Is a 203k loan the best way to go for a rehab?

Asked by Donna, 12589 Fri Nov 14, 2008

house was in the middle of construction. It seems like the closing cost is going to be higher. exc. credit-no debt-low cash oh no what do I do?

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12
William Metz…, , Portland, OR
Fri Nov 14, 2008
BEST ANSWER
The short answer is yes, if you can swing it. There aren't many alternatives right now. Go to a couple of time-honored sources--a credit union, Wells Fargo, or a lender with a few gray hairs working for it.
0 votes
Sarahlmac, Home Buyer, Fort Worth, TX
Mon Sep 28, 2009
Bank of America bought our 203 k and now, three weeks later, we have contractors about to sop working because we cannot figure out how to pay them...the 1800 number has no option to speak to a person and you cannot leave a message...no one has contacted us either. Meanwhile we are living with our inlaws in a house that, thanks to contractors, has no toilet, bathtub, or kitchen sink so we cannot move in.
1 vote
Kyle, , Scottsdale, AZ
Mon Jul 27, 2009
You cannot take out a 203k loan on a home unless its at least 1 year old. Starting from the date the certificate of occupancy was issued. In other words if the home is not yet finished you will not be able to use the 203k program to finish the homes construction.
1 vote
Vicky Chrisn…, Agent, Purcellvile, VA
Sat May 16, 2009
Unless you can handle a higher down payment, then your 203K is probably the best option. But, be aware of who you are getting the loan through. Ask questions and get written answers.
1 vote
Cree Quaker, Agent, Woodstock, NY
Tue Mar 3, 2009
You may have already found the help you need, but I would try local lenders first. They have an investment in the community and tend to be private. Small banks, credit unions, etc. have not been affected nearly as much as the big lenders and they have some programs similar to 203K. I have a client doing a 203K esque loan with Key Bank. Keep searching and you shall find.

Best,
Cree
Web Reference:  http://www.Barqua.com
1 vote
Brandon Leib…, Both Buyer And Seller, Los Angeles, CA
Tue Feb 4, 2014
Has anyone tried Prospect Mortgage since all the bad rap on BOA keeps appearing. I tried Prospect last year and was pleased at the ease of the process. I thought it would be a loooong drawn out process but it was completed within a few weeks; not months!
0 votes
No Name, Home Owner, Montana
Tue Jul 12, 2011
NO NO NO.....dont get one!!! Bank of America nor HUD made this process easy. HUD seems to change the rules as you go and NO ONE at BOA understood how the process worked. Depending on who you talked to at BOA you would get a different answer to the same question. The absolute worst experience we have ever been through.
0 votes
..., , Lexington, MA
Fri Feb 26, 2010
I do have experience in FHA 203(k) renovation loans. I've also closed 203(b) loans for homes owned by HUD that required some repairs.

The 203(k) can be a very good choice, but it's not well-suited for a home that has not been completed. Very few lenders will touch that as there would be horrendous title issues amongst other things. Such homes are best left to well-funded contractors who are familiar with the issues involved.

My suggestion would be to look for other homes in need of renovation or you may want to look at HUD REOs with repair escrows that might be in your area - these are foreclosed homes now owned by HUD that are offered with as little as $100 down in some cases or the usual 3.5% down as with other FHA loans. Let me know if I can be of help!

Tom
Eagle Nationwide Mortgage Thomas.Stevens@ENMCdirect.com
0 votes
Contractor B, Home Buyer, Apple Valley, CA
Fri Feb 26, 2010
I purchased a home that was completed in 2006. The owner was a contractor and completly ripped everything out of it. It seemed as if this was ideal for my wife and i because the price was great and i am also a contractor. Now as we start dealing with the bank this is where we have problems. Completing the work was easy due to the fact that i was doing it myself. Getting money from the bank was another issue. First of all we were forced to hire a "consultant" that has done nothing but screw things up. Every thing we do as far as the draw process is on his terms. We put around 46K in escrow for remodel work. Our house has been completed, signed of by the city, and signed off by "consultant" for almost 3 months. I have only received 18k to date. My wife and had to put the majority of remodel cost on credit cards because the bank puts you on a deadline witch is not a problem but they fail to let you that getting your draw money to continue your project is like pulling teeth. In closing i would stay away from this loan if you can or make sure you hire a contractor that Knows the process. I you are not carefull your contractor will end up putting a lean on your house. Then you will not be able to get final draw from bank because they will not issue final draw on a house that has a lean on. Whats funny is that if they would issue the draw money in a timely manner the lean would never be issued. Also keep this is mind. You are resposible for making pay ments on the full amount borrowed. Example If you need 200k to purchase house and 50k for remodel your payment is based on 250k so you are paying intrest on money you dont have and will have a hard time getting, then if there is any money left over at the end of remodel you are not allowed to revise loan to lower you payment. They will apply the extra money to your principle witch will not help you monthly, you will not see that money for about 29 and a half years. Sorry about the rant and rave. Unhappy customer. This is not my first home or my first construction loan. We had a much better experience with or first full construction loan. But for some strange reason you cant get one anymore. Good luck
0 votes
Sheesh, Both Buyer And Seller, Indianapolis, IN
Thu Dec 10, 2009
The 203k program at Bank of America is a nightmare. I am a contractor that finished a complete bathroom remodel for a couple who used BOA. I have been done with the job for 3 months and still have not been paid. If you can get someone on the phone from BOA, they are rude and not helpful..The homeowner is paying their mortgage and paying interest on my money. BOA is getting paid double. They keep the money and get paid interest on it. What a ruthless way to make money.
0 votes
Michael Ofsa…, Other Pro, Grayslake, IL
Fri Nov 13, 2009
As an FHA Fee Inspector I can offer a little insight into the 203k loan. This is a great program but has limitations and rules you must follow. This program does not work for folks who want extra money and have dad and uncle Joe fix the place up.

FIrst, you need an approved contractor. The contractor must be familiar with the program and maintain certain insurance policies such as general liability and workers' comp. You can act as a contractor but must purchase these insurance policies. All sub-contractors must be licensed if necessary. Plumbers, electricians and furnace/air-conditioner techs must be licensed in Illinois.

As for the money, the contractor will itemize the cost of repairs and once the repairs are made the contractor will request the money from the lender. The lender will release funds after there is proof the reparis meet FHA criteria. For big jobs Draw Inspections (periodic payments from the lender) may be required, it depends on the lender. To ensure the repairs meet FHA criteria an FHA Fee Inspector will inspect the work, at your expense, and submit paperwork and photos to the lender. For large jobs that require Draw Inspections you may need more than one inspection.
0 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Fri Nov 14, 2008
I couldn't find anyone in our area who does 203k's. When you say house was in the middle of construction, and I have no idea at what point, I wonder if the 203K is even possible. There are construction loans and renovation loans, but both require a higher down payment than an FHA 203K. FHA is also more forgiving on credit issues.

You need to speak with a local lender. Bank of America operates almost everywhere, and they have a good renovation loan if you don't have to go FHA.
0 votes
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