I looked at short sale home today that needed quite a bit of work. The real estate agent told me that it could not be financed with a 203K loan, and that it would have to be financed conventionally (20-30%down). Is there any physical problem that this property could have that would not allow it to be financed via a 203K? Perhaps the agent or bank doesn't want to deal with a 203K? Any insight will be appreciated.
JP
Hi JP
Here is what I could come up with as to why the property might not be able to be financed with an FHA 203K. The only issue I can think would be that the sales price, and the necessary repairs might need a larger loan than what is allowed in your area.
You can check FHA loan size limits at this link.
https://entp.hud.gov/idapp/html/hicostlook.cfm
Beyond that, here is the way that 203K’s work. There are 2 categories…a streamlined 203K that is designed for what they call cosmetic repairs, but in reality it covers way more than just cosmetic. You just cant do any structural items on this one. The steamlined has 2 threshholds one being between 5-15K in which the borrower may do the work themselves if they wish. Beyond 15K up to a max. of 35K you must have a licensed bonded contractor do the work. An FHA Inspector will also work with the lender/borrower/contractor to assure the success of the project.
The other 203K is known as a full 203K, which allows for any repairs and even additions with virtually very little limits. There is no dollar amount limit on this program except that the repairs/remodel dollars spent cannot exceed 50% of the after repairs value ARV.
Of course all this has to be within the max. loan limits for the county where the property is located. I hope this helps