Limited 203k loan account for 98% of the problem 203k loans, use them often... NOT. Knowing that they have issues that cannot be resolved without a consultant why would anyone want to use a Limited 203k. A most misunderstood program to say the least.
Having said that there are times when it can be to your advantage to use the Limited 203k program.
If your appraisal comes in up to 10% low, you can gain a 10% advantage on that appraisal if you switch to a 203k... in this case a limited 203k and fix something, anything. Technically there is no minimum repair so I'm sure you can find something to repair.
That is a time where it makes good senese to use this program.
Why is it so hard to understand the "limited part of the Limited 203k program"?
There are still those lenders who are relatively new to the program and find it a great asset to their business yet don't understand it.
1) Not your fault, but HUD says it has a maximum loan amount for construction of $35,000 and that isn't the end of the sentence yet no one reads beyond it for explaining it. The maximum construction amount is $35,000 including costs and fees. Those costs and fees are about $800.00 so the real amount is $34,200 isn't it?
2) Not finished yet, it also must include any contingency reserve, so if the lender requires a 10% contingency you are now at $30,780 for actually contractor's bid.
3) Not all lenders require a 10% contingency but some require a 20% contingency so it would be prudent for you to find out which one is used by your lender. If a 20% contingency is required then your total construction cost or contractor bid should be no more than about $27,360.
4) The key here is to know your lender, know the funding lender which may not be your lender. Do your homework.
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