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  • FHA 203K Question? Post it Here

Do you have a FHA 203k question you’d like to ask a 203K Specialists?  Just post it here on the blog.

Scroll down all the way to the bottom of this page (the QA post page) and type your question in the “Leave a Reply” box and press “Submit”

Your question does not have to be FHA 203K related, it can be general FHA or Conventional questions as well.   A 203K Specialists will answer your question the best to their ability.

We look forward to hearing from you!

“Your FHA 203K Mortgage Lender”
www.203kMortgageLender.com

 

 

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  • Hello,

    I completed an FHA203k loan on the home I purchased about a year ago. The entire 203k project was completed about 6 months ago. If I were to sell this home in the next 6 months- would I be able to do the same process (FHA203K) on another home?- Is the FHA203k loan a one time dealm, or can you do it multiple times, and is there any kind of time limit I would have to wait before doing the process over again on a new home?

    • Chase Asked:
      I completed an FHA203k loan on the home I purchased about a year ago. The entire 203k project was completed about 6 months ago. If I were to sell this home in the next 6 months- would I be able to do the same process (FHA203K) on another home?- Is the FHA203k loan a one time dealm, or can you do it multiple times, and is there any kind of time limit I would have to wait before doing the process over again on a new home?

      203k Mortgage Lender’s Answer:
      Hello Chase,

      The FHA 203k loan is not a one-time deal and although there is no time line using it again, the purpose and intent of the program is for “Owner Occupancy”.

      Take Care,

  • Pam Wilkinson says:

    We are in the process of purchasing a foreclosure using the 203K streamline program. Our mortgage broker seems unsure of what items are needed for this process. We have completed all the FHA 203 streamline paperwork and so have our contractors. In the paperwork it mentions the need for a 203KS Disbursement Draw Form that needs to be completed for disbursement of monies. We are unable to locat that form anywhere and our mortgage broker seems unable to find it. We are hoping to close within the next week (already past our 1st closing date due to paperwork issues). Can you point us to the location of this disbursement form we need for our contractors & us to use? Thanks for your help!

    Pam

    • Pam Asked:
      We are in the process of purchasing a foreclosure using the 203K streamline program. Our mortgage broker seems unsure of what items are needed for this process. We have completed all the FHA 203 streamline paperwork and so have our contractors. In the paperwork it mentions the need for a 203KS Disbursement Draw Form that needs to be completed for disbursement of monies. We are unable to locat that form anywhere and our mortgage broker seems unable to find it. We are hoping to close within the next week (already past our 1st closing date due to paperwork issues). Can you point us to the location of this disbursement form we need for our contractors & us to use? Thanks for your help!

      Pam

      203k Mortgage Lender’s Answer:
      Hi Pam,

      Let me start by saying YIKES! Because it sounds like you are in the hands of a mortgage broker that doesn’t have a grasp of the paper work needed on your 203k loan. The good news is that there is no “disbursement draw forms” for the streamline. The lender should release one-half of the repair escrow to the contractor at closing and the other half when the work has been completed, inspected and approved by the lender.

      Never the less you can find a copy of the “HUD 9746-A” that is provided and prepared by the HUD Consultant on the full 203k version at: http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_13001.pdf

      Wish you the best of luck

  • Kenneth Garges says:

    One of the terms for qualifying for FHA203k as I understand it is no other mortgage payments more than 30 days late in the prior 12 months. When is that determined?

    Specifically what if I apply for FHA203k, get approval, get the rehab work started and then default on another existing mortgage? Is the 203k approval final at the time rehab work is started? Or can it be revoked in light of the default?

    • Kenneth Asked:
      One of the terms for qualifying for FHA203k as I understand it is no other mortgage payments more than 30 days late in the prior 12 months. When is that determined?
      Specifically what if I apply for FHA203k, get approval, get the rehab work started and then default on another existing mortgage? Is the 203k approval final at the time rehab work is started? Or can it be revoked in light of the default?

      203K Mortgage Lender’s Answer:
      A 30 day mortgage late older than 12 months could be acceptable but like most everything in the mortgage application process, there is no cut and dry guideline it’s more dependent on the circumstances. Assuming the credit scores are still high enough for the lender after having a mortgage late, time periods are usually determined from the date of the credit report.

      Now whether an existing mortgage stays in place after closing on a new FHA home loan with or without renovations the new loan is final the day it closes and you become the owner.

