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Are FHA 203k rehab mortgage loans too difficult to utilize for first time home buyer?

We are first time home buyers looking in the east side metro area of the twin cities (i.e. Woodbury, Oakdale, Lake Elmo, Maplewood, etc.).  Who are possible lenders that do 203k rehab loans and do them smoothly that we can look into.  We are still looking for that house with great potential to turn into our home!
  • October 29 2013 - Woodbury
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Answers (14)

They are very difficult.  But if you have the time and patience you can do it.  Wells Fargo has them.  There are a lot of restrictions.  If you have at least 20% down and some real estate experience consider Bridgewater Bank in Bloomington.  They do construction loans and are a lot easier to work with.  Call me with questions.
  • November 08 2013
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203k Loans are easy when working with the right team, which consists of the Lender, Consultant, Contractor and Realtor. All of these need to either have extensive 203k experience or at least some 203k education behind them. 

The lenders in Minnesota for the 203k would be Academy Mortgage (make certain you ask for Mike Wilcox, National Renovation Manager) or Waterstone Mortgage (ask for an experienced 203k Loan Officer), but Waterstone only does the Streamline 203k. There may be other lenders but these are 2 good ones.

Regarding the contractor, it used to be difficult to find ones that knew and understood the 203k, but not anymore. Just use a Certified 203k Contractor found on the 203k Contractor Directory and you will be in great shape.

Your 203k-Experienced Lender will select the Consultant. So, don't worry about that too much.

Finding a Realtor who likes or isn't afraid of the 203k can be a tricky one to locate, but they are out there. It may be a good idea to ask for Realtor references from the 203k Lender and Certified 203k Contractor.

In Washington County, MN, the max FHA 203k Loan can be as high as $365,000 for a 1-family and up to $701,900 for a 4-family.

The 203k is an amazing option for that provides many benefits to those who use it correctly. 
  • October 31 2013
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Profile picture for JimSeabold
I have a couple lenders that I can refer to you.  To answer your subject question: sometimes they can be.  There are a lot of regulations and requirements behind 203k loans.  I'd be happy to have a lender discuss them in more detail with you.  Check out my page.  I'm located in St. Paul and very familiar with the east metro so would be happy to help.
  • October 30 2013
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As others suggested you need a team.  An experienced Realtor, mortgage broker and general contractor.

The draw back to the 203K is finding a contractor who can comply with the qualifications required by FHA and who is willing to work under FHA payment terms. 

You cannot do the rehab yourself.  You have to do your rehab budget based on the cost of a general contractor.
  • October 30 2013
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Profile picture for TeamBorden
I think most of us have great recommendations for rehab lenders. Your best option is to determine which agent you think would be a good suit for you and ask for referrals. Make sure the agent has experience in construction and these type of deals as they can get tricky. We are limited to the amount of information we can put on these sites as you can see from about half of the answers here. Feel free to contact a handful of us directly and we will be happy to assist you with quality referrals.
  • October 29 2013
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You are correct that you need a great lender who is experienced in 203's.  You need a complete team to be really successful with this including a professional realtor, a title company experienced in 203's, and a General Contractor experienced in 203's.  Once you have the team go ahead with that home with great potential.

We did several 203's in the last few months and have the skills and team to help you be successful!
  • October 29 2013
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Profile picture for lvdsold
It is not a difficult process but the buyer needs to be connected with not only an agent who understands it but also a lender. There are mulitple steps the purchaser must complete to get things done they way that they want. If they have good direction it can be a smooth and successful transaction. 
  • October 29 2013
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Profile picture for KarleneSmith

You can get a list of approved 203K lender at www.hud.gov. 203K loans has a lot of hoops to jump through but if you have the stamina to hang in there and get the quotes needed on the repairs you can benefit by getting a home that needs so TLC for a good price and turning it into a nice place. My advice would be to make use you know what the projected value of the home will be once it is done so you do not over spend on the remodel as you may never be able to recover your expense in the future.

  • October 29 2013
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[Content removed by Zillow Moderator. Please see our Good Neighbor Policy]  He is very easy to work with and is a great resource for anyone looking for FHA or even Conventional Renovation loans.
  • October 29 2013
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There are two types of 203k loans. There is streamline and the full blown one.

The streamline 203k is typically for the "minor" stuff in a home. There can be no structural changes so pretty much cosmetics. This is a great option for homes that won't pass FHA due to small items. The max is $30,000 so there is for sure a lot of options. Even septics and HVAC are included.

You still need a GC that is familiar with how 203k works, but it is not too complicated to do.

The full blown 203k is a little trickier but can be done. There is a FHA specialist that oversees the project to make sure things run smoothly and the draws act differently, but in the end it just works like a rehab loan nonetheless.

You need to make sure you buy the home at the right price, because either options require an appraisal. Also, keep in mind that you need to be pre-approved for the end loan amount and the interest rates on these loans tend to be a little higher than regular FHA loans.

My wife and I considered a 203k so I have some knowledge on the topic. There are a couple handouts I can give you for education if you would like. Just contact me and I will email them over. As you can see there are lenders to choose from that will do 203k just fine. I do have my own referral if you would like.

I think the more important aspect is hiring a Realtor with knowledge on how this loan acts. Like I said, due to the end appraisal you need to buy a home at the right price. Having an idea of the repair costs upfront will save you quite a bit of time determining the "good deals from the bad ones". The places you are looking do happen to by my primary areas of business, so if you would like to speak with me further I would certainly love the opportunity to work with you. I work with a investor in the same area and there are a lot of good potential houses. Oakdale and Maplewood especially.

Good Luck!

~ Christopher Block
  • October 29 2013
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  • October 29 2013
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Calling all Buyers! FHA 203k Renovation loan is easy for any buyer and should be considered by all with the desire to renovate and create a very personal space on a solid foundation. Look at it this way... you have more experts involved in your home buying/rehab process than you would on a more traditional transaction. It's actually an incredible tool to have an FHA certified Engineer guide you on where to put your money mazimizing your investment. Best part is, these Engineers are trained to understand vaule as well as an appraiser and becuase they are a requirement of the loan there services come with the financing package! Great option for buying or refinancing!

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  • October 29 2013
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They are a specific kind of mortgage, but not too awfully difficult.  Mostly, you want to make sure you choose a good contractor.

There are other rehab loans besides the FHA 203k and they may help you keep the up-front costs down.  Wells Fargo has a group that specializes in both the FHA 203k and their own Conventional Rehab loan. [Content removed by Zillow Moderator. Please see our Good Neighbor Policy]
  • October 29 2013
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Not too difficult at all

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  • October 29 2013
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