FHA 203k loans Pros & Cons

Asked by Sam, 06484 Mon Oct 10, 2011

Im buying a home in Shelton CT that has a completly messed up flat roof. It needs a pitch and a new roof 20-30k job. What is the pros and cons of 203k? Any reccomendations? Im using a mortgage broker. Any roofers you reccomend?

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Jill and Matt…, Agent, Dunkirk, MD
Mon Oct 10, 2011
We are not local in your area, however have done many 203k loans for our clients. The 203k is a very nice loan product for properties that need some fix up and/or may not qualify for other types of financing. As far as a pro/con approach - Some of the pro's would be that you get to fix up a property the way that you want to, with your contractor, and have the cost rolled into your loan. It is a great way to get into a home that you otherwise might not be able to.

As far as the 'cons' to the 203k (and many of these CAN be avoided if you choose the right lender and agent that knows what they are doing) - It can be a lengthy and frustrating process. Your contractors need to know how to submit quotes the right way, and you need to make sure you budget properly for any repairs that will be required by the FHA 203k consultant (who is basically a check and balance for the bank and makes sure required items get done). Good, open lines of communication need to be had by all parties' in the transaction. Some banks, who shall remain nameless, have a reputation of not being very helpful or diligent AFTER the loan closes if you have any problems... and also may give a hard time in paying your contractor. Be sure to investigate your 203k lender up front to get a better idea of what to expect once work actually begins.

Overall - we have a lot of success doing 203k's for our clients in our area due to the amount of foreclosures on the market that need significant repair. If done right, it can be a smooth process - it is very important though to work with competent contractors, lenders, and real estate agents who are in good communication with each other... otherwise it could be a bumpy ride.

I wish you the best of luck with the house and hope you find a good roof contractor!
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