OfflineHas anyone done a rehab loan, especially a FHA 203k?
My current broker and agent (who I realize now aren't good for investing - they're nice, but not investors) are telling me that it's a nightmare, don't ever do it, and other stuff that sounds a little extreme. Of course, they've never done them. Well, the agent had a client do one about 16 yrs ago, and it was a pain back then.
I contacted another broker, who has done one recently, and he's telling me pretty much a whole different story.
Can brokers just flat out lie to get you started on the deal, or is it more likely that my current broker just doesn't know what she's talking about (since she never did one) and is getting erroneous info from her associates?
Would love more details on this - it sounds way more like what we need on these apartments.
Tracey R.
Hey all. Well, it looks like the seller is accepting our offer. We got page 1 of the counter offer tonight, but there's an addendum page that didn't come through, so they're resending in the morning. So, that part's settled (at least it better be, LOL!)
And, for the 203k, we are going for it, and switching brokers. The current (about to be previous) broker is nice, and my agent says she knows her stuff, but she doesn't know about 203k streamlined loans, and that's what we need.
In fact, for the types of properties we're looking at, I'm thinking the 203k is going to be my favorite!
We'll be getting the loan money and the rehab money all in one mortgage, one close, 3-1/2% down payment (based on purchase price, before repair costs), at 5 to 5-1/2% interest, fixed 30 years. We'll have one close, shooting for 45 days, at which time 50% of the repair funds will be availble for the first draw. The second draw is after all repairs are done, and will be the balance of the funds, up to actual costs. Any funds left in the escrow account go back to pay down the principal of the loan.
I guess it can be a pain becasue of the documentation required - but it's not that bad. There is an additional fee that is a percentage of the rehab amount (on $30k it will come out to about $350), but that is not an upfront fee. It comes in at the close, and in our case, seller is paying the closing costs.
The appraiser has to do a 2-part appraisal, an as-is value, and an after repair value. So, that's a little more work for them, I guess. THe contractor has to provide a copy of his license and bond - not such a hardship. There doesn't seem to be any more documentation required on our part over what was required for the regular FHA loan.
I am really excited, because this will eliminate a few major steps in our plan, and save us some serious time and money. If we weren't doing it this way, we would have to close this loan, borrow the rehab money (probably from a hard money lender), do the repairs, wait for the 1st to season a little, and then get a 2nd mortgage to repay the HML. I like this a LOT better - plus everything goes at the same lower rate, instead of having a 2nd at a little higher rate.
If anyone knows any downside to these loans, please let me know asap, because we're planning on making the switch on mortgage brokers tomorrow. I feel like the first one is going to be mad at me, like I'm wronging her somehow, but the simple fact is, she didn't even know this loan existed, and now that I've educated her (practically against her will, I might add), she can't seem to find any lenders from among her hundreds who will fund it. I found 4 in about 15 minutes on google (that's in our state, too). I really don't feel like I should have to stay with her when she can't do what we need done.
So, that's where we are on the apartments. Tonight, get all the documentation emailed to the new broker, and do an online application. Tomorrow, do whatever we need to to get the offer signed, make the final decision on the broker situation, and then get ahold of the contractor. Jeff will be calling his family to dig up the down and some floating cash, and then we're off to the races! also will have to find property insurance. Any tips there will be appreciated. I know that there's some kind of benefit for rental vacancy or something, so I will ask about that.
It's getting so exciting!!
Tracey R.
you know more than the broker, I was looking at the site the other night, and saw they had streamlined and increased the rehab limit. My problem is my FICO. The approved lenders are asking for 700 are better scores, are so I was told by 1 mortg. brker. Maybe I should be calling more than 1. BUT please keep us updated on your progress.
And good luck !!!!!
go the HUD site and click hud homes for sale. They have links for HUD lenders in your area.
Now go do this deal.
You posted on my post regarding my bank. Best bet for your rehab is to go through your mortgage broker. If you structure it properly, you should be able to finance everything. Rehab loans are normally around 6 months term, and you need to refinance it after that, or sell it before the term expires. You need to find a suitable broker to meet your needs. Of course, this are also base on your credit and how many houses you already have under your name.
The bank that I use requires down payment.
I an anxious to hear some feedback on 203K loans. I was going to use one on a big rehab, but the deal fell out. I am currently looking at another. Keep us posted Tracey, Let us know how this works for you.
Al
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
Regarding the 203K. I didn't see it in your post here that you are occupying this property, but I was looking around and read it from another Forum that the HUD 203k is only for owner occupied. Please verify it with your Broker.
Regarding the 203K. I didn't see it in your post here that you are occupying this property, but I was looking around and read it from another Forum that the HUD 203k is only for owner occupied. Please verify it with your Broker.
Regarding the 203K. I didn't see it in your post here that you are occupying this property, but I was looking around and read it from another Forum that the HUD 203k is only for owner occupied. Please verify it with your Broker.
Folks, be very careful about 203K loans. I've got a lot of experience with them. They are for multi units (not more than 3 in most places), and one unit must be owner occupied. Say you found a triplex that you want to buy for $100k, and you get a contractor in there who estimates it will take $25K to bring it up to speed. You may qualify and get a loan for $125K, but the $25K rehab amount is parceled out in piecemeal as the HUD inspector verifies everything. You must have a licensed contractor. In almost all cases, the HUD inspector will come and say, oh no - not $25k - you'll need $60k. Almost always more than double you think.