      Best of luck to you

  • Hello,
    I really hope that someone might be able to answer a few questions I have about my 203k loan. One thing I have learned about this loan is it is difficult unless dealing with someone who has a lot of knowledge about it.

    So I bought my home 12 months ago with a regular fha loan and fha203k loan, a total amount of 132000. The selling price was (house$75k)+(203kloan $57k)=(total132k).

    So I’ve been in the house for accouple months now afte the renovations. I have owned the house now for 12months and I am ready/need to sell. My house will sell somewhere around 215k
    My question is when I do sell and i go to pay capital gains what price will my gains be based on. A(The 74k sell price) B(the combined of sell price and 203k)

    I know renovations can be deducted but..in short what am I looking at paying in these taxes? Or does anyone know what they are based on?

    • Chase asked:
      Hello,
      I really hope that someone might be able to answer a few questions I have about my 203k loan. One thing I have learned about this loan is it is difficult unless dealing with someone who has a lot of knowledge about it.

      So I bought my home 12 months ago with a regular fha loan and fha203k loan, a total amount of 132000. The selling price was (house$75k)+(203kloan $57k)=(total132k).

      So I’ve been in the house for accouple months now afte the renovations. I have owned the house now for 12months and I am ready/need to sell. My house will sell somewhere around 215k
      My question is when I do sell and i go to pay capital gains what price will my gains be based on. A(The 74k sell price) B(the combined of sell price and 203k)

      I know renovations can be deducted but..in short what am I looking at paying in these taxes? Or does anyone know what they are based on?

      203k Mortgage Lender’s Answer:

      Hi Chase,

      Agreed!!! Working with someone who has knowledge on the 203k products can make a big difference.

      Unfortunately your questions are more tax related so they should be directed to a tax professional not a 203k specialist. The 203k loan though is for owner occupied property owners so according to the IRS any capital gains on a personal residence could be exempt up to either $250k or $500k plus an adjusted cost basis can be used…here is the IRS link from where that information came from:
      http://www.irs.gov/publications/p523/ar02.html

      By the way I noticed in your comment you said:

      “I bought my home 12 months ago with a regular fha loan and fha203k loan, a total amount of 132000. The selling price was (house$75k)+(203kloan $57k)=(total132k)”.

      So not to confuse visitors at this site who might read your comment a clarification is needed. There is no splitting of FHA loans. It’s either one type of FHA loan or the other…it is either a regular FHA loan that does not have renovation funds or an FHA 203k which includes the renovation funds. So, actually you ended up doing an FHA 203k loan for a total of $132k. If you were told differently than that explains the first part of your comment about working with someone with knowledge on the 203k.

  • I purchased a complete gut renovation last year using a regular FHA loan…with the intention to change to a 203K loan when I had all the permits and contractors and such in order. That took about a year to do, and now that I applied for the 203K my mortgage guy says they won’t give it to me because I’m not living in the house! The house is a shell right now not livable by any means…does this make sense? Please help!

    • Raphoug Asked:
      I purchased a complete gut renovation last year using a regular FHA loan…with the intention to change to a 203K loan when I had all the permits and contractors and such in order. That took about a year to do, and now that I applied for the 203K my mortgage guy says they won’t give it to me because I’m not living in the house! The house is a shell right now not livable by any means…does this make sense? Please help!

      203k Mortgage Lender’s Answer:

      Hello Raphoug,

      If you bought the property with a regular FHA loan (203b) then that means the property must have been livable originally. Unlike the FHA 203k that deals with property conditions after closing the FHA 203b must deal with property conditions beforehand. That would mean any gutting must have taken place after you purchased it. Now whether that was on the advice from your loan guy or you took it upon yourself at this point what’s done is done.

      Your biggest hurdle from what you have described would seem to be the owner occupancy so don’t be surprised if the 203k lender / Underwriter has questions such as…

      Where are you living now?
      How far is your current residence from the property?
      Do you own another property or currently renting?
      Did you ever live in the home before gutting it?
      How long has it been vacant?
      Can you prove you will live there afterwards?

      Definitely more information and answers are needed for your situation because there might be some mitigating circumstances that could apply in your case to help you get your 203k loan so it would be best to go over it with a 203k Loan Specialist for your state.

