203K Loans - does anyone have experience with these?

jay-tea

I have a couple of questions...  a little long winded, so if anyone has done one of these, I'll ask.. thanks!

katharine25

I didn't do FHA 203K but i did a long program renovation loan that was very similar through Well Fargo.  Was basically the same program just without certain FHA regulations.

jay-tea

Okay, we are doing this one through Wells Fargo.  I'm just curious on how they work the appraisal to come up with the projected value?  Did you have any issues with that?  The appraisal is the last step... and he just left a few minutes ago.  We are supposed to close a week from Thursday.  I thought he'd go over the finishes we're putting in and everything, but he didn't sound concerned about those.

katharine25

They factor in "newly renovated", they don't really care about the finishes. The concept is you use average priced finishes in line with for the quality/market value of your home. Ie, you don't put high end designer finishes in a builder grade home neighborhood b/c you'll never get your investment back into it. What you see as raising the market value isn't necessarily how the bank sees it.  Make sense?

ETA: just further clarification, the appraiser will compare your home to numerous other homes in the neighborhood, ones that have been renovated, ones that haven't ie. to come up with the projected after renovation value. 

 

This is a tough point if you're trying to meet 20% down- you want the appraisal to come in at or above purchase price + renovation cost, but not too far above or else they will require you to meet the 20% of appraised value. 

 

Good luck, I remember this last week as being absolute he!! we were buying a foreclosure so it made it even more difficult. Wells Fargo was great to work with though. Not sure how extensive your renovations are (we gutted) but it's a fun program guaranteed to give you lots of gray hairs and an empty wallet.