All Forum Posts by: Matthew Porcaro

This is my first 203k loan and only project @Ramar Price

I'm looking to get a duplex using a 203k loan. The house is a Fannie Mae HomePath foreclosure, they are selling it as it. 

So far the bank has accepted my offer, and they want me to continue signing the paperwork. My lawyer advised me to verify that there is a CO for the property as well as check if there are any building violations on the property that I would be liable for. 

I went to the town, and they said to get that information, I need to fill out a Freedom of Information Act form, and wait up to 20 days for the records. I definitely don't have 20 days to wait.

How should I approach this situation? Do I just take the risk and hope for the best? How could I price out the worst case scenario in terms of getting permits etc? My town doesn't seem to have any information on permit costs, etc. 

I'm in the middle of one now. Really the two main things you need to make sure of are 1.) You have a lender who is well versed in 203k loans. 2.) you have a reputable, punctual, and licensed contractor who is on top of their game, and preferably, experienced with the 203k process as well.

There's a lot of red tape, but it's the cheapest way to get into a property currently while instantly (hopefully) building some equity. 

It's basically any of the other FHA loans. The Homepath loans, like HomeReady and ReadyBuyer are owner occupant loans that allow low down payments.

You can also go as far as to finding properties that are up to 4 units. With the 203k loan, you can take out a loan for up to a 4 unit property. This way you can build up more equity. This is what everyone refers to as 'house hacking'. 

I'm in the process of doing it myself on a duplex. 

Well - the 203k lenders won't loan on the property if, after repair costs, the appraisal doesn't come back higher than the purchase price + rehab. That would be a pretty bad loan with such a small down payment. 

Most people refi out of 203k loans ASAP due to mortgage insurance, etc. But again, you can only refi if the numbers allow it. It's very possible to build in 20% equity after the rehab, but you still need to play nice with the FHA in terms of owner occupancy, etc. I think the "1 year" rule is more of a rule of thumb than an actual set guideline. If they sense some shadiness, they can go after you for mortgage fraud.

I'm in the middle of one now. In the beginning, but as long as you have a lender familiar with the process, and a punctual/approved general contractor, it's one of the best ways to get into your first property for low money down. I am currently in contract for a foreclosed duplex I found through Homepath. The plan is to rehab the home with the 203k, and live in one unit and rent out the other to cover most if not all of the mortgage. Once I have enough equity built in I will refi out and go into the next property. 

There must be something you're not telling us or something blatant you are missing. It's not the easiest thing in the world, but banks are in the business of making money. If your portfolio shows you make money "hand over fist" that should be a huge green light for these lenders. The fact of the matter is, there's more money out there waiting to be lent out than there probably is in circulation. The money is out there and it's ready to be sold a good deal.

If you're goal is to stiff him AND fire him, you're going to have a hard time. If he feels he is rightfully owed money for work he has done, he will file a lien. Or he may not. If you pay him up to date then fire him there's nothing legally he can do.

If they're selling it 'as-is', when you offer on the property you are essentially waiving that you are offering without any contingencies. Unless you try to submit an offer with inspection contingencies, but chances are they will immediately reject it. 

Most crucial things to look for are:

• Condition of the mechanical, electrical and plumbing systems. "checking the lights" isn't going to tell you if the system is up to code, or if the electrical service is relatively up to date. Plumbing you can't really do too much other than checking the water main coming into the house and check the date on the boiler.  
• Structural components - check for cracks/water in the foundation. Also in the basement, check the floor joists and supports. Check spot and record any water or mold you see anywhere in the house. 
• Roof/exterior. Look at the roof, usually just by looking at it you know if it needs to be replaced. Do you see any rotting in the sofits/fascias?

I would bring someone who knows what they're doing from a construction standpoint. An inspector is the only way to be close to sure, but obviously they cost money. 

Understand how much cost the rehab will be, and be aware that in order for you to be approved for the 203k, the appraised value after work done needs to be more than the loan amount. So if the repairs are more than you'll get out of the home, you will be denied.