  • Darren and Alice Rouse says:

    We own a home in Monument, CO and have a 5%, 30 year VA loan on it. We owe 215K and it appraised this year for 228K. We would like to do a major addition to double our home size that our contractor said would cost approximately 180K-200K to do. Our house is the smallest in the neighborhood at 1800 sqft so we would only be bringing it in line with the other homes around us which are 3-4K sqft, and we’re confident the appraisal after the reno would be more than sufficient. We are interested in a renovation loan that would become a home mortgage loan after reno is completed. Our credit score is 789, 72K annual income, and we would be bringing 150K cash toward the reno/home loan. What could the 203K loan program do for us? We’re interested in getting a lower interest rate than what a conventional mortgage lender is quoting us right now, 4.65%. Thank you.

    • Darren and Alice Asked:

      We own a home in Monument, CO and have a 5%, 30 year VA loan on it. We owe 215K and it appraised this year for 228K. We would like to do a major addition to double our home size that our contractor said would cost approximately 180K-200K to do. Our house is the smallest in the neighborhood at 1800 sqft so we would only be bringing it in line with the other homes around us which are 3-4K sqft, and we’re confident the appraisal after the reno would be more than sufficient. We are interested in a renovation loan that would become a home mortgage loan after reno is completed. Our credit score is 789, 72K annual income, and we would be bringing 150K cash toward the reno/home loan. What could the 203K loan program do for us? We’re interested in getting a lower interest rate than what a conventional mortgage lender is quoting us right now, 4.65%. Thank you.

      203K Lender’s Answer:
      Hi Darren & Alice,

      One recent thing to consider in your situation will be the new maximum FHA Loan Limits for El Paso County which is where the property is located. The limit will be: $271,050.00 for a single family home after October 1st. 2011 unless there is an extension on the current limits. Because you plan on bringing $150,000.00 into the transaction it would appear that your loan amount would be within the new loan limits…$215,000 current balance + $200,000 in renovations LESS $150,000 in cash you are bringing in = $265,000 plus closing costs/pre-paids) so you should still be fine.

      As far as the 4.65% your bank is quoting you, there is a good chance with today’s rates you could get something lower (depending on the costs associated with the rate) but just keep in mind that FHA loans must have mortgage insurance “initially” regardless of how much you are bringing in, putting down or the current equity the property will have.

      What the 203k loan program can do for you and your situation though is give you a ‘single closed loan’ which will include the renovation and costs with an interest rate fixed for up to 30 years that will not change after the renovation is completed.

  • We were given an old church building that we would like to convert into our home. We would need about $30,000 to do our own renovations. Would we be able to get a 203K loan just for renovations since we already own the property? We are currently renting a house where we live, so we have no mortgages and only school loan debt.

    • Stacy Asked:
      We were given an old church building that we would like to convert into our home. We would need about $30,000 to do our own renovations. Would we be able to get a 203K loan just for renovations since we already own the property? We are currently renting a house where we live, so we have no mortgages and only school loan debt.

      203k Mortgage Lender’s Answer:
      Hi Stacy,

      That’s great…you can be at home while at the same time already in church, no more being late. Okay, enough with the jokes. Your scenario sounds do-able but when you say “to do our own renovations” it gives the impression you might have a DIY (Do-It-Yourself) in mind which wouldn’t be allowed as a contractor(s) is required for a 203k Loan. The lender may allow some exceptions as long as they are minor items that you plan to do yourself but that would have to be discussed with your lender.

      As far as your question: “would we be able to get a 203K loan just for renovations since we already own the property”? The answer is “YES”, the transaction would be a refinance and if the property is “Free & Clear” then basically all the cash out in your case would be designated for the renovations as there is no existing loan to pay off.

      More details regarding the property are definitely needed in this case but it is 203k do-able.

      Good luck on your conversion.

  • Hi – we have found a home we wish to buy that needs some rehab work. The owner was 93 and did not do the necessary upkeep so it needs a roof, new siding, windows and has water damage on some walls/basement which lead to mold. We had someone out regarding the interior water damage who said it’s only about $2k in repair.

    We have been told by the seller’s agent that the 203k is our only option since he does not believe it will pass the appraiser (not sure if he’s worried about the value of the house not passing or the condition). We have the funds, etc necessary to do the repairs I noted without additional financing. It appears we would only really “need” the 203k loan in order to ‘get around’ the appraisal issues.

    Question we have is do we have to finance the repairs thru the 203k loan, or can we simply just finance the cost of the property and then handle the repairs ourselves with our own cash? We’d prefer not to deal with the hoops of the 203k but understand it may be the only way (due to appraisal issues). Is it possible to only use the 203k to purchase, but not finance the repair? Thank you!

