Cash Purchase Now, 203K Loan Later?
If I had a dollar for every time I got this call I would not be typing this post right now, I’d be on the beach. Better yet, if I had a dollar for everyminuteI’ve wasted on the phone going over this I’d not only be on the beach, I’d be sipping some icy coldChampagnewhile laying there.
Clearly I don’t get a dollar for any of that so I guess I’ll write about 203K loans instead.
LISTEN UP!
I am clearlyfrustrated atrepeatingthis so I want to be very clear. I am tired of UNEDUCATED REALTORS AND LENDERS giving out inaccurate info like the bank gives out Lolly-pops. If you just purchased cash and now would like to renovate your options are somewhat limited.
FHA guidelines say that if you’d like to REFINANCE (which is what you are doing, regardless of the fact you own free and clear) within ONE YEAR of purchase that you must use the ACQUISITION COST (aka the PURCHASE PRICE) as the appraised value.
So what does that mean? Let’s use an example.
- $30,000 Purchase Price
- $50,000 of Repairs Needed
Doable deal? NO! You have to use the purchase price of$30,000 as the appraised value. It does NOT matter that the house is worth$120,000 now and will be worth$175,000 after the repairs. That is completelyIRRELEVANTsince FHA GUIDELINES require you to base the loan off the acquisition cost of$30,000.
- $30,000 Purchase Price x 97.75% =$29,325 in allowable 203K repairs.
Good luck finding someone to do a loan less than$30,000
The Property Listing Says Cash Only, What Do I Do?
You educate thelistingagent that’s what! Almost EVERY listing is eligiblefor FHA 203K whether the Real Estate Agent knows it or not.
You, and your 203K lender, need to help educate the Real Estate Professional that you can actually obtain a mortgage on this hone. Here’s the process;
- Check with a 203K Loan Expert, describe the property, your occupancy and your scope of work.
- Have the 203K Expert call the listing agent and explain that this home is, IN FACT, eligible for mortgage financing
- Get 203K Mortgage PRE-APPROVED
- Present your 203K offer and put your 203K loan into underwriting
- Purchase AND Renovate the home with one loan and one closing with FHA 203K
OR, you could go ahead and buy with cash because the Agent or Lender told you that was the only way. Then you can wait.
It’s YOUR CALL.
More From 203K Mortgage Loans
- How to Write a FHA 203K Purchase Offer | 203K Loans | HomePath Renovation Mortgages – Georgia, Florida, Alabama, SC
- HomePath Renovation Mortgage
- 10 Ways Renovation Loans Create HUGE Value | 203K Loans | HomePath Renovation Mortgages – Georgia, Florida, Alabama, SC
203K Mortgage Loans Recommends
- FHA 203k Streamline: How Do Payments Work? (Arizona Mortgage Team)
- FHA 203k Streamline: Contractor Requirements (Arizona Mortgage Team)
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