203K Loan - Greater Boston Area

[Michael Brown]

Hello Everyone - Newbie/Future Real Estate Guru Here!

From doing some research and listening to numerous podcasts, I have found that a 203K loan sounds like an awesome way to get into the real estate game. My fiance and I are getting married in August 2017, and I have been looking into buying our first home/investment. I would like to kill 2 birds with one stone, meaning buy our first home, and our first real estate investment, a multi unit home to house hack. The first step in doing so however, is getting pre-approved. Can someone recommend a 203K loan lender that they have used in the Boston Area, that was awesome and painless? 

[Joshua Olitzky]

Hi @Michael Brown welcome to the area. I'm actually a couple of weeks out from closing on a deal with a 203k loan. The 203k is a great way to get into the game with little money down. I'm guessing since you know about 203k you're aware of the PMI fees etc that are pretty easy to find. You can't get the 1.5% fee thats added to the principal back, but you can remove the monthly PMI by refinancing at some point. My lender has been excellent and I'd highly recommend them if you haven't found one yet. It was the Shant Bonosian team with Guaranteed Rate, and the 203k specialist is Victoria Pagliarini.

203k does have some nuances and some costs that you might not expect, however. 

The "Inspection" that your lender is required to do, is more of an estimation and safety check, and it costs twice as much as a normal home inspector. I also recommend you use a private home inspector as well, since the HUD inspector will not be nearly as thorough. So instead of ~$500 for an inspection process, you'll be at ~$1500 plus two trips to the property. During that estimation process you'll have required, recommended and desired "levels" of work. FHA will require you do certain things, for instance screens with no tears on all windows, hand rails to code etc, which is fine in general. The hiccup is that anything "required" will have to be done by a contractor, so with the screen example, it will cost you quite a lot more than if you did them yourself. Those things add up. None of these were deal breakers for us, but some of these details were a bit unexpected.

The contractor part is a little tricky as well, you will have to have a contractor bid the job and accept their bid prior to ordering the appraisal. What does that mean? Well, you must have a contractor or two vetted and selected when your ready to make an offer. This one actually got me. The first contractor I had bid the job came in about 3x too high, so it required another multi hour trip with  another contractor a week later to the property. This made getting everything done to stay on time for closing more difficult.