borrower having to pay FHA Mortgage Insurance. I try to avoid having my clients pay MI if at all possible. Also, the lag in time from closing to construction completion if Borrower doesn't have the ability to wait to move into the new home can also be a drawback. Most people, I find are willing to live with the inconvenience if they know they will get the home of the dreams in another 1-2 months afterwards.
0 votes Thank Flag Link Tue Apr 19, 2011
Depending on scope of work streamline 203k may work
0 votes Thank Flag Link Tue Apr 19, 2011
A lot of work has to be done on the front to ensure the client gets what they pay for & the contractor receives payment for their services. We use a detailed contract with many details about materials to be used, and scope of work to be performed with cabinet drawings and verbage such as like and type of address 123 joe lane. Adds have to be paid out of pocket because the budget is set fourth usually before starting the job. This is not for the faint of heart and I would not reccomend this to people with low trust issues and shallow pockets. Do not try & beat the system in reguard to the brother in law who once upon a time was a contractor. The best way this works is an owner occupied forecloser at a base of .50 on the dollar then work with a contractor who has been in business for at least 5 years, BBB member, insurance & referals a must who will give a strict daily time line & stick to the budget. Then the homeowner has to stay out of the way & refer all inquires through their agent, visit the jobsite with the agent. The agent will work their butt off in this type of deal for all to be happy. Daily visits to the job site are not out of the question, my rule if you show up without your agent I will ask you to leave. Anyway hope this helps, its a lot of work for an agent so it does not happen often their are easier ways to earn a living.
0 votes Thank Flag Link Thu Apr 14, 2011
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