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How soon can I apply for a 203K loan after purchase?

I am closing on a home in Jan 2014.  My broker has advised me that I should wait 60 days after closing to set up my 203K loan.  Since I have equity already it may be easier to do it that way.  Does this make sense?

Also he mentioned that I can roll over my closing costs in the 203K loan.  Is this accurate?
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November 18 2013 - US
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Answers (7)

I am struggling to understand why you think you will qualify for a 203k loan 45-60 days later if your qualifying ratios are high now.  Are you anticipating coming into some money to pay down your debt from now until then?

I would suggest you do the 203k loan first. As long as the house is safe and structually sound, you may need to reduce the amount of repair money you borrow upfront to qualify. 
As Ethan stated, if you do the 203k loan first and the equity position isn't as good as they are telling you, there is at least the option of doing a FHA streamline refinance into a standard FHA loan. You will need to make sure that you have made at least 6 mortgage payments and have not been late on any of the payments.

If the equity position does turn out to be as good as they are stating, then you may be able to refinance into a conventional product and remove the mortgage insurance.

It is important to note, that in January of 2014, getting a mortgage will be a lot harder. The qualifying ratios that lenders use to offer financing are going to be restricted to 43% of your total income. This means your total mortgage payment (PITI) plus all your recurring debt will be limited to 43% of your total income.
 
So keep in mind the qualifying ratios may eliminate you from refinancing if your debt to income ratio is too high in January. It may be better to get the money you need now, versus not being able to do it later on.


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November 19 2013
It makes 0 sense if your ratio is high today why would it not be high tomorrow?  What will change that...Not to mention having no idea what rates will look like in January!

You will pay closing costs a 2nd time...Please call someone and get a 2nd opinion!
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November 18 2013
Why would you not close as a 203K loan?
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November 18 2013

This sounds like a lender that doesn't do 203k loans or doesn't want to do a 203k loan. You should do the 203k loan first. The rate is higher and will carry mortgage insurance since it is a type of FHA loan. If you do it first and the equity position isn't as good as they are telling you you can at least streamline in to a standard FHA loan at a lower rate. If the equity position does turn out to be as good as they are stating (20-30% LTV) then you can refinance into a conventional product and remove the mortgage insurance. I think you should at least check with a lender that specializes in 203k loans in your state. I specialize in 203k loans and would be happy to advise you even if you are not in Washington state. 

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November 18 2013
I personally did a 203k Loan on my home and they are not the easiest to pull off.  I think you can do that as long as the home appraises for the sales price, renovations, and the closing cost together.  You need to make sure your mortgage person knows what they are doing on these, they are very hard to pull off.  Also, you need a good contractor that is experienced in them as well.  The contractor has to go through an approval process through the lender for their approval, they have to carry a Million Dollar liability Insurance policy.  You will want to make sure the lender and contractor are on the same page for the estimate and how it needs to be broken down.  They are very particular on how it has to look, showing a line item estimate for the cost on everything to the penny.  The contractor has to understand how the draw system works as well because they will have to be on board with floating some of the cost to get the work done, probably will have to send pictures to prove completion before getting the next draw payment.  In order for the contractor to get his final quote done, you will need to have made all the selections upfront so you will need to start doing that asap so you know what you are putting in for the renovations.  Hope this helps, it is worth it in the end if you can get through it, bought my house for $160K in a really good area and put $35k into it and it is worth $250k now.
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November 18 2013
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Hi Cassandra,

Yes, I've finalized the process and appraisal already.  He feels that since my back-end ratio is pretty high now, redoing the loan including the 203K loan will balloon my payments substantially.  He said that the best route is to wait the 45-60 day period then apply the 203k loan since i have over 30% in equity at time of closing.  Does this make more sense?

Thanks!
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November 18 2013

Seems odd that you aren't just closing AS a 203K loan...and also-a lender may 'gift' you back closing costs so you have less out of pocket but generally your rate will be higher. I'm curious as to why you just aren't closing your home as a 203K so that when you get keys you can start on the work immediately???  Or are you possibly purchasing and then hoping for instant equity...then going to refi as a 203k loan?
Maybe it is the way the question is worded...but this is confusing. And 203k's are one of my go to products...

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November 18 2013
 
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