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Can I do a FHA 203(k) with an ARM instead of a fixed rate?

Forgive me if I don't get all the technical terms right, but..

My dilemma is my front end DTI is about 29%.  (I am lowering it by refinancing a vehicle and paying down my credit cards. Can probably get it down to 26% or less within 30-45days.)  I make $49,100 a year, have a 725 credit score, and have $13,000 I can use for a deposit. 

I found a foreclosure that I can prob get for $115,00 and it would need about $5,000 - 10,000 worth of renovations.  3 bedroom townhouse, ~2000 sq.ft., Wake County, NC.

My question is, can I do a FHA 203(k) rehab loan with a FHA ARM instead of fixed?  I know within 5 years before the ARM activates or whatever, lol, I can re-finance into a fixed rate.  I know there are a lot of unforeseen market issues, life issues, etc., but I am secure in my job and know the earning potential is there. 

Anyway... any suggestions?  I need to be moved by August 30th.  Thanks in advance.  :)

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May 28 2010 - Cary
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IS it going to be your primary residence?
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May 28 2010
Profile picture for kchris1123
Thanks for the reply Andy. 

Yes, it will be my primary residence. 
And I should also add, that I am a title holder on a property, but not on the mortgage.  Have been off the mortgage since 2006, I believe.
The list price of the property is $134,900.  The last tax value was $142,000.


Correction for typo:  I make $48,100, not $49.
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May 29 2010
I assume you're interested in an ARM because the rate would be lower, is that correct? I haven't seen FHA 203-k loans as ARMS; only as 30 year fixed. If your DTI is so low, it shouldn't be an issue. DTI is often allowed up to 50% if your credit and assets are good which they are. Good luck!
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May 29 2010
Profile picture for kchris1123
Yes, an ARM would be lower which is what I would need so as not to make my back end number too high.

I meant my DTI before the mortgage was added in.  Not sure about the terminology, sorry. 


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May 29 2010
a better question is do you really want to spend the additional money needed for a 203K clsoing costs for only 5 - 20k in closing cost?
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May 29 2010
I think Ricardo was getting to a great point but didn't elaborate.  A 203k doesn't seem to be the best or only option.  Have you considered a straight FHA which would require about $4k for a down payment and if you could get the seller to pay your closing costs you would still have $9k to do the needed repairs unless they are repairs that are required to get the loan.  Do you have a buyers agent assisting you in negotiating?  It sounds like you know the situation as you are a title holder.  Could this be a possible short sale/pre-forclosure and not yet a foreclosure?  Maybe there is something the seller is willing/able to contribute toward repairs?  Feel free to contact me with any specific questions as your situation doesn't sound like a generic issue.
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May 30 2010
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May 30 2010
 
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