Would I qualify for a 203K loan?

Question

Hey guys. I haven't yet made my first deal, but I've decided when I do, I'd like to use a 203k loan. I just like the idea of 3.5% for the total cost of the house + the repair costs to fix it up. The only question is, I'm not sure if I even qualify for this loan, since I've never received one before. I'm not even sure where to get one. I have over 100k in student debt from a graduate program I am in, and this is worrisome to me as I am unsure of what factors they consider. I am sure I want to do my first deal by the end of this year, and want to be ready for one when the opportunity presents itself. With that said, what are your recommendations for me?

I'm willing to any other questions to help you help me answering this.

Kevin Fox · Answer

Hey @Mohammad Haidarasl

It is almost impossible to tell whether or not you'll qualify, let alone how much you'll qualify for, without speaking to a lender.

@Jerry Padilla is someone I recommend you speak with.

Josh Dillingham · Answer

@Mohammad Haidarasl I bought a house earlier this year with a standard FHA loan.  My house did require roughly 8K in rehab and I considered a 203k loan but after talking about it with my loan officer the additional closing costs of a 203k loan weren't worth it for such a small amount of rehab.  Talk to @Upen Patel. He was my loan officer, he specializes in FHA's and is very knowledgeable.

Kevin Fox · Answer

You are very welcome @Mohammad Haidarasl!

Keep us updated on your progress.

Mohammad Haidarasl · Answer

@Josh Dillingham Thank you. You've just dropped some major knowledge on me that helps so much. I think then I'd prefer going with a standard FHA loan because I'm looking for a property that doesn't have that much fixing up to do. I'm also going to see if I can get that approval letter from a loan officer. I've contacted a local lender and seeing if they reach back to me on time. It's a bit of a stress reliever that the agent will deal with the contract portion of it all, that was worrying me a bit.

Josh Dillingham · Answer

for me the 203k didn't make sense because the amount of repairs needed were small and the fees associated with a 203k ( as opposed to a normal FHA) are higher. If the repairs are $30-50k or more then a 203k could make sense. If you've got absolutely no savings it will be very hard to get an FHA loan (or any kind of loan) you will also need some money for closing costs.

A sellers agent is going to want you to be pre-approved before they show you a place. You can do that by talking to a loan officer and getting a preapproved letter

As far as the contract goes your agent will write that for you. First youll submit an offer, then if it gets accepted you'll sign a purchase agreement.

Mohammad Haidarasl · Answer

@Jerry Padilla Thank you for getting in touch with me, I'm much more comfortable hearing that news. I do have years of schooling behind me with transcripts that are recent, so that definitely wouldn't be an issue for me to provide.

@Josh Dillingham Thanks for the insight Josh. So was a standard FHA loan better in your case? I am a little unsure of the differences in the two loans besides that the 203k includes the fixing cost in the 3.5% So, was it just that you had enough money to fix it up that you didn't feel the need to get the 203k? The reason why I'm asking is cause I literally do not have any money besides for groceries at the moment, but am working on finding my first house.

The reason why I'm seeking all these answers is because when I find the house I want to go after, I want to make sure that I'm able to get the funds to actually do the deal in not too long of a notice. I'm unsure if you do a verbal agreement first, then apply for a FHA loan, or if there's an actual contract you sign if you come to an agreement. I know this is a little off topic, but I saw some contracts posted on BP, I just don't know which I would need to use and in what point of the process.

Jerry Padilla · Answer

@Kevin Fox

@Mohammad Haidarasl

You are required to have 2 years of stable income, but college education does count towards the 2 year history. You would need to show your transcripts and have at least 30 days of paystubs with a stable job.

Kevin Fox · Answer

Looking forward to it!

Mohammad Haidarasl · Answer

@Wayne Brooks So in total I should be expecting around an 8.5% loan?

@Kevin Fox Thank you for the contact information, hopefully I'll be able to get it.

I checked a local FHA lender website and saw they require 2 year stable income/pay stubs, which I don't have. So I'm guessing I need to have some stable job for a while. I've been off and on with jobs the past year and so that is something I don't have.

Would I qualify for a 203K loan?

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