    • Dawn Asked:
      Hi – we have found a home we wish to buy that needs some rehab work. The owner was 93 and did not do the necessary upkeep so it needs a roof, new siding, windows and has water damage on some walls/basement which lead to mold. We had someone out regarding the interior water damage who said it’s only about $2k in repair.

      We have been told by the seller’s agent that the 203k is our only option since he does not believe it will pass the appraiser (not sure if he’s worried about the value of the house not passing or the condition). We have the funds, etc necessary to do the repairs I noted without additional financing. It appears we would only really “need” the 203k loan in order to ‘get around’ the appraisal issues.

      Question we have is do we have to finance the repairs thru the 203k loan, or can we simply just finance the cost of the property and then handle the repairs ourselves with our own cash? We’d prefer not to deal with the hoops of the 203k but understand it may be the only way (due to appraisal issues).
      Is it possible to only use the 203k to purchase, but not finance the repair?
      Thank you!

      203k Mortgage Lender’s Answer:
      Hi Dawn,

      Congrats on finding the home you want to buy. As you have found out the next step is now the financing and what will be an acceptable condition of the property to get the loan on it. In your case the streamline 203k version should be sufficient enough to take care of the roof, siding, windows and mold issues you mentioned.

      The seller’s agent reference that…”he does not believe it will pass the appraiser” was more intended toward the condition not the value of the property which is why the 203k is being recommended.

      Now to answer your question…”Is it possible to only use the 203k to purchase, but not finance the repair? The answer would be “No” because regardless of the amount and whether or not you have the funds yourself to correct or make the repairs on the house it still must be financed into the loan which is the whole purpose of the 203k.

      Best of luck.

  • I would like to get a 203k for a renovation but am confused on if I can use the 65,000 I have in equity at all for the down payment. Do you have to take the loan out for the full loan amount and not use any available equity? Do you have to pay PMI or is there any way to avoid that? Also is a 401k loan counted towards debt to income ratio?

    • Kristen Asked:
      I would like to get a 203k for a renovation but am confused on if I can use the 65,000 I have in equity at all for the down payment. Do you have to take the loan out for the full loan amount and not use any available equity? Do you have to pay PMI or is there any way to avoid that? Also is a 401k loan counted towards debt to income ratio?

      203K Mortgage Lender’s Answer:
      Hello Kristen,
      You mentioned $65k in equity, a down payment and do you have to take the loan out for the full loan amount and not use any available equity…so I’m a bit confused also as I’m not sure if you are referring to a purchase or refinance.

      If you mean can you pull money out of a property for a down payment on another, then sure you can do that.
      If you mean can you use/substitute the current equity of the property you are purchasing as a down payment then no.

      Definitely more clarification is needed so contact the 203k Specialist for you state but here are the other answers to your remaining questions…
      Yes, PMI which is called MMI (monthly mortgage insurance) for FHA loans is initially needed for all FHA loans. It’s the same as PMI except PMI stands for Private mortgage insurance and is used for conventional loans not FHA loans. So, there is no way to avoid it at least in the beginning of your loan.

      No, a 401k loan is not counted towards your debt to income ratio.

      Hoped this helped.
      203k mortgage lender

  • I’m about to close on an all cash transaction for a house which cannot qualify for a conventional loan. I will need money for renovation,etc. How long should the process take to secure a 203K? Can I begin work, using my own money, before the process is completed?

    Thank you.

    • Michael Asked:
      I’m about to close on an all cash transaction for a house which cannot qualify for a conventional loan. I will need money for renovation,etc. How long should the process take to secure a 203K? Can I begin work, using my own money, before the process is completed?

      203k Mortgage Lender Answer:

      Hello Michael,

      You should figure the 203k loan process on average will take about 30 to 45 days give or take depending on what type of 203k loan it is (Streamline or Full).

      Regarding using your money and getting work done before the 203k loan is processed and closed, that would be a “No” if you are thinking of getting reimbursed. If it’s unrelated to the 203k work that is scheduled to get done which will be paid with the proceeds of the 203k loan then that would be your choice. But typically all work should commence after closing.

      The 203k Specialist for your state could explain in further details the guidelines plus the pros and cons regarding your personal scenario.

      Best Regards

      203k Mortgage Lender

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