Flipper · Chicago, IL · Member since 2015 · 7 posts · 4 votes
I have a question about getting an FHA approved loan. I want to purchase a property through an FHA/203k loan and use the 203k loan to rehab the property. I know that before you can rent it out you have to live in the property for atleast a year. My broker told me that the same rules DO NOT apply when selling. I was told I could sell anytime as long as I'm selling and not renting. This is my first property that I'm trying to flip and I'm trying to limit my mistakes. The numbers look good, they want 69k but the place needs a little work. I plan to offer 55k-60k for the property. The property is already estimated at $164k. The comps in the area are between 150k-200k. Let me know what you guys think.
Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
10y
You will definitely need to live in the property while you are doing the rehab to qualify for the FHA203k. I do believe you are correct that there are not stipulations on how long you must live there before you sell it.
Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
10y
You will definitely need to live in the property while you are doing the rehab to qualify for the FHA203k. I do believe you are correct that there are not stipulations on how long you must live there before you sell it.
lansing, IL · Member since 2015 · 7 posts · 2 votes
10y
Hello All,
Kevin Taylor can you please explain this type of loan a little? Do you need to have personal credit or business credit to obtain this loan? I will do some research as well to get more info. Thanks much for any answers. :-)
Evanston, IL · Member since 2016 · 5 posts · 1 vote
10y
Hi Kevin!
I am in Evanston, IL. Not far from you. I am looking to purchase a home for my first time with an FHA 203k loan as well. Where in Chicago are you looking and how many units are you looking at?
I know your post was about six months ago as well. Can I ask how it has been for you since that time and how the loan worked out for you?
Kevin Taylor can you please explain this type of loan a little? Do you need to have personal credit or business credit to obtain this loan?
This loan is meant to help people with little down buy a property, as low as 3.5% down and I believe they will take credit scores about 580. You can only have one FHA loan at a time. There are some cool things you can do with an FHA 203k, like bundle the renovation costs of a property into the mortgage, include mortgage payments into the loan if the property in not habitable during construction. There are extra fees like monthly mortgage insurance and an upfront mortgage insurance, but you can buy single family homes as well as 2-4 unit properties.
Kevin Taylor can you please explain this type of loan a little? Do you need to have personal credit or business credit to obtain this loan? I will do some research as well to get more info. Thanks much for any answers. :-)
FHA 203b is what most people mean when they say "FHA Loan." It's a standard product, loan is based on present value of home, requires owner occupancy, 3.5% down, modest credit/income standards.
FHA 203k is a renovation mortgage product. Requires owner occupancy, 3.5% down, etc, but loan amount is based on the FUTURE post-renovation value of the home. You can if you wish finance all but 3.5% of the renovation budget.
In hot markets, it's VERY hard to get an offer accepted using 203k because it'll take 2-4 weeks longer to close, sellers want to get paid now, and none of that extra loan amount is going to them. It has to be a beat up crappy home that for some reason all-cash flippers are overlooking. The home needs to be a natural perfect fit for 203k.
More realistically what you do in these markets is buy using standard non-reno financing, live in while doing what you can do yourself, and then at six months look at refinancing into 203k if it turns out there was more stuff than you could handle.