What is a 203k loan? What are the pros and cons? Can i use that loan on a foreclosed home? Are they difficult to get?

Asked by Tynettamd, Greensboro, NC Fri Jul 29, 2011

My husband and I are preparing to buy a home. We have not been pre quailified because we still have credit issues to take care of and need help. We were watching the property borthers on HGTV and saw that they were bascially gettingpeople in their dream homes by purchasing run down homes with good bones and remodeling them, I looked into the 203k loan and it sounds nice, but what's the catch? HELP

At the point our credit situation is uncertain, so if all fails we plan to rent.

Answers

10
Dana Lindberg, Both Buyer And Seller, Phoenix, AZ
Sun Sep 8, 2013
An FHA 203k loan is offered by the federal government to help people buy and repair homes that need rehabilitation. I found a site which will give you a detailed guide and other valuable information about 203k loan. Check out http://www.cfs203k.com.
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Kriston Gall…, Agent, greensboro, NC
Fri May 31, 2013
I am currently helping a buyer with a 203 Streamline. It is a GREAT way to go, but I will be HONEST and tell you ... it has not been the easiest process. I teamed up with a great lender who is very expert and it has helped tremendously. They take longer to close and require a lot of hard work and effort on everyone's end. You will need a contractor you can trust and a good team on your side. If you would like the lenders information, please email me kkgallop@yahoo.com. I would agree that they are under utilized in our market, but I think much of that is due to lack of experience. I am not as experienced in this arena as I would like to be and have not used this product very much in brokerage. I have ran across some local agents that are EXPERT in this area and would also be happy to refer an experienced agent for 203K loans.
1 vote
Thomas Young, Home Buyer, Phoenix, AZ
Fri May 24, 2013
From my experience with 203k loans, the best advice is to use a lender that offers assistance via third party with 203k processing.
This shortens the closing time by weeks. Try http://www.cfs-mortgage.com/203k/ for more information.
1 vote
Deborah Garv…, Mortgage Broker Or Lender, San Diego County, CA
Fri Jul 29, 2011
The 203K loan is, in my humble opinion, the most under utilized and best mortgage product in mortgage financing. What is the catch? Working with an experienced mortgage professional and a company who is seasoned in funding and managing the loan after funding. I suggest you find a local expect who works for a mortgage bank (this is not a loan to do remotely and I don't recommend doing the loan with a mortgage broker). I have written several blog posts on the product that are focused on education of the opportunity and would be happy to send you a link. I do not do loan in NC; however, my corporate office does and we are extremely adept at assisting consumers with this loan product.
1 vote
Paul Welden, Other Pro, Tempe, AZ
Fri Jul 29, 2011
Tynetteamd,

The FHA 203k loan is a great option because you can include the purchase and renovation money into 1 mortgage loan, which means you can buy a home in it's AS-IS condition and do the renovations AFTER you own the home!

There are 2 versions of the 203k - Standard/Full & Streamline.
Standard/Full - requires use of 203k Consultant, min $5K in rehab, max rehab limited by FHA max mortgage for the area and allows for structural modification.
Streamline - does not require use of 203k consultant, min $0 in rehab, max rehab is $35k, does NOT allow for anything structural.

There are many more guidelines, but the FHA 203k Renovation Loan is an amazing option. Just make certain you use a Certified 203k Contractor for the renovations. There is a great FAQ section on the 203k at http://203kContractors.com.

-----
Paul Welden, Director
203k Contractor Education & Certification Program

203kContractors.com®
Contractor Directory for the FHA 203k Loan
Office 480.463.4663
Web Reference:  http://203kContractors.com
1 vote
Rudy R. McDo…, Mortgage Broker Or Lender, Bloomfield Hills, MI
Sat Jul 30, 2011
Hi, Tynettamd

Please check out my blog regarding FHA 203Ks. It layouts and explain the entire program and process.
0 votes
Lloyde Young, Agent, Hampton, VA
Fri Jul 29, 2011
FHA 203K Loan - How the Program Can Be Used:

This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:

· To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.

· To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.

· To refinance existing indebtedness and rehabilitate a dwelling;

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.

To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.
0 votes
Ron Thomas, Agent, Fresno, CA
Fri Jul 29, 2011
You are right in everything you said, except the part about the Brother's using the 203K loan:
The 203K loan is intended for people like YOU; owner occupants.

There are a lot of details to be considered: talk to an FHA 203K specialist when you're ready.
0 votes
Leanne Poole, , Rhode Island
Fri Jul 29, 2011
There is no catch - 203k loans are a great and very popular option, especially for first time home buyers. They are not difficult to get as a 203k loan is an FHA loan so the same guidelines apply (3 1/2% down payment...). What is important to note is that the repair minimum needs to be $5000. As stated below you will need to use a licensed contractor, except for painting (that you are allowed to do yourself), and the contractor will need to submit the repair quotation to the bank at the beginning of the loan process. After your loan closes you will have 6 months to get the repairs completed.
0 votes
Sally Grenier, Agent, Boulder, CO
Fri Jul 29, 2011
A 203K loan is a great way to buy a house AND have money to fix up the house. Not all lenders do them, so you may have to search for someone in your area. I do know that you need to use approved contractors for the improvements (it's not for "do it yourself" types) because the bank wants to know the job is done properly. It's sort of like a construction loan, in that payments get made in stages to the contractors. Hopefully you'll get some responses from people in your area who do them.
0 votes

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