All Forum Posts by: Paul Welden

@Alex Ballesteros 

The 203k is a type of an FHA loan.

The "normal" FHA loan is categorized as an FHA 203(b), but everyone just calls it an FHA loan.

There is a version of the FHA loan that allows the borrower to include $ into the loan to pay for renovations. This type of the FHA is called an FHA 203(k).

It can be used only for borrowers who will occupy the property as their primary residence for a min of 1 year. 

You can buy a single family, manufactured home, condo, townhome, rowhome, duplex, triplex, or 4-unit dwelling. There are many other uses for the 203k but it's too comprehensive to list here. 

Sellers may not be a fan of these mainly because they are not familiar with them and could take 15-30 days extra to close the loan. In fact, sellers receive many benefits by accepting a purchase offer where the buyer will be using an FHA 203k loan.

So, if the seller can stomach a few extra weeks closing time, the seller will be very happy with the buyer's selection of a 203k loan. 

Hope this helps! 

@Wesley A Showalter 

I would suggest looking at properties have have a good ARV that is within your price range, regardless of the amount of rehab that needs to be done.

Focus on the ARV.

Hope this helps! 

@Charli Cook 

You'll have to refi out of your current FHA loan before obtaining another FHA loan, including the FHA 203k.

Depending on your equity, you could do a cash out refi and use that money to buy investment properties. 

You could also do a renovation loan as an investor using the Fannie Mae Homestyle and the Freddie Mac Choice Renovation Loan. 

Whichever route you choose, make certain you are using the most experienced rehab lender and a contractor who knows rehab loans, such as a Certified 203k Contractor. 

Hope this helps!

@Kendall Conkey 

The 203k is a good option if you have the right lender and contractor. 

The lender needs to have experience closing 203k's. HUD.gov has 2 database of lenders where you can select the ones with the most 203k experience.

The contractor needs to be financially strong & stable, understand the guidelines, timelines, paperwork, compensation structure, and nuances of each version of the 203k. Suggest using a contractor with the accreditation as a Certified 203k Contractor. 

You're only as strong as your weakest link. So, select your partners wisely. Otherwise, the 203k can be a "nightmare" like @Jason Wray stated. 

Hope this helps!

@John Havel

Time periods start the day you close on the purchase. 

Same goes for refi .... time periods start the date you close on the loan. 

@John Havel

There is generally a buyback for 6 months associated with your mortgage loan. So, If your loan is refinanced within 6 months, the 1st lender will lose their earnings from doing that loan. So, I don't know any lender who will refi your loan until after you pass the 6 month mark. 

Most owner occupant mortgages require that you reside in the property for 1 year.

Buying a 4 unit MF and living in 1 of the units while renting out the others still qualifies as you residing in the property as your primary residence. 

@John Havel

As @David M. mentioned, you need to have sufficient equity in your property to do a cashout refi. But if you are simply doing a refi to get out of the FHA MI, then you don't need 20% equity. You'll need to have made 6 payments on your mortgage before you can refi.

Doing a cashout refi, most lenders will go up to 80% LTV, which means that you may need/want more than 20% equity to do a cashout refi. And if you do a refi, you will have to select whether it will be an owner occupant loan or a non-occupant loan, which has higher rates/fees. So, if you intend/plan to rent it out after the refi, you need to do the non-occupant loan .... don't want to commit mortgage fraud.

Fannie Mae Conventional Renovation Loan is called the Homestyle. 

Freddie Mac Conventional Renovation Loan is called CHOICERenovation

Hope this helps! 

@JC Ceba

A few modifications if you don't mind ......

Contract term: should check with lender for their recommended time they need to close the loan (maybe 45-60 days) as loan closings are taking a bit longer today. 

Property Inspection: not required, but it can give you more info about the property than what the 203k Consultant FHA Inspection will

Rate Lock: you can do this as soon as you get the offer accepted by the seller

The FAQ's on the Certified 203k Contractor directory have an easy to follow recommended steps for both versions of the 203k. 

The CO is typically issued for the property .... not to anyone specific person. 

You do NOT pay the contractors in advance! They get paid from the rehab account as work is completed and inspected.

Yes you can add an ADU.

And you already answered your own question regarding contractors... "Proposals from a certified 203k contractors; one or more have to be accepted http://203kcontractors.com/" 

Hope this helps! 

@Rogelio M.

WWU is an acronym for Work Write-Up

@Alecia Randolph

I know a lot about the FHA 203k but I'm not licensed in your area.

One thing is for certain is that you need a lender with verifiable experience with the 203k and a contractor who knows/understands the 203k and has the financial capabilities to afford the start up costs and ongoing expenses associated with the 203k, such as a Certified 203k Contractor. 

Hope this helps!