How to finance a home that needs renovation
FIXER UPPPER - FHA 203K Rehab Loan | LESSONS LEARNED
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are you thinking about the 203k rehab
loan as an
option for you as a first-time homebuyer
i'm gonna go over my clients current
experience
and some advice to you if you plan on
using this type of loan
this is shahidah hill getting you over
the hill to home ownership and helping
you
confidently buy your first home i don't
like to do videos about things that i've
never actually
done so um the 203k loan although i
mentioned it in this video
i'm hidden opportunities for first-time
homebuyers
i really wanted to make sure i had done
one before i did a video about it and i
am in the midst of one right now so let
me give you a little bit of background
my client is a first time home buyer
their budget is was about 150
000 he qualified for much more but he
didn't want
want to spend over 150 000 however he
wanted to be
in a county where the average home price
is about 370 000.
so as you know number one were in a
seller's market
number two he won it he's fha qualified
number three um he wanted to be in an
area
where his price point was much lower
than the average price point
so all of those things considered if
you've watched any of my videos about
how to get your offers accepted
it was a major challenge so number one
there's few homes on the market
number two um you know
even getting them fha or you're
competing with cash buyers that sort of
thing
so we decided to take the 203k route
and the reason why i put chip and joanna
gaines from fixer upper is because if
you ever watch their shows
they buy a house that needs major rehab
and then they fix up the house and they
add that all into one loan
or you know we're assuming that the
people didn't have cash to do it
so um so that's the route that we took
and i want you to number one um
know that this is my first 203k
loan he was already pre-qualified for
fha so i asked his
he got qualified with two different
lenders i asked both lenders
do they participate in the 203k program
only one of the two lenders he got
pre-qualified with
or pre-approved with did so we went with
that lender and that lender was up front
she said that she hadn't done one in
many moons
so we were all kind of at this um at the
first time together we found a house
that didn't need some repairs
now there are two different types of
203k
loans and it really varies by amount and
what you need to do
so they call the lower um cost one
so you can get a loan for under thirty
five thousand dollars to fix
up non-structural items so mostly
cosmetic
items they're not to like move walls and
do that sort of thing or check your
foundation or build like additions onto
homes
it's really for basic things in the
house so that's the one that
she um partic this lender participated
in
and um and there is another one so if
you're thinking about doing this for
over 35
000 then you probably want the other um
option of 203k loan so
that's what we decided to do we got a
home under contract
we did it for 60 days because i talked
to other agents
there's really not a lot of information
about this alone so i guess my thing was
let me go ahead and do one
figure out everything for myself and put
some systems in place if this is
something i'm going to
um do with my clients or suggest for my
clients
so we went ahead and we got it under
contract we did a 60-day closing
because that's what most agents
recommended to me
and right now we're at the point where
he
selected a contractor he's through
underwriting
however they did not order the appraisal
until he selected a contractor and
selecting the contractor
really took the majority of the time
because not only did he have to select a
contractor
he also had to get that contractor
approved with the lender
and he had to make sure also that the
work that they were going to do
was going to be under um 35 000 and even
not even up to 35 000
it had to be lower because you have to
put a contingency in there
so the lender really wanted it to be
under 30 000 so he would have that
contingency if needed if things came in
a little bit higher
or if he had to do anything extra so
this is where we are right now
um we had to do a rush on the appraisal
because we're past our 60-day contract
so we had to get an extension
from the seller that was not happy um to
give us an extension but he
had already been you know 60 days into
this contract so we were able to get you
know working with the listing agent
to get him to hold on a little while
longer so we could at least get the
appraisal through
we did pay to rush the appraisal so if
you're ever in this situation you can
pay
extra to rush the appraisal so we did
that it was supposed to be in
by yesterday it's still not in the
lender did confirm that they have it but
it's under review right now
so hopefully we'll have the appraisal
today and then i can do an update video
on you know how the whole 203k process
went but i do want to give you my
five tips to um to make the process if
you decide to go
this route to make it smoother for you
so number one
is you want to make sure you're working
with a lender that number one does 203k
loans and number two that they've done
one res or they've done
multiple recently because you have
different things that happen
you want to know that they've done them
i would say at least three or more in
the last
year the more the better of course but
ask them up front have you done 203ks
because a lot of lenders do not
participate or they don't do them
um but if you find one that's you know
done one before
none not even before you want like the
most recent i would say in the next the
last 12 months have they done
how many have they done ask them that
specifically
number two you want to look i had
contractors
but either the contractors bid over the
35 000
or they did not want to do the 203k
process
because the 203k process is um lengthy
you're
you have to go have a lot of paperwork
the lender has to
approve you you it definitely definitely
has to be a licensed contractor at least
in georgia so you can check in your
state license contractor
they have to have a certain amount of
insurance they have to be approved they
have to submit their um
their estimate all of those things a lot
of people don't want to be bothered so
when we were looking for contract
additional contractors they were like oh
we don't do 203ks i've been burned by
the lender before
because they're going to do the work and
then the lender is going to pay them
little by little as they complete
certain parts of their project
and a lot of contractors don't like to
work like that so you have to find
a contractor that is willing to go
through
the 203k process that's like very
important
and i would do that before you even
apply for the loan like i mean you'd be
looking for the lender once you have the
lender
or you know contractors do it at the
same time but you definitely want
contractors that have done 203ks
recently
and you want lenders that have done 203k
loans recently
number three you definitely want to get
at least 60 days for it to close if the
if the seller is not willing to give you
60 days at least
then you may want to you know keep on
looking you need at least 60 days number
one for the contractors to go and do
their estimates
for them to get the paperwork through
you know every you're in a rush your
buyers in a rush but sometimes the
lenders are not in that big of a rush so
you want to make sure
and it's not just your lender they have
to go through underwriting departments
and
you know whoever the construction person
is with the lender has to look at it
so there's a lot more paperwork than in
a typical transaction
and you want to be able to get through
those things as quickly as possible
i'm sorry not as quickly as possible but
you want to give yourself enough time
to get those things done and then in
your contract if you're able to
in your contract you want to try to put
in that you definitely want to put in
that both
of the parties agree that this is a 203k
loan
but you want to try to get some kind of
contingency
that if the loan the 203k
loan does not get approved so separate
from your due diligence period
but if the 203k loan is not approved by
the lender
that your buyer can get their earnest
money back because that is a possibility
that the the property does not get
approved and you may not find
out until later like for my example you
know the appraiser just went out and
we've been under contract for 60 days
so um those are my um also just know the
difference between the
types of 203k loans there's 203k is
specific to
fha but they also have um some
renovation loan products for
conventional
so in the description i will list both
so you can have some idea but research
is going to be key
the contractors and you cannot do any of
the work yourself they're going to have
you sign up you know a thing saying that
you're not doing this work yourself
there's a lot of things that they're
trying to make sure um
you know eyes are dotted and t's across
um in this rehab option
but it could be a good option for
first-time homebuyers who are
under like the average price point to
get a home that they would really enjoy
and you know
that they could live in so my um
hopefully i'll have a part two video
really really soon but put any questions
down in the comments and i'll try to
answer as many as i can
but i really want to you know wait see
how this you know
pans out and then hopefully have a new
updated video for you as soon as it
closes
all right thank you so much for watching
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