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2011-09-13 10:07 AM

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Subject: FHA 203(k) and Fannie HomeStyle Rennovation Mortgages?
As I've mentioned before, the husband and I are looking to buy a home. Fortunately, Pittsburgh has a lot of great reasonably priced houses in our price range, and we're very realistic about what we want, need, and can afford.

We went and got prequalified (I had to laugh when the agent told us we could afford $1700 a month-- yeah, if we didn't eat or turn the lightbulbs on). We've seen a bunch of homes. We've sort of narrowed it down to a list of two, tentatively three, that we could put an offer in on.

We love the idea of buying a preexisting home-- the McMansions are not for us. But that of course means the little quirks that come with older homes. They all need some degree of repair- our number one needs very minor renovation, our number two needs new windows, a back porch torn off, and some cabinetwork in the kitchen, and our number three is a tentative because it's not up for sale and one of P's coworkers is living in it...for a few more weeks at least. If it becomes available at the price I think it will based on the assessments and recent purchases on the same street, then it shoots WAY up to number one.

We are a very handy family. My uncle was head building engineer for a school district and overall Bob Villa doppleganger, my dad is also just helped my brother renovate his kitchen, deck and bathroom, plus he and my uncle redid my mom's kitchen and we all helped lay carpet and laminate on the entire first floor of their house last year. So the manpower is not what is getting us. We've got that covered. It's the cost of materials and perhaps some specialists for things we can't do (windows).

We mentioned offhand to someone that we were wondering if we could "borrow extra" when we bought a house to make some of the improvements, and it didn't seem like anyone knew if that was possible.

Then my mom spotted this article in the PG on Sunday ( http://www.post-gazette.com/pg/11253/1173406-30-0.stm)and it seems like that would be a very viable thing for us, if we decided to go for a house that needed more intensive renovations, rather than putting the cost of those materials on a credit card. We both have excellent credit scores, so we qualify for either program, but I was wondering if anyone had ever used these? Pros? Cons?


Edited by phoenixazul 2011-09-13 10:09 AM


2011-09-13 12:03 PM
in reply to: #3684125

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Subject: RE: FHA 203(k) and Fannie HomeStyle Rennovation Mortgages?

if i remember correctly, most loans where you borrow "extra" as you said are pretty particular about what that "extra" is.  credit qualification is generally the easiest part, it's qualifing the house that's the tough part.  the renovation work that you try to finance is usually pretty strictly underwritten and i think it requires that any renovations that take place are affixed AND add value to the property.  i'd definately talk to a mortgage person that knows about these products in details (which will probably be hard to find) and read all the fine print.  make sure you talk to someone that has done several of these loans before, not just some mortgage sales person that wants your bidness and will tell you they will find out.  these are too complicated, generally, to have the loan officer learn how it works with you.

also keep in mind that there are usually several appraisals and inspections that need to be done with these loans, all which cost the buyer money.

ETA:  most of the time i've heard of these programs being used is when the renovations are pretty significant.  not just updating a bathroom or kitchen, but when rooms are added/subtracted, roofs are overhauled, and other things that would be considered 'rehabilitation'.  also, i think they have clauses that "luxury" items are not eligible.  can't remember how those are interpreted though.



Edited by antlimon166 2011-09-13 12:12 PM
2011-09-13 12:12 PM
in reply to: #3684125

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Subject: RE: FHA 203(k) and Fannie HomeStyle Rennovation Mortgages?

while I have not used that program my suggestion is plan for the future but get something you can live in now. If you are working with or offering on non bank owned properties remember that there will be negotiating room after the inspection to get things repaired which are required or needed. For instance the house we just put an offer in on, needs some serious maitenance work on its HVAC system, possibly even replaced, so we are asking for that in our inspection report/offer.

Aside from that we are looking and budgeting long term for things like - new floors downstairs, re-doing the downstairs bathroom, updating the kitchen, redoing the yard, building a boathouse, and finally, in 4-6 years, doing an addition to the house. It is a lot to do, and we have to think slowly about each thing, but it should be possible for us to make a house that is ok now but in a great location, into a great house with some elbow grease and hard work. Like you we have a lot of friends and family about to help out with most things but it will still require a lot of time and Money. I would rather do it this way than get a loan to cover things right away.

Either way, good luck with it all!

2011-09-15 3:58 PM
in reply to: #3684417

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Subject: RE: FHA 203(k) and Fannie HomeStyle Rennovation Mortgages?
bel83 - 2011-09-13 1:12 PM

while I have not used that program my suggestion is plan for the future but get something you can live in now. If you are working with or offering on non bank owned properties remember that there will be negotiating room after the inspection to get things repaired which are required or needed. For instance the house we just put an offer in on, needs some serious maitenance work on its HVAC system, possibly even replaced, so we are asking for that in our inspection report/offer.

