Question on 203K loan - Posted by Matt B

Posted by CurtNY on January 09, 2001 at 12:27:07:

Hey Matt,
Your brother doesn’t have to have the contractor go out in order to apply but if he is approved, and goes forward with the 203K, then yes he will need a contractor to give an itemized list of repairs. (note, he can do the repairs himself but they will still need the contractor estimate and escrow the repair funds based on the estimate-in case he doesn’t finish the repairs and a contractor needs to complete them). As far as the interest rate, yes it is higher 1% in very good, I’ve spoken to other companies and the rates were as high as 2% higher. Try and remember, its not the cost of the funds it the access to them. Most lenders won’t fund 100% of the purchase price plus the repair costs (too much risk) the 203K program is an excellent tool for rehabbing a primary home. The only other solutions I see are ask the bank that owns the property to give him a mortgage for the purchase price & repairs (escrow the repairs). Depending on the banks motivation they may be willing to do this (if your brother has good credit). Or ask the bank to give the financing for 100% of the purchase price and have your brother pay the repairs (if he has the money). Best of luck to you and your brother! (let me know if you want a contact for a 203k lender, I’m currently dealing with a NationalCity Mtg, their GA office does nothing but 203K loans-they’ve been great so far)


Question on 203K loan - Posted by Matt B

Posted by Matt B on January 09, 2001 at 09:50:18:

My brother is looking into a 203K loan for the house that he wants to buy, rehab, and live in. He said that he was told that he has to have a contractor go through the house and write up a list of the things that the house needs to present along with his loan application. Is this standard? He is trying to save on the cost of getting the deal set up and didn’t want to have to pay a contractor if he didn’t have to.

Also, he noted that the 203K loan carries an interest rate 1 point higher than a conventional loan. Is this correct? If so, is it possible for him to just get a conventional loan with enough extra built into it to do the rehab? The numbers again are $55-60,000 ARV, the house is bank owned and they are asking $30,000, and it needs around $10,000 in repairs. Is the 203K the best way to go? I would guess that he could always refinance at some point to bring the interest rate down after the rehab, right?

Re: Question on 203K loan - Posted by JohnPA

Posted by JohnPA on January 10, 2001 at 08:16:10:


Have your brother call Phyllis Ott from Wells Fargo at 412-531-2119. She’s the best in the 203K business.


203K is great - Posted by Anne-ND

Posted by Anne-ND on January 09, 2001 at 15:08:23:


I did a 203K 18 months ago on my primary residence which is a duplex. Lots of lenders (and realtors) balk at doing these because of the so-called “mountain of paperwork”. Okay, so there’s some paperwork, big deal. It’s a fantastic program.

I also think the interest rate and strictness with which they follow the contractor estimate rule varies with the lender. My lender just needed a one-page statement from a contractor agreeing to do the work I’d outlined. I had $15K done on my house: new basement poured, 2 updated bathrooms, one new bathroom added, outside entry to second story with new stairs, new door and two new windows, all new carpeting throughout the house and paint. I did the painting, and tore down some of the walls.

The 203K will allow you to pay an architect up to $500 to draw up plans, which I did. The contractor followed the plans.

In my case, the 203K was in association with a first time homebuyer loan, my interest rate is 5 3/4%. Shop around for rates and for lenders who do 203Ks with some frequency, that way you won’t get as much flack about the paperwork at closing. It’s a great way to get started in REI.

Good luck,


Re: Question on 203K loan - Posted by dewCO

Posted by dewCO on January 09, 2001 at 14:32:01:

Yes, getting an itemized bill is part of the program. I think I recall that if he can work something out with the contractor to oversee his doing some/part of the work, that it is OK. However, FHA doesn’t want people who don’t know what they are doing messing around with their homes.

Yes a higher interest rate is always the way it is with FHA. I don’t know that this is anything different plus the loan amount is very low, so the lender has probably built in a 1/2 point or so to make some extra money whic is typical also, especially on FHA. They are more work and the 203K is increidbile more paperwork for the lender.

I had heard that Fannie Mae had a similar product, but don’t know that any of the rules would be different and it’s probably a harder program to find.