FHA questions for a rehab, hold, & rent? Private money better?

[Griffin Pratt]

I'm looking for some insight regarding the flexibility of FHA loans. I know about the general qualifications for FHA/203k and am thinking this could be a good strategy for a property I am analyzing in St. Petersburg, FL. I plan to purchase the property with FHA and rehab with the 203k. It has been my understanding that FHA loans must be used for homes that are "move-in ready". I'm concerned the extent of rehab it needs will prevent approval by Fannie Mae. Any advice or experience with the flexibility of FHA loans in this context?

Also, I know its required that I live in an FHA financed home for minimum 1yr, so can I live/rent somewhere else while the rehab is being done or does the home have to be my primary residence?

Also looking for references/connections to reputable private money lenders as an alternative if anyone would be interested in working together and wants to connect!

Griffin

[Andrew Postell]

@Griffin Pratt wow, I guess I should start hanging out in this forum a little more.  I need to give you some real, and specific information here if you don't mind:

There are 3 different "standard" renovation loans designed for primary homes - FHA, Conventional, and VA. All 3 have renovation loan options.

1. FHA Renovation Loans - FHA loans in general are more flexible with credit and allow us to have a 3.5% downpayment on 2-4 unit properties. That's their main benefit. On the other side of the coin, they also have mandatory PMI, higher closing costs, lower loan limits then conventional loans and they can be REALLY annoying. There are also 2 sub-sets of renovation loans in this category. If you are buying a SFH there is very little reason to go this route unless your credit is "challenged".

2. VA Renovation Loans - these do exist and I'm just putting this out there so that some people looking for this subject will ready that, YES - VA RENOVATION LOANS DO EXIST! But they are only for Veterans - 0% down, no PMI. They may not give us the best care after we are discharged but they can certainly get us into debt.

3. Conventional Renovation Loans - And this is the 3rd type.  

Ok, here's why I am saying this - If a property won't get approved for a "standard" conventional loan - then just take it with a conventional renovation loan. That's it. There's no reason to go FHA. The unfortunate thing here is that not every lender will offer these 3 loan types - so they will often steer you towards one...without even telling you that other options exist. It's super frustrating. I have even seen lenders only offer 1 type of the FHA renovation loan! If you are wanting to build a pool - FHA won't even allow that; but conventional rehab loan will! There are clear differences between the different renovation loan types.

Now maybe that FHA renovation loan IS the best loan type for you - but how do you know unless your lender offers the other type?  

You do not have to move into the property while the rehab work is being performed.  The sooner you move in, the sooner your 12 month time starts though.

So let's start with getting you in front of a renovation loan expert first.  And THEN we can go over the specifics of the property and what will be needed with the renovations.

Hope all of that makes sense.  And if you need more details I am certainly willing to share.  Thanks!