What to consider when doing the 203K loan

[Kal Wol]

Hello awesome BPs.

I just learned about the rehab loan aka 203k today and I was wondering if it is a good idea or not. Recently I have got a house that is sitting on the market and needs a serious work on it. The price is about 120K below the market value for the very reason.

So, I wanted to know more about the 203K regarding if it is a good thing or what kind of things to lookout when going that route. I will be having a discussion tomorrow with the lender who is referred to by my agent and he is supposed to provide me both loans for the mortgage and for the reno.

This is something I am considering in preference to putting my own larger money. The property that i am thinking to proceed is not for flip, I will be living in it and rent out some of the rooms in the house - house-hack.

Thank you all.

[Paul Welden]

@Kal Wol

The 203k is a great idea! 

Best advice is to organize the most qualified 203k Team possible. This includes the Lender, Contractor, & Realtor.

Lender - need to have verifiable 203k experience. The 203k lender controls the process, calls the shots, and manages the paperwork, funds the loan, selects the 203k Consultant, etc.

Contractor - any licensed, bonded, insured contractor is allowed to do the work, but that doesn't mean they know the different versions of the 203k , familiar with the unique 203k paperwork, processes, timelines, compensation structure, nuances, etc. Best to use a contractor who has been properly educated on the 203k, has sufficiently strong financials to pay for the startup costs and ongoing expenses for the 203k project. There is an accreditation called Certified 203k Contractor that verifies all that for you.

Realtor (optional) - need one who is not afraid of the 203k, can identify properties where the 203k can be used, and who can write the offer paperwork properly according to HUD guidelines.

You're only as strong as your weakest link --- select your partners wisely.

Hope this helps!