Pro’s and Cons of the FHA 203k

By
Mortgage and Lending with AnnieMac Home Mortgage NMLS #38670
http://actvra.in/4GpV

I honestly believe that the FHA 203k renovation loan is the best mortgage product available. The loan creates amazing opportunities in ways that other mortgage products cannot. At the same time it is not the perfect loan for everyone in every situation. Here is how I weigh the FHA 203k loan looking at both the pro’s and cons:

 

Pro’s

 

·      Home renovations can include many things from windows and siding to new kitchens, additional bedrooms, bathrooms, and levels

·      It is easier to qualify for this loan. Credit scores as low as 640 and higher DTI’s are eligible

·      3.5% down payment is required. This includes both the purchase price and the renovation costs

·      The FHA 203k offers lower interest rates compare to construction loans

·      It is possible to gain instant equity on your transaction

·      The renovation and purchase costs are bundled together into one low fixed interest rate. You can even include 6 months of mortgage payments if the home is not habitable during construction

·      Loan amounts can be based off of 110% of after improved value 

 

Cons

 

·      Luxury items are not included. This means no basketball or tennis courts, swimming pools, outdoor barbeque areas, or Jacuzzis.    

·      Additional fees are inherent. The borrower is required to have mortgage insurance and pay consultant fees, title update fees, and supplemental origination fees.

·      There are more moving parts to the FHA 203k compared to a conventional loan. It is very important to find a lender who specializes in the 203k loan.

·      The FHA 203k loan process can be a little bit longer, about 45-60 days total. This is again another reason to deal with experienced 203k lenders 

 

With all of these things taken into account, including the longer loan process and increased fees, I still believe that the FHA 203k loan is still a great option to help you customize your house the way you want. The goal for me is helping people get into the home of their dreams and the FHA 203k renovation loan is the best way for many people to do so!

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Will Nesbitt 07/11/2014 12:35 AM
Topic:
Home Improvement
Groups:
The FHA Mortgage Group
FHA 203-k and FHA 203-k Streamline Loan Group
Tags:
rehab loan
fha 203k loan
fha 203k
renovation loan
fha 203k renovation
203k benefits
fha 203k benefits

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Rainer
177,893
Ted Glover
Alderman Classic Realty, LLC - Moultrie, GA
ABR in Moultrie, Georgia 229-854-5422

Thanks Jeff for the good advice and information on the FHA 203K loan program.

Jul 10, 2014 05:01 AM #1
Rainmaker
99,487
Cat Zwicker, CRS
Desert Sky Real Estate, LLC - Redmond, OR
Down to Earth Service; Out of this World Results!

Great information on the 203K program. Have you had much luck using these with REO purchases? I run into the REO company not wanting to allow for the extended close time and would love some ideas on how to present it in a more favorable light to them. 

Jul 10, 2014 06:15 AM #2
Rainmaker
1,112,093
Jeff Jensen
The Federal Savings Bank/Lending in 50 states - Greenwich, CT

Hey Jeff nice to see you out there in the bloggosphere.

Jul 10, 2014 07:45 AM #3
Rainer
33,997
Jeff Onofrio
AnnieMac Home Mortgage - Mount Laurel Township, NJ
FHA 203k Lender and Homestyle Reno Specialist

@Ted Glover- thank you sir and thank you for reading! 

Jul 10, 2014 10:35 PM #4
Rainer
33,997
Jeff Onofrio
AnnieMac Home Mortgage - Mount Laurel Township, NJ
FHA 203k Lender and Homestyle Reno Specialist

@Cat Zwicker - yes we do about 65% of our business is REO purchases.  I believe the key is letting them know that you know what you are doing and that your team has experience.  If they have that comfort level than they know the chances fort a successful closing are that much higher.  Thank you for stopping by and reading and commenting! Have a great weekend! 

Jul 10, 2014 10:38 PM #5
Rainer
127,767
Chad Felter
Virginia Beach, VA
Providing service through out Hampton Roads

I think these loans are a great way for people to get what they want from home ownership. It's not for everyone, but it helps a lot of buyers into the market on their own terms. Plus the end result is more personal and satisfying.

Jul 11, 2014 01:34 AM #6
Rainmaker
580,942
Bill Reddington
Re/max Southern Realty - Destin, FL
Destin Florida Real Estate

Have never sold a property with the buyer using a 203K loan. Wish FHA was used more in the area. Just learned the VA has a similar program

Jul 11, 2014 06:21 AM #7
Rainmaker
1,033,409
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Jeff, thanks for educating me on the FHA 203K loan prooduct.

Jul 11, 2014 04:37 PM #8
Rainer
33,997
Jeff Onofrio
AnnieMac Home Mortgage - Mount Laurel Township, NJ
FHA 203k Lender and Homestyle Reno Specialist

Your right Chad- allowing someone to buy and make it the way they want and add the cost into the loan is a great opportunity.  Its not for everyone but it helps a lot of people!  Plus building instant equity isn't half bad either :) 

Jul 14, 2014 07:24 AM #9
Rainer
33,997
Jeff Onofrio
AnnieMac Home Mortgage - Mount Laurel Township, NJ
FHA 203k Lender and Homestyle Reno Specialist

Bill- I think VA used to have a program similar to this but stopped it a few years back.  To my knowledge there is no such program available today for VA loans.  If you have the info though please post! 

Jul 14, 2014 07:25 AM #10
Rainer
33,997
Jeff Onofrio
AnnieMac Home Mortgage - Mount Laurel Township, NJ
FHA 203k Lender and Homestyle Reno Specialist

Thanks for stopping by Sharon! 

Jul 14, 2014 07:25 AM #11
Ambassador
3,577,260
Praful Thakkar
eXp Realty - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Jeff Onofrio - where do I get more details about FHA/203K?

Does it impact seller's net? When is the work carried out?

I'd also appreciate if you can answer my question in Q&A section --

What is FHA/203K mortgage?

Jul 20, 2015 09:24 PM #12
Rainmaker
445,509
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

The 203k loan is an under-utilized tool. Many buyers could create equity by using the FHA/203k loan to buy and renovate homes that need some work.

Aug 10, 2017 09:28 PM #13
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Jeff Onofrio

FHA 203k Lender and Homestyle Reno Specialist
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