All Forum Posts by: Paul Welden

@Benjamin Sulka

MI = Mortgage Insurance (FHA Loans)

PMI = Private Mortgage Insurance (Conventional/Conforming Loans)

MI & PMI essentially do the same thing .... insure the mortgagee in the event of a borrower default.

Hope this helps! 

@Benjamin Sulka

You have a pretty good understanding of the 203k. 

But......
FHA 203k is not a government backed loan. FHA only insures the loan through the borrower's payment of the Mortgage Insurance premium and the upfront fee paid at closing.

There's no need to hear back from FHA when originating/approving/funding 203k's.

There's no PMI .... that's for conventional/conforming loans. FHA's, including the 203k, have MI.

Secret tip .... the Limited 203k can go up to $50k, if the property is in a QOZ and the borrower is one of the first 15,000 people to use this secret tip! 

Hope this helps!

@John Wargo

One cool secret tip on a Limited 203k, is that if the property is located in a QOZ, the max rehab increases to $50k for the 1st 15k borrowers each calendar year. 

GC's are almost always your best route instead of multiple specialized trades mainly because the first trade to finish doesn't receive their final payment until all the trades are done. 

Hope this helps!

 So, @Yang Zhou, finding a Realtor with 203k experience will be almost impossible considering the number of active Realtors in your area, the # of properties sold last year, and only 141 of them being 203k loans ..... needle in a haystack. But if you find a Realtor with 203k experience, that most likely means they've done 1 in the past 2-3 years. 

Here are the 2 databases of 203k lenders ...  and 203k Endorsement Summary Reports. 

Hope this helps! 

@Yang Zhou

I think the 203k is feasible anywhere. 

In NYC area, a 4-plex can have a 203k loan up to $2,211,600 with only 3.5% down payment plus you can use 75% of the market rent (as determined by the FHA appraiser) from the 3 units you will not occupy as additional income to help you qualify for the mortgage.

HUD.gov has 2 databases of the lenders with the most experience with 203k's. Let me know if you want help with them.

Finding a Realtor with 203k experience can be quite challenging considering only 141 FHA 203k's were closed last year in NYC area. The 2 most important team members IMHO are the Lender and the Contractor. Best to use a contractor with verifiable 203k experience/education, such as a Certified 203k Contractor. 

Hope this helps! 

@John Wargo

All work on any 203k has a maximum completion time of 6 months but can be less depending on renovations being done. 

There are also intermittent deadlines depending on the version of the 203k that is being done. 

Contractors doing 203k work are NEVER vetted by the HUD consultant.

Contractors are selected by the borrower and the lender must verify their credentials and experience to ensure they can do the project. 

Any contractor that meets the minimum licensing and insurance requirements for their jurisdiction can technically be allowed to do the work. Heck, even the borrower can do their own work. 

But just because someone is allowed doesn’t mean they are qualified or prepared to do 203k work. 

Contractors should know the different versions of the 203k, what is and is not allowed, timelines, guidelines, paperwork, processes, compensation structure, etc. they should also be financially sound bc there’s no $ upfront for these contractors 99.9% of the time. 

Maybe best to use contractors who know and understand the 203k, such as Certified 203k Contractors

Hope this helps! 

@Matthew Villalon

The 203k is the most underutilized tool that savvy home buyers can use. 

Lots of hurdles and hoops to jump through but the benefits are amazing, as long as you work with the right team of people to help you, including the Realtor, Lender, and Contractor, such as a Certified 203k Contractor. You're only as strong as your weakest link ... select your partners wisely. 

@Benjamin Sulka Informative article you shared on the 203k but unfortunately, it contains many errors. 

#1 - The streamline 203k no longer exists. It was eliminated in 2015 and replaced with the Limited 203k which has different guidelines (although some are the same as the streamline).

#2 - Mixed use properties are permitted to be purchased and renovated using the 203k. Mixed Use Residential can be one with a 203k as long as the residential section is 51%+ of the GLA and the rehab money only used on the residential section. The article may be referring to a lender specific restriction, but it's not a HUD restriction.

#3 - Repairs are permitted to be done by the borrower. HUD calls this "self help". However, it will be very difficult to locate a lender who will allow a "self help" 203k. The article may be referring to a lender specific restriction, but it's not a HUD restriction.

#4 - Investment properties can be bought with the 203k. An owner occupant purchasing a MF property renting out the other units they will not occupy is a type of an investment property. 

Hope this helps! 

@John Currey

The FHA 203k loan was used 4,034 times last fiscal year 10/1/2022-11/30/2023.

It's certainly not the most popular loan but it is absolutely the most underutilized tool that savvy home buyers and creative "investors" on MF properties use to build generational wealth. 

The 203k can be tricky but only if you do not have the right people helping you, which includes the Lender and Contractor. 

There are tons of lenders who have specialized departments that only do renovation loans and there are contractor who also specialize in 203k's, such as Certified 203k Contractors. 

Find the right property and use the right people, and you are GOLDEN! 

Hope this helps! 

@Mariah Pierce

Is it correct to assume that on one of the 35 line items that the contractor did not spend all the money for that specific line item and now they want to keep the remaining money? 

If this is correct, then the contractor cannot keep the money. 

However, the contractor could have an increase in their profit margin enabling them to keep it. 

When the project is 100% completed and there is money leftover in the rehab account, the remaining money can be used for additional improvements or to reduce the principal loan amount. 

in 99.99% of 203k loan, 100% of the money is used with nothing being left over for additional improvements or loan balance reduction. 

Certainly hope you're working with a Certified 203k Contractor who knows the rules/guidelines.

Hope this helps! 

@Aaron Bard

So, you are approved for an FHA loan (aka FHA 203b) and some of the properties you've looked at do not qualify for the traditional FHA loan because their current condition does not meet FHA's Minimum Property Requirements (MPR).

Maybe, consider an FHA 203k, which is an FHA loan but it allows you to add into your FHA loan the cost to correct those deficiencies and other rehab that you may want to do, close on the deal in it's as-is condition, and correct those items AFTER you own the property!

Just make sure you use a contractor knowledgeable with 203k, such as a Certified 203k Contractor. 

Hope this helps!