203(k) Home renovation loan

[Dave Kennedy]

What do you guys think of this program? Any draw backs? Anyone here use it.

I had actually never heard of the program until a realtor mentioned it this weekend.

They allow up to 35k in renovations to be wrapped into the loan if the ARV shows that the contractors work will improve the value of the home by that much or more.

This seems like a great opp to get renovation money without paying to much out of pocket. I am looking to start something up with a few friend and we are just a few years removed from college (not a lot of cash funds ) So this may help us out.

Am I understanding this program correctly? Lets look at an example.

Assumptions
180k purchase price
5% down
Contractor comes in and says for materials and labor he can do the job for 35k.
Assesor values the house at 260k ARV.

So 180K - (down payments 9k) + renovation costs 35k = 206k.

So would the value of the loan be 206k , 30 yrs fixed. Before wrapping taxes and PITI into it?

We plan to live in the house during the 3-6 months we fix it up, does that allow us to be considered "owner occupied" rather then "investors"? Is there a certain minimum amount of time you need to own the property before selling?

This seems like a great option because we would only need 9k up front and be paying around $1700-1800 a month in mortgage payments. Split 3 ways that is more then doable. Its a heck of a lot better then each having to put 10k-15k into renovations out of pocket.

Are there other programs like this that you would recommend? Does it make more sense to just get a home renovation loan from a lender? Are there to many restrictions here?

Thats for the input guys!