Are a renovation 203k loan and mortgage loan two seperate monthly paying bills? When you get the 20k or 30k do you hire your own contractor?

Asked by Ravenangel, 01453 Sat Nov 26, 2011

We have a homepath renovation loan of 150,000 at 4.8%. The house is 35k and will need new roof, plumbing work, and porch repair. We thought that the way it works is that the loan amount of, let's say, 30k is then added to the value of the home. so 35k 30k= 65k. The total value of the home is 65k. We need 20% of this 65k and will be paying $272 for the mortgage for 30 yrs. Please correct me if i'm wrong which mostly likely i am. How does the rate differ if different payment and how much will we be paying for just the mortgage? Thank you.

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Ann Sabbagh, Mortgage Broker Or Lender, Pawtucket, RI
Sat Nov 26, 2011
Hi. 203k loans are only one loan. It can be a streamline 203k loan ($35k or less in renovations) or a full 203k loan (greater than $35k in renovations). Note the limits include a 10% contingency reserve, so the real rehab limit is around $32k for a streamline. A streamline just means it is a simpler loan to receive approval on, thus less requirements. You can hire your own contractot as long as they are licensed in the state. 203k is a GREAT rehab loan with only 3.5% down required of the total purchase pus rehab costs.
1 vote
Andrew Adams, , 01915
Sat Nov 26, 2011
Well lets start with Homepath Renovation and a 203K renovation loan are not the same. They do work similar to one another one is backed by Fannie Mae and the other by HUD.

You will only have one loan. In both cases the funds for renovation are placed in escrow and will be disbursed to you and the contractot you hire when the conmplete the work. If you are being told you will have 2 loans with 2 different rates you are not in either a homepath Reno or 203K.
1 vote
Mary Saunders…, Agent, Gardner, MA
Fri Nov 22, 2013
No. They are one and the same. The 203k loan covers both the selling price and the renovation price. It allows you to pay for the renovation over the life of your loan rather than a lump sum. If you bought the home for 35K and got a loan for 150K, that means the lender has made an assessment that says your property will be worth 150K once the work has been completed. It also means they expect the cost of repairs to be approximately 115K. Who is your lender? Why didn't they explain this to you?
0 votes
Thomas Young, Home Buyer, Phoenix, AZ
Sun May 26, 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 for more information.
0 votes
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