203(k) loans. Good idea or Bad idea?

[Eric Kulling]

Hello everyone.

I'm looking to buy a house (and live in it) in Discovery Bay, CA. I'm interested in FHA 203k, however one of my lenders said it can get very messy and potentially cost more time and money than if I do the rehab with cash.

Anyone have experience with a 203k in the Bay Area? Or in general.

Good idea or no?

Any lenders interested in working with me?

Cost is around $600-700k

Thanks!

[Paul Welden]

The FHA 203k Loan is both GOOD & BAD.

It's good when you use the best 203k-experienced lender and a contractor who knows & understands the 203k, such as a Certified 203k Contractor (203kContractors.com). 

It's bad when you select partners that do not have adequate 203k experience as that can cause the entire process to be a total disaster. 

Your purchase price is NOT in the Jumbo Loan range for FHA, which has a max loan limit of $765,600 for 1-family dwellingsin Contra Costa County, but it could be for conventional loans only if your loan exceeds $510,400. But if the property is located in a high cost area, the max conventional loan limit can be as high as $765,600, which is also the same as the FHA max loan limit for Contra Costa County for a 1-family dwelling. Be very careful on your purchase price to ensure you leave sufficient room to the rehab money.

If the property condition will qualify for the loan and you have the cash available to do the rehab yourself without causing any financial constraint, then I would forego the 203k or any rehab loan and just do the rehab on your own.