All Forum Posts by: Bill Rich

Hi Bryan 

There are 2 types of loans out there that allow for rehab financing and home acquisition all rolled into one. They are the FHA 203K and the Fannie Mae HomeStyle. These programs are not hard to secure contrary to what some have said on this post. I handle rehab mortgages and can attest to their ease. I will say the one VERY big factor to consider is the lender you are working with and how much experience they have. A more experienced lender should have the know-how to get you goals accomplished but a lesser experienced lender can lead to disasters. As @Matthew Porcaro mentioned either program would work for you. Just a few things to clarify.  FHA loans are NOT asset based lending as Eric mentioned above.  Asset based lending is when you are using your own assets as the collateral for the mortgage.  The collateral for an FHA loan is the home itself that you are buying.  In addition, FHA 203k loans do not take 8 months to close.  They take about 45 days on average to close.  If you have any questions please let me know. 

Hi Michael 

You have to basic options, the FHA 203K or the Fannie Mae HomeStyle. Both work generally the same way however since you are putting 30% you are better off going with the HomeStyle so you would not have to PMI. With any type of FHA loan, you pay PMI no matter how much you put down so its probably not the best fit you for you. I do a lot of renovation loans and if you have any questions please feel free to use me as a resource.

No problem at all!  Let me clarify the HomeStyle pretty much works the same way with the self-help standards, its allowed by guideline but most lenders (including my company) do not allow self-help. 

Rates for a 203K are going to be higher than that of a standard non-renovation FHA loan. Typically I see a spread of about .25% to .50% higher depending on the days market activity and rate sheets.

Hi Eric

Your questions are some great ones to ask as a first time buyer and buying a duplex is a great way to help offset your mortgage payment, so congrats!!

Let me address each question for you as I have a lot of experience with rehab loans like the FHA 203K and the Fannie Mae HomeStyle.

1. The 203k will allow for peeling paint or any other cosmetic issues as such. In fact there really isnt much you cannot fix with a 203K. Just because it is an FHA product doesn't mean the home has to be in excellent condition.

2. This is tricky, while FHA does allow for what is called "self-help" there are not many lenders who will allow for it. That said I would not plan to do any work yourself in the grand scheme but if you have the right contractor you may be able to work with him to help shave your budget.

3. Yes the HomeStyle requires 15% with a duplex and essentially has no restrictions on what you do to the property. In contrast to the 203k which requires 3.5% down but does have some restrictions.  Those restrictions are going to be more geared towards luxury items like putting in a pool or a sauna. 

4. The 203K would be your best and only option for the low down-payment renovation loan.  

Any other questions you have please feel free to reach out. 

 How do you not see it that way? The homeowner is literally creating equity in the home by doing the work and that subsequent work is being financed through the loan.....thus getting the cash needed to do the work.

 David thats actually incorrect as you can take additional cash out of the equity of the home to include home improvements. As the original post made reference to, this is a 203k or HoneStyle renovation mortgage.

@Kerry Baird I am not looking for a list of lenders as I do all types of financing so there is not any due diligence I would need to do.  I was simply asking the question for it seemed a lot of people were leaning on your list and your list may have been outdated the moment it was posted. That's the only reason I asked. Just today I learned two more of these Alt-A type of lenders have suspended services.  They are dropping like flies. Have a great day!

@Kerry Baird is this list up to date?  I ask because since the crash in the market from Covid-19 we have seen a large number of Non-QM and jumbo/Alt A lenders exit lending either temporarily or permanently.  We have seen several literally go out of business in the past week.  

@Ben Safren there a lot of great renovation programs out there. The FHA 203K is a program that allows for as much as 110% of ARV and the Fannie Mae HomeStyle allows for up to 95% LTV of the ARV. If you have any questions please feel free to ask.

@Paul Welden thank you for the recommendation!!