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Mort. consultant told me it's impossible to qual. for 203k after approving me for a VA and FHA loan

Hello everyone and thank you for taking the time to answer my questions. I was recently approved for both a VA and FHA loan. I was looking for some way to buy a house in need of repair and finance the repairs with the amount I was approved for on my mortgage. I asked my lender about the 203k loan and he said it is basically impossible to get the loan unless you have a credit score of above 700 and a "very low debt load." After more research into this, it seems as if it is a program to help those on the other end of the spectrum who only have decent or even worse credit scores. What are your thoughts? Also, this may be of importance: I have a home in North Carolina that has a tenant in it. I first bought the home in 2010 while I was still in the military and purchased it on a VA loan, but ended up moving back to Texas for school. I am not an investor and do plan on living in this new home I purchase until my daughter graduates high school (14 yrs). Will this hinder me from qualifying for the 203k program even though I was already approved for an FHA loan?
  • July 12 2013 - Dallas
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Answers (4)

203k loan is designed to help home owners who are in need of financial help for home repairs, renovation, and even new purchase.

It is a very good program however, getting it is not the easiest process. You have to team up with a great lender who is knowledgeable about it.
  • September 21 2013
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There are better loans out there that do not have mortgage insurance.  I would continue to shop around.  FHA requires mortgage insurance that never will drop off.

There are first time home buyer programs out there that offer NO mortgage insurance, no payments for first 3 months, low down payment and also you can qualify for these loans with less than perfect credit.  
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  • July 23 2013
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I suspect that your lender is not familiar with FHA 203K loans or doesn't handle them.

These days, it is difficult to find a lender that still does them.  They take a long time to close typically 60 to 90 days instead of the 30-45 days that is needed for FHA.  They also require a lot more work from all parties including the lender.  Your downpayment doesn't change either, you are still only required to put down 3.5%.

There are 2 FHA 203K loan types.  Regular 203K which requires the repairs to be over 35K (work has to be completed within 12 months) and streamlined for repairs under 35K and none can be structural (work needs to be completed within 6 months).

Your interest rate would also be higher than a regular FHA.  Your home in NC shouldn't affect your purchase capability as long as it's either paid off or rented with rent covering the rent amount.  However, a good loan officer should look at your entire application and your income and DTI and determine your eligibility.  As far as credit, if you qualify for an FHA loan, the 203K should be easy. There are no income limits, credit score down to 620 (depending on the lender), the rest is just like any other FHA loan.

Naima
  • July 14 2013
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I think it'd probably be best if you "shopped around" on mortgage lenders.  Even though they basically offer the same product overall, the fees can indeed vary for things like interest rates, loan origination fees, etc....as well as their various credit score requirements for specific loans.  

Generally speaking, 203k loans do actually require higher credit scores than a "regular" FHA loan.  I can't confirm whether a solid 700+ is truly needed or not though, this varies among lenders, and as I'm sure you're aware, there are numerous other factors that they will consider when determining your loan eligibility.  

I do work with a couple of very knowledgable lenders, that I'd be happy to pass along to you.  If you're interested, please feel free to call or email me.  My contact information is viewable by clicking on my profile link (and Zillow's policy also prohibits me from posting it openly here as well).  Thanks!

Diane Briggs, REALTOR®
Asset Realty
  • July 13 2013
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