FHA 203K loans and how you pay for them

I've closed many 203k Loans and the Streamline K LRP the average close time is 35days. These are fairly simple they are just a few extra forms from the typical FHA203b no bumps or hits it is priced the same. I had my own home picked up and moved 15 Miles with the 203k Loan.

Your loan originator should be cloned.

I did a 203k loan on a foreclosure. We started in early May of last year and didn't close until August. It was an absolute nightmare. And I'm a real estate agent! I had access to the best help from my broker, a fantastic lawyer who is a personal friend, the best info all around, and it was still a near-disaster.

The problem was that the 203k program is incredibly complex and the foreclosing bank was--as is usual--very hard to deal with. So we could never get either side in agreement and we didn't actually know when we were going to close until about 2 hours before the sale, and even then we didn't get the keys until the next day after closing. So tell S. not to get too discouraged.

And yes, that $5000 for MIP is about right--that's what we had to pay on a $300k loan (combined rehab + purchase). But on the other hand, we got a fantastic deal on a 2-family house that we absolutely love, and our neighbors are jealous because for all our aggravation we got a great price that makes sense from the fundamentals (i.e., we could move out, rent both units at very competitive rents, and turn a profit). The whole 203k process from start (May of last year) to finish (March of this year) was shockingly difficult, but it was still worth it. We did our loan with M&T Bank, and they were pretty familiar with the process and our checks generally came within about a week of the draw requests.

One big word of caution, though--choose your contractor up front VERY carefully because you are going to be married to that guy via the 203k process. We wanted to fire our contractor after about a month but it was so difficult with the 203k loan that we ended up sticking with him even though he was nothing but trouble. And whatever you do, don't pay him anything up front--make him wait for the draws on the rehab payments, the way it's supposed to work. Good luck!

Jason,

S here, thanks for the words of encouragement, I appreciate them. I was schedules to close in April, then it was supposed to be today. Now it's Monday. Everyday i call my broker and ask him what the "condition of the day is." We laugh and then one arrives. In fact today they wanted bank statements from January and February, that they already had. Yesterday morning it was kitchen elevations and floor plans. Last night it was a complete breakdown on each items costs. What a complete bunch of incompitent people.

I'm a 203K consultant. The article left off a bit of information explaining the importance of the consultant.

Tip: Interview the consultant! He/she should work in concert with the loan underwriting department. If you've chosen one with little experience you may prolong the closing. The consultant should have extensive construction background. They play an integral roll in helping the buy maintain a budget and to help control fair practice.

Rona, Thanks for the compliment. I also want to comment on Gary Smith's comment.

You only need a consultant when doing the Full 203k, with the Streamline K their is no consultant needed. I will be glad to walk you throught the program and show you where to send it for financing, I coach loan officers all over the U.S., I am 1 of 7 originators that has closed 150 Streamline K loans in 2008,

I also am a consultant and we tell our clients that "if your loan is held up for some reason, it won't be due to the consultant". We typically turn these around in 1-3 days after we see the property, once in a while it may take a little longer but for the most part we will NEVER be the reason for the delay of a project.

Am a Consultant here in Austin, Texas and have had great success working with the FHA 203K Loan. However, I do admit that some have been quiet a challenge to say the least, but mostly after closing and during renovation, either because of cost overruns, code inspectors requiring more work than we anticipated, Borrower(s) not satisfied with Contractor's workmanship, Borrow(s) on vacation and Contractor needs to get paid, etc....
Majority of the FHA 203K's I have worked on have closed within 30 days from the day I get involved.
Here-after the financial crisis, investors buying this loans are few and active ones are doing more due deligence even if insured by FHA. They are more conservative, requiring more information and spending more time processing the loans.

FHA 203K Loans are more labor intensive to work with, especially for those who are new to them. I believe within time most Lenders will be well versed with all types of FHA loans which will help expedite processing and closing.

FHA 203K loans do have there advantages, they are less expensive than Hard Money Loans, they are a One Time Closing Loan which is unheard off now-a-days, they are qualifying assumable - but assumable, have lowest down payment than any other loan (except USDA & VA), low interest rates for a renovation loan, 15, 20 or 30 year fixed rates or variable rates, allows $8,000.00 additional for energy efficient items, can combine loan with most community assistance programs, can use with $8,000.00 tax credit, etc.
It appears to me that the Advantages out do the Dis-Advantages.

I am having a horrible time with a foreclosure/203k situation. It is a relief to know that there are other people out thre who are experiencing this! Our process started in mid April and we have had to get two extensions on the closing date so far. Basically our realtor is clueless and the loan officer can't ever give us concrete information. The realtor tells us to hurry up (as if we can do anything!) because he's afraid the selling bank is going to cancel on the sale and our loan officer tells us he can't promise us anything. Meanwhile we are getting charged 50 dollars EACH DAY this goes past the closing date. We have no idea what to do and no one involved seems very concerned. Any advice???

Nightmare! I do not advise anyone to do this loan unless you give the loan officer at least 2 months to finish all the details. If you are a first time homebuyer like me, good luck! This has been one of the most horrible experiences of my life!

I am going through this same thing. Put a contract on a foreclosure property on April 20th, original settlement date was to be July 2nd. I have had 2 extensions already and getting ready to need a 3rd. The underwriters are taking their grand old time. I don't think I would ever go through this process again.

I closed on a 203k property in June. It was a 4 month process and now I'm waiting weeks for my draws.

Does the draw come to the homeowner directly?

We closed on a Foreclosure/203K loan about a month ago. Luckily, we were only 1 week from our original close and I was upset, but hearing these stories of months makes me feel a lot better. Now, I am playing the waiting game for our first draw which in itself it nerve wrecking. I don't know why they don't just bring that money to the table like we have to bring our down payment... Good luck everyone!

If your LO tells you less than 60 days to close your 203K then he has no experience with this loan product. Use a LO with experience in reno loans and avoid any 203K serviced by Bank of America.

Jonathan, just wondering what experience you have had with Bank of America. My husband and I are seriously that bank for a 203k on a foreclosure. Thanks.

DO NOT GO THROUGH BOA!! 203K's are absolutley horrible. And I am speaking from personal experience. I contracted my house on March 4th and I am still waiting to close. It has got so bad that the seller has put a timeline of 10.30 on our loan. If I don't close by Friday, I will lose not only the house, but the good faith deposit I put down as well as all of the inspection costs. They know this at the lender, and they still are unable to provide a closing date and time. It has been one of the worst experiences of my life!!!!

It took us about 45 days to close on our 203K. What a hassle. At one point we were told that if we did not mee the 2nd extension deadline the house would be put up for action. This after all money had transferred hands. We closed on the deadline but now I hear Bank of America is not releasing funds for 45 to 60 days after close. FHA says that work on the house must begin within 30 days of close.

Anyone know if the wait time for B of A is accurate