First Time Home Buyer, 203k Loan or No?

[Zachary Hite]

So first time homebuyer, originally I was thinking that my wife and me would purchase a duplex up to a fourplex using a FHA loan. However with the market the way it is any multifamily is far outside the realm of possibility now for a newbie like me as it seems that the established investors are snatching up any deal in sight before I can do anything and there is the whole cash buyer issue too. The duplexes left are ones that would be way to far outside my wife's comfort zone in owning and living in.

So we are looking at switching strategies now. Rent has increased to the point that it would be better to put money into something we get a return on. So on to single family housing (maybe an even more scary option, but at least there is some inventory).

So 2 options..... 

1. Regular FHA, and we buy a ready to move in house (Wife's preferred option) I would then just be hoping and praying that the market doesn't crash and the house improves in value and eventually I can pull money out of it through a refinance to either buy a new house to move into and rent the old one, or buy a new rental.

2. FHA 203K loan, buy a house around the 100 range and dump 50 in repairs. Houses that have been rehabbed this way seem to be going for around the 200 - 250 range depending on location. So I could then in a year or so (if the market holds as is) pull out some money for a new rental property to get the ball rolling. Even if the market drops at least I have a buffer zone so we don't end up underwater.
Second option seems to me to be the better one on paper.

Now for the kicker... I have a couple limiters...

1. We have to be in a new home before the end of the year, there is a personal reason for this but by December we need to be moved.

2. I already have gotten approved for a normal FHA loan, should I call my lender and ask if they do 203k loans? I have read that a lot of lenders don't like these for the increased risk they bring.

3. I (obviously) don't have a contractor lined up. With the market the way it is, is it even possible to get a contractor scheduled as fast as I would need it? Should I find then contact General Contractors in my area that could answer if this would even be possible? I could do a lot of the work myself (raised on a farm teaches you a thing or two) but my understanding is that you have to be licensed to do the work under a 203k so I wouldn't be able to.