FHA - 203(k) Purchase/Renovation Loan...

jill.costello · #1 01/27/09, 04:19 AM

Let's try this again!! (never got to read any responses before the restore!)

Anyone ever qualified/got one of these?

I'm looking at a foreclosure on 4.87 acres, but it was pretty well ransacked by vandals/squatters. It is only a 12 yr old home, and is structurally sound and roof and mechanicals are all fine.

I would like to use FHA's 203k loan to purchase and renovate the home....

Peace n Quiet · #2 01/27/09, 09:24 AM

Here are some links:
http://www.hud.gov/buying/

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm (specifically read 203K how is it different, and the paragraphs below it)

http://www.hud.gov/offices/hsg/sfh/203k/faqs203k.cfm (frequently asked questions regarding the 203K program)

You will hear from many people who tell you that there are many hoops to jump through in order for a home to qualify for an FHA loan. They are right. However, keep in mind that FHA trying to ensure that the house is SAFE, and worth the investment.

Your inspector will be expected to note the condition of the home, focusing on the major components like the electrical/heating/cooling systems - these things must be in good working order. Ventilation & insulation in the attic. Dry basement. Possible mold growth. Distance from the well to the septic & property boundary lines. In older homes, lead paint is a big issue if the paint is peeling, flaking, or cracking.

There could be quite of bit of work involved in bringing a house up to FHA standards if it fails to meet the requirements. I think that it's a great program though and well worth the effort. The rates can't be beat and you have a healthy, ready to live in home with the big (think costly) maintenance issues already taken care of and out of the way.

Shawna · #3 01/27/09, 02:55 PM

We did this when we purchased our home. It was the only way we could have bought the house and do some remodeling (was a 100+ year-old farmhouse that hadn't seen an improvement in probably 60 years). The process was a pain in the behind, only because the lender we went through didn't admit to us that he wasn't familiar with the loan/loan process for 203k loans.

You have 6 months to use the money. They are very particular about certain things. A good example, we ran out of nice weather to paint the outside of our house. Our 6 month time period was up in February....we painted our house in 34 degree, raining weather to get it done for the inspector, who never even checked that it was painted.

Make sure you get a lender who KNOWS about these loans. We had to push back the closing date on our house 4 TIMES because our lender kept coming up with things we had to have in writing/inspected/tested before we could close on the house. We were lucky that the people we were buying from were VERY understanding, otherwise we surely would have lost out on the house.

Another biggie....if you are trying to get this loan to do the work yourself, you can pretty much forget it. Almost everything they require someone who is licensed to do the work (which, there goes 2/3 of your money!). You could not have a licensed family member do it either, which made no sense to me as it had to be inspected. Also, they do not give you the money up front....you spend your own money and they basically reimburse you. You can only do two draws on the money.

We got $15,000 in renovation money. They add 10% contingency to whatever amount you ask for. It is a giant pain in the behind, but worth it if it gets you what you want. And the headache only lasts for 6 months, so it's not like it's neverending

Feel free to pm me...I'll try to answer any questions you have, at least from our experience.

Good luck!
Shawna

CGUARDSMAN · #4 01/27/09, 04:24 PM

when i looked into that several years ago it was just a hassle i was better off taking out a personal loan and doing things as i could afford them beyond the loan.

chewie · #5 01/27/09, 06:51 PM

hmm, my post on this is gone? anyhow--i know its not the same loan, but govt is govt....

we tried using the rural lender program to 'get first time home buyers in rural areas into homes'. ha. they kept telling us to do things, then saying we didn't have to--like having huge books of papers signed by contractors, etc. (and when called on it, saying, no they didn't require that, when in fact it was highlighted to do it!??) it was horrible, but after over a year, we got it done, our plan was approved! yeah, right!? nope--with the same package saying its a go, they slipped in a letter saying they were out of money, try again later. a few weeks later, they sent a letter saying if we want to keep our file open to continue when they DID get more money, sign it. we did. sent it back in a few days. weeks later again, get a letter saying since WE took over a year to fill out the application, we would have to start over, file is closed, too bad. argh!!!!! now i know why ppl drive their pickups thru govt buildings. and i sure wonder what is going to happen to all that very private information they have on us now??? free for anyone there to take home? i can honestly say that i hate those ppl.

our bank uses them as a secondary lender or something, and has had the same issues with this branch, and has sent letters to regional leaders, etc.

now, i know this isn't the same type loan, but be very careful--this seemed like a perfect loan situation but they ruined that year for us. every page we filled out we were told "oh, this is it, finish this and we're on the way!" believe nothing they say. sorry to be a downer, i certainly hope your's goes better.

oh, and what the others said was true too--we woudlnt' have been able to even PAINT ourselves, had to hire it all done! so the cost was just crazy too.

Soap · #6 01/27/09, 10:20 PM

1) Read the rules until you know them inside and out.
2) Find a lender who has experience doing these loans.

We did a Rural Development loan ( a different Federal program) following the above 2 rules.

The hardest part was finding an old, not remodeled house that we liked and could afford that met their requirements. We had 3 offers fall through due to the seller having problems (divorce, bankruptcy, etc.) which made the process longer. Total time spent 5 months from application through move in.

chewie · #7 01/28/09, 11:26 AM

soap did the same loan i was talking about. i will say that the office i had to work with is becoming known for their inadequacy.

MN Gardener · #8 01/30/09, 03:17 PM

try a local bank and see if you can get financing with them. They generally allow you to do your own work and give you more time.

Shawna · #9 01/31/09, 04:09 PM

Quote:

Originally Posted by MN Gardener

try a local bank and see if you can get financing with them. They generally allow you to do your own work and give you more time.

We found the opposite to be true. We went to quite a few banks, including the two we have done business with for the past 20+ years and no bank would lend us the money with rehab $$ attached to it. Now, this may have all changed with the 'downfall' of Fannie and Freddie, but no bank who backs their mortgages with Fannie or Freddie (which was all but one bank we went to) would back you with money to fix up a house without you hiring every bit of it out.

Shawna

deb · #10 01/31/09, 11:43 PM

Quote:

Originally Posted by chewie

soap did the same loan i was talking about. i will say that the office i had to work with is becoming known for their inadequacy.

WI Rural Development offices got an award a while back for making the most RD loans and having the lowest percentage of loans in default compared to the other states.

deb
in WI

MN Gardener · #11 02/02/09, 02:02 PM

Quote:

Originally Posted by deb

WI Rural Development offices got an award a while back for making the most RD loans and having the lowest percentage of loans in default compared to the other states.

deb
in WI

Rural Developement is another good option. They will do rehab loans too, but I think they require contractors to do all the work. Not sure though, good one to check out.