203ks....worth it?

jesspacatc · February 2012

Our realtor brought this up to us today after seeing a foreclosed home that was missing just about all major appliances, had a partially finished basement without permits, and needed some general maintenance. I was reading about these afterwards, but anyone have any experience with them?

kaylie622 · February 2012

I don't have any real experience with it - we looked into it but our realtor steered us away. Our mortgage broker told us that there is a limit to what can be paid for with the renovation money and that it's a huge hassle to get it all approved. That said, we would probably consider it if we had more time to deal with the process.

mica178 · February 2012

We considered it for the house we're buying. However, the rates are usually 0.5% higher than for conventional loans. Since we had the cash to make the repairs we wanted and had enough for a decent down payment, it made more sense to not go the 203k route. With the 203k, all repairs need to be done within 3-9 months of purchase by contractors approved by the FHA, and it sounds like a pain.

katharine25 · February 2012

I didn't do 203K with FHA, but I did a renovation loan which has a VERY similar program. Despite all the red tape, I loved it. BUT, I did a significant more amount of work than just appliances and a basement. I completely gutted, re-worked the floor plan, moved both bathrooms and kitchen, and upgraded electrical, plumbing, & mechanical. For me, it was the only way to get it done.

That being said, for the amount of work your saying this house needs, then it depends. you could do a short program 203K which allows you to pretty much borrow up to $35K without itemizing the costs for general upgrades. Your overall mortgage may b subjected to a .5% additional interest rate, but it you would be borrowing the money on a 15% interest CC, than the 203K is a lower interest rate options- that $35K isn't a huge dent in a monthly payment plan compared to a cc bill. If you are able to take out a new 0% interest CC to buy the appliances, then pay that off in 1 years time, I would do that instead, and just save up the money to finish the basement.

For more complicated 203k's where you need over $35K, than you need to itemize all the work to be done and get a contractor who is FHA approved all before closing. It an be tricky if you're not familiar with renovations.

HTH

203ks....worth it?

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