Aside from that we are looking and budgeting long term for things like - new floors downstairs, re-doing the downstairs bathroom, updating the kitchen, redoing the yard, building a boathouse, and finally, in 4-6 years, doing an addition to the house. It is a lot to do, and we have to think slowly about each thing, but it should be possible for us to make a house that is ok now but in a great location, into a great house with some elbow grease and hard work. Like you we have a lot of friends and family about to help out with most things but it will still require a lot of time and Money. I would rather do it this way than get a loan to cover things right away.

Either way, good luck with it all!



I totally agree with the above. The more we think about it, the more the above takes House 2 out of the equation. The windows need to be replaced NOW, otherwise it will be a very HOT autumn and a very very cold winter. The deck is not safe to stand on. And the owner wants way too much return on their investment for how much they have put in.

The first house is still in. The "not for sale yet" house is still in...and we've had a dark horse charge in yesterday--a house that ticks all of the boxes we're looking for (older, ac, off street parking, has a dishwasher, basement, lots of light, a big level yard with a fence, and it is in a bit of a nicer neighborhood that House 1, etc) and they just dropped the price 10k, putting it about 40k under our "top price". So we're going to see it tomorrow...and bringing my uncle along (oh my). If its as nice on the inside as it is on the outside, we might be in trouble

2011-09-15 4:49 PM
in reply to: #3688471

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Subject: RE: FHA 203(k) and Fannie HomeStyle Rennovation Mortgages?
phoenixazul - 2011-09-15 1:58 PM
bel83 - 2011-09-13 1:12 PM

while I have not used that program my suggestion is plan for the future but get something you can live in now. If you are working with or offering on non bank owned properties remember that there will be negotiating room after the inspection to get things repaired which are required or needed. For instance the house we just put an offer in on, needs some serious maitenance work on its HVAC system, possibly even replaced, so we are asking for that in our inspection report/offer.

Aside from that we are looking and budgeting long term for things like - new floors downstairs, re-doing the downstairs bathroom, updating the kitchen, redoing the yard, building a boathouse, and finally, in 4-6 years, doing an addition to the house. It is a lot to do, and we have to think slowly about each thing, but it should be possible for us to make a house that is ok now but in a great location, into a great house with some elbow grease and hard work. Like you we have a lot of friends and family about to help out with most things but it will still require a lot of time and Money. I would rather do it this way than get a loan to cover things right away.

Either way, good luck with it all!

I totally agree with the above. The more we think about it, the more the above takes House 2 out of the equation. The windows need to be replaced NOW, otherwise it will be a very HOT autumn and a very very cold winter. The deck is not safe to stand on. And the owner wants way too much return on their investment for how much they have put in. The first house is still in. The "not for sale yet" house is still in...and we've had a dark horse charge in yesterday--a house that ticks all of the boxes we're looking for (older, ac, off street parking, has a dishwasher, basement, lots of light, a big level yard with a fence, and it is in a bit of a nicer neighborhood that House 1, etc) and they just dropped the price 10k, putting it about 40k under our "top price". So we're going to see it tomorrow...and bringing my uncle along (oh my). If its as nice on the inside as it is on the outside, we might be in trouble

Awesome! Have fun with it. Looking was by far the most fun part of the home buying process for us, putting in an offer though tends to be bad for your blood pressure

2011-09-15 9:57 PM
in reply to: #3684125

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Subject: RE: FHA 203(k) and Fannie HomeStyle Rennovation Mortgages?
I've done appraisals on 203(k) loans before, and it amazed me at how little "extra" some of the people were borrowing against the future improved value based on the repairs/renovations. As in, $2,500 in new windows and $500 in a new patio (obviously a small home with few windows). So they're out there and people are doing them. On the appraisal side of it, there is an appraisal up-front that is made "subject-to" the proposed repairs/renovations where the comparables used best reflect what the home will compare to when it's all fixed up, not what it would compare to now. Those two values may be closer than you think (depends on each house, price range, neighborhood), so just be aware of that. Once the repairs are complete they will send the appraiser back out to do a 1004D (completion inspection) that basically says you did what he said you were going to do in the original appraisal. If it takes a long time to complete the repairs/renovations, however, the lender may want to order a new appraisal since home values obviously change over time un-related to improvements. Hope that helps and I hope you find a winner!


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