Change an accepted HUD offer from cash to 203k?

Question

Hello! I just got my HUD offer accepted. The thing is I made this offer in Jan as a cash offer. I'm still interested in the property and would very much like to get it. Is it possible to change an accepted offer to the same amount but using a 203k loan? Or is a hard money loan my only option now?

If it's of any help, it's in Philadelphia, through Sage, and there's an incentive for a 203k on the property.

Thanks so much!

Jeshua Patrick · Answer

Giang Nguyen the $100 down option may not be available to investors. It is often an option for owner occupants however. Owner occupants must occupy for a minimum of 12 months. I have done two HUD deals from an owner occupant position. Both deals were different as there was a different agency managing the property for HUD each time. The first time also had a repair escrow that I had to fund up front and could only recover after repairs were completed. The second deal was a 203k with a terrible lender, loan officer actually, and was the one I learned about the appraisal issue with. What I can tell you is that it is a learning process and an experienced realtor should make the process smoother. Make sure all the paperwork is right the first time. Also, make sure you have your ducks in a row as they expect additional paperwork requests to be received within 24 hours of the request date. Great deals to be had if you can tolerate the hassle.

Giang Nguyen · Answer

@Melvin List Hi Melvin! Thanks for the advice! Any literature that you found helpful for understanding the whole process that you can recommend? Thanks!

Giang Nguyen · Answer

Jeshua Patrick Hi Jeshua. I didn't know about the $100 option. I don't think that's an option for my area but I'll keep an eye out for that. I'll talk to my lender about the appraised value. Any literature you found particularly helpful for understanding all the components of the process and how they work together?

Melvin List · Answer

@Giang Nguyen I would get your repair bids ASAP. The will make the 203K process much smother if you have everything ready for the loan officer and appraiser

Jeshua Patrick · Answer

Giang Nguyen are you planning to take advantage of a $100 down, if available, or do you intend to do a larger down payment 3.5% down? I did a $100 down, 203k loan about 4 years ago and it was difficult but only because the loan officer made it so. The most important thing to understand about the process is that HUD's appraisal is typically only for their target price and not based on actual value. That said, you MUST make sure your loan officer pulls a new appraisal conditioned on the declared repairs you are including in your 203k loan. Insist on this immediately. If you do this it will speed things up tremendously so long as the new appraisal comes in where it needs to. If it doesn't you know you are in trouble and should reconsider your purchase even if it costs you a small escrow deposit.

Giang Nguyen · Answer

Greg H. Hi Greg! Thanks for your input. I put in an offer back in Jan. It wasn't accepted then, but was held as a backup. 7 months later, they then accepted mine. I assume all of the offers ahead of me fell through. I sure would love to know the reasons why they fell through but don't know how to find out. I understand 203k is challenging. I started the preapproval process for another property but that offer wasn't accepted. I do have a very experienced 203k loan officer who specializes in 203k and used a 203k loan himself.

Greg H. · Answer

My experience has been that yes HUD will change the financing/cash terms but do not always want to change the closing dateThere is not many more difficult tasks in real estate than trying to get a 203K loan closed. Being a HUD home on top of that puts in on the edge of impossible. Please please research here on BP the difficulty in doing this and DO NOT proceed just because of a small incentiveSo you offered in January and just offered again and it was accepted ? Can you clarify ? Has the contract been signed(ratified)

Christopher Phillips · Answer

@Giang NguyenThen you should fine. HUD allows ~60 days escrow for 203K loan. Less for cash or regular mortgage.HUD penalizes going past the date. So, keep on top of it and get extensions if needed.

Giang Nguyen · Answer

@Christopher Phillips Thanks so much for your reply! Yes, I'm planning on occupying one unit while renting the other one out.

Christopher Phillips · Answer

@Giang NguyenYes. You can change financing. Are you planning to live there? 203K is intended for owner-occupancy.