hey Joseph, I just saw that no one had replied here so wanted to give you some information.
Major Difference between conventional and FHA/203k: FHA-you can get a low 3.5% down payment. Conventional you have to have 20-25 percent down on a 4 Plex. Also, FHA loans require mortgage insurance, which will raise your monthly payment...
I used a 203k(owner occupant-rehab) loan, on a fourplex back in May of 2014. You have to use one general contractor, and cannot use individual subcontractors. The GC can use subcontractors but it all has to go through the GC. before you close on the loan, there is a huge stack of paperwork that you have to go through and the GC has to be selected and finalized and you must turn in the borrowers agreement, signed bid and scope of work, and the GC has lots of paperwork as well.The GC you select must be licensed bonded and insured, provide several references.
A little about my experience-The extra paperwork that the borrower and the GC must fill out for the 203k approval is pretty extensive. I contacted four GC's- up front, 1 declined to bid, 1 didn't meet licensing and insurance Requirements. The other 2 bid on the projects. I selected the lowest bid. After about a month and two closing date extensions,after pushing this contractor and working with 4 different people in the company, I still was not able to get all of the required paperwork turned in. It came down to one last piece of info we needed and they finally decided to back out a couple days before closing. Another extension. I then had to go back to the last GC who was the highest bid. I was able to negotiate a little lower price on some projects, which was good, but he was still 2-3 times higher than 1st GC On some major projects. I ended up using the cheaper contractor for some work later, but this I had to pay out of pocket and couldn't wrap into the loan. I also did lots of work myself, but anything on the signed scope of work using the 203k, must be done by the GC you hire. payment-the bank pays the GC half up front and half on completion when you and the inspector has signed off on the finished work.
My loan application and paperwork approval almost blew up on me due to timelines and paperwork expiring because of all the delays. Luckily even with all the extensions we were able to close on the property Thanks mostly to my very knowledgeable mortgage lender and help from my agent! I highly recommend using a very experienced mortgage lender who has done several 203k loans And can push all parties to get required paperwork submitted.
In the end, it was a TON of work but definitely worth it! Good luck on finding a deal! let me know if you have any questions I may be able to help with.