You say what are you talking about with a HUD inspector? This is not a HUD deal - yes it is. The HUD inspector comes to verify all phases of construction on behalf of the lender, and reports back to lender. Also, say your contractor says to you privately that it will only take $10K to rehab, but I'm going to say $25k and we can split and pocket the difference. No, no, no! Firstly, the repairs are almost always double because the HUD inspector has a higher standard than say a Fannie Mae Homestyle loan (for 2 units - 1 must be owner occupied) or a private loan the owner gets from somewhere else. No HUD inspector needed for Homestyle loans. Next, any excess money (if there is any) is always applied to the principal and you don't get to pocket the difference. There are many tricky ways to skin a cat, but if you really want to go the easy way - find a duplex, live in 1 and get a Fanny Mae Homestyle fundning loan. No HUD man involved in duplexes.
Meanwhile, if you do get a 203K loan, the HUD man parcels out the money, and you don't get $10k up front to do the roof - no; the HUD man will parcel out only about 1/2 for materials, and when the work is done, you'll get the balance for that leg. In most cases, your contractor is working on good faith and materials only. Do your homework and speak with CONTRACTORS who have worked on 203k loans. They know firsthand how it works.
That being said, just be wary and know what you're up against, and that you won't be able to honestly pocket extra money. Call your local Wells Fargo branch and ask for the senior loan officer to explain it all to you. (No, I have no interest in or for WF.)
I was approved for a 203K on a SFR. It does need to be owner occupied.
"NOW GO FIND A DEAL"
Watch your thoughts; They become words,
Watch your words; They become actions,
Watch your actions; They become habits,
Watch your habits; They become character,
Watch your character, it becomes your destiny.
Frank Outlaw
We are going to be owner-occupied on this - one apartment will be held out for our personal residence, although since we're on the road with hubby's work, that will mostly be weekends and holidays only. Once we have all our other investment properties cash-flowing and we can move back home full time (about $3k per month in cash flow, of which $1000-$1500 will come from these apartments), then we will find a permanent personal residence for us and buy that and then we can rent out the final apartment, and up their cashflow to closer to $2k. Our timeline is 12-18 months.
Jenny - did you do the streamlined 203k, because it sounds like you did the regular one. The regular, full-fledged 203k rehab loan is a pain, from everyone I've talked to. It does require a HUD Consultant, who charges an arm and a leg, and makes everything 10x more difficult than it needs to be, and there's like 5 draws, which require a re-inspection before each one.
The Streamlined 203k is for repairs up to $35k, and does not require a HUD consultant, engineer, blueprints, architect, or anything like that. The same FHA appraisor as for the 203b FHA loan comes through and does his "as-is" report and an ARV (after repair value) report, and that determines what minimally HAS to be done, and what the maximum loan amount would be on that property.
There are only 2 draws, like you said. 50% at the closing, and the other 50% when all work is done and the appraisor comes back to sign off on it. Work has to be started within 30 days of closing and finished within 6 months (although my mtg. broker said they really like to see it done within 90 days). Our contractor has trade lines at all the suppliers, so it's not a big deal for him to get the materials up front, and carry the balance for 90 days - that's totally typical in any big job anyways. And, as long as he's on this full-time (which he will be), there's no reason it should take more than 30 days to get it all done. The carpet and vinyl will be subbed out, he can do the roof in a week probably, and most of the rest we can do "working for him" on weekends, or he can just slam out himself in a week or two. Not a huge thing for our project. Then he gets the final 50%, pays himself and his crew (maybe including us, LOL). Done.
They add in a 10% contingency reserve fund for overages on the repairs, repairs are limited to certain things - nothing major like structural changes, moving load-bearing walls, no landscaping, etc. However, you are free to bring the place up to date beyond what the minimum FHA requirements are for safe and habitable. We'll be replacing carpet and vinyl, fixtures, appliances, garage door, new countertops, etc.
In our case, hubby is a carpenter, and has been doing construction work for 15 years. In fact, he and our contractor both used to work for the same company building custom homes, and now our contractor's son works for hubby's new company doing big civil jobs. So, they have a great history, and Jeff will be able to do a lot of the work "for" the contractor, and get paid for it, which is how we'll put a little back from that. But, honestly, even if we didn't, it is so much easier (in my mind) to do this all in one loan, with one close, and one good interest rate, that it more than makes up for not pulling cash out immediately. In 6 months or a year, after all the repairs are done, we can pull a 2nd or maybe a HELOC out for some cash. Still worth it!
Also, with a Streamlined 203k, as I am understanding it, repairs up to $15k don't even require a 2nd appraisor visit - the receipts and contrator bill is sufficient for the lender to modify the title.
I will keep you guys posted on how it goes, but it sounds like a gem to me!
We are having our own inspection done, probably will happen tomorrow or Monday, and we are going home for the weekend, and meeting the contractor there on Saturday or Sunday to go over what we want done. Then he'll get the estimate and other FHA paperwork back to us by Tuesday or Wednesday, and we'll get the appraisor in there.
The plan is to close by Feb. 27th or 28th. Work will commence the day after closing, and should be done within 30 days.
I'll get lots of pictures this weekend, and maybe borrow a video camera to "document" the transformation of the apartments from druggie dive, to up-to-date family living!
Tracey
Anyone have any idea what the current terms are for a 203K?
We are getting 30 yr fixed at 5-1/2% with 3-1/2% down. That's 3-1/2% of the full loan amount, not just purchase price.
Tracey
The cost of a 203k is usually about 1 point over current interest rates. However, once the work is done, you can do a refinance without having to fill out all of the paperwork all over again, which surprised me, and get current market rate asuming you've got decent credit. During that time period, someone could have strategically filed BK.
There is a broker/funder back east called homesteadfunding.com. They're in quite a few states back east and even FL. I worked with a man there named Chuck who absolutely knew all of the ins and outs, and is the King of 203K and Fannie Mae Homestyle Funding loans (aka streamed lined).
Happy Home Funding!
Jenny