203K Underwriting guideline question

[Nando Gapasin]

Hello, I found a home that can be purchased for $100K and needs $140K in rehab. ARV $315K. I was thinking about using a 203K loan, but was uncertain about the underwriting guidelines for the 203K.

- Do I qualify for 203K if I've already had a 3.5% FHA loan?

- Can I be self employed less than a year and qualify ?

Please let me know if you experience with the 203K.  Thank you! Nando

[Andrew Postell]

@Nando Gapasin the FHA 203K is a good loan to know about but here's some important items to be aware of:

1. It must be your primary home.
2. Renovations can be rolled into the loan
3. Your downpayment is based on the purchase price + renovations added together.  Essentially 3.5% of that total amount.

Now, FHA loans have rules that apply to ALL FHA loans and for your scenario here's what you need to know:

1. You must be moving more than 90 miles away from your current FHA loan.
2. If you need rental income from the pre-existing home that you are vacating you must have an appraisal performed on that property that proves 25% equity in the property. If that is not present, then you cannot use rental income from your vacating home.
3. You will be required to show 2 years of self-employment history on your tax returns

So while some of these items might tell you that an FHA loan isn't the right fit here that doesn't mean you can't get another loan type. Just expect a higher downpayment on a different loan type though. Hope all of this makes sense. Thanks!