Pros & Cons to 203K Loans

[Alex Ballesteros]

I asked my realtor his thoughts about 203K loans and he said that they are pretty costly and that sellers aren’t fans of them, but i didn’t exactly know what he meant by that.

Can anyone clearly explain what a 203K loan is, the requirements & why sellers aren’t a fan of these loans ? 

[Paul Welden]

@Alex Ballesteros 

The 203k is a type of an FHA loan.

The "normal" FHA loan is categorized as an FHA 203(b), but everyone just calls it an FHA loan.

There is a version of the FHA loan that allows the borrower to include $ into the loan to pay for renovations. This type of the FHA is called an FHA 203(k).

It can be used only for borrowers who will occupy the property as their primary residence for a min of 1 year. 

You can buy a single family, manufactured home, condo, townhome, rowhome, duplex, triplex, or 4-unit dwelling. There are many other uses for the 203k but it's too comprehensive to list here. 

Sellers may not be a fan of these mainly because they are not familiar with them and could take 15-30 days extra to close the loan. In fact, sellers receive many benefits by accepting a purchase offer where the buyer will be using an FHA 203k loan.

So, if the seller can stomach a few extra weeks closing time, the seller will be very happy with the buyer's selection of a 203k loan. 

Hope this helps!