All Forum Posts by: Bill Rich

Christian

Yes FHA requires you to occupy the home for the first 12 months of ownership. However if you sell it then it would negate that affidavit you are signing. However if you aren't to occupy the home at all but you are saying that you are just to take advantage of owner occupant guidelines is a slippery slope that could be construed as mortgage fraud. FHA will do audits as well to insure that you are occupying the property as well.

Hi Christian 

A few things you need to consider. In my opinion a 203k or HomeStyle loan could be an option but you need to be very careful. These loans are not really for flipping purposes but more a buy and hold. Lenders who originate these loans are generally required to keep them opened for a period of time ranging from 6 months to a year depending on who the investor is on the secondary side of the market (this isn't general consumer knowledge but lenders know this). A fix and flip mortgage is indeed a type of hard money loan that will require larger down payments when compared to the 203k or HomeStyle and sounds more like what you need. You also have to remember that you are signing an afadavit that says that you are going to live in the property with a 203k. So if you aren't planning to live in the property you really can't sign the afadavit. Personally I have closed hundreds of 203ks and HomeStyle renovation mortgages and would be happy to answer any questions you may have. I will have access to fix and flip programs as well and can guide you through the process. 

@Juan Alvarez

Being a renovation lending expert I can tell you the process is not that complicated.  The complications come with working with a lender who doesn't truly know how to process these types of loans.  The FHA 203K would be your best option here over the HomeStyle because with a multi-family property conventional loans require more money down than FHA. For example a 2 family property would require 15% down going conventional where as FHA would only require 3.5% down.  The calculation is based off of the total acquisition price of the home (purchase price + renovation budget) not just the purchase price.  

As for your credit, FHA doesn't have a guideline that requires you to have established credit. In fact you can have no trade-lines at all and still qualify. You mentioned that you were buying a duplex so that rental income from the 2nd unit can also be used to help you qualify from an income perspective. I hope this helps and if you have any other questions please let me know.

Best of luck!!

@Peter Bui if you are doing an FHA 203K yes you would have PMI regardless of how much you are putting down. If you are doing the HomeStyle yes you would avoid PMI you put down 20% or more.

Hi Margaret 

Both the 203k and HomeStyle loan are great programs and are actually not hard at all when working with the right lender. I do know of one who is licensed in state of Washington. Let me know if you you need further assistance.

@Peter Bui

Simple answer is yes there are programs out there that are not hard money. Both the conventional HomeStyle and the FHA 203K would give you that option. It sounds like you are making this property an investment property so the FHA 203K would not be an answer because you are required to occupy the the home (a multi-family home is ok if you occupy one of the units). Which leaves you with the HomeStlye. The HS loan allows you to finance all rehab monies needed into one loan and your downpayment is based on the total price of the home (purchase price + rehab budget). If it is an investment property you can only do single family homes, no multi-family homes with this program. The downpayment requirement is 15% as well and it is your end loan so you dont have to refinance out of it like you would typically with hard money or construction loans.

I hope this helps.  

Alex

Yes the HomeStyle does allow for 5% down if the home was a Single Family Home.  A duplex requires 15% down.  

@Alex Nelson

Congrats on taking the step into REinvesting. Having a vast amount of experience doing both of these loans I can speak very knowingly of them. Both are great programs and your overall credit profile would be a large driving factor as to the better fitting program. With a duplex, HomeStyle will require more than 5% down. The DP requirement is 15%, so depending on your cash flow this could be the determining factor. The FHA 203K would only require 3.5% down.

Both programs are great programs for investors and first time buyers alike.  I would not say one is automatically better than the other because the individual borrower's credit profile may make one better than the other.  Does that make sense? 

Hi Guys 

Not sure if this post is still current but there is a VA mortgage that allows for renovations as well. The VA program allows for renovations of up to $35,000 and the repairs are limited to minor cosmetic type repairs.

@Ben, welcome to the world of renovations. Renovation properties and mortgages are a great way to break in as a real estate investor. Both loan programs are great but each certainly have their own pros and cons, which really are tied to your credit profile and the property profile. If you have any questions please feel free to post them.