FHA 203K Renovation Loan Success story in Louisville KY
Renovation loans can be a challenge in the Louisville KY market as well as many others. We see lots of bank owned homes that need more than a little TLC to get them back in shape. These would include Fannie Mae, Freddie Mac, local banks as well as the big boys, and HUD homes.
We recently bought a Fannie Mae Foreclosure that needed a lot of “Tender Loving Care”. Our issues were termite damage, dilapidated carpet, single pane windows, shingles at the end of their life, gutters, siding with holes, outdated kitchen, etc. Did I mention that it needed paint? We knew that the price was right, but we required funds for repairs as well as the regular mortgage.
We initially tried to get a HomePath “Renovation” loan as that seemed like a great deal. Our first obstacle was finding a loan officer that could take care of us. In Kentucky, HomePath loans are fairly popular, but we do not have anyone writing HomePath Renovation loans within the state. To get a HomePath Renovation loan required us going to an out of state lender. We found a good loan officer in Ohio and were quickly pre-approved. As we progressed, we found that our down payment would now be 5% putting a squeeze on our cash flow.
FHA has always had their regular 203b loans. They now offer a program called the 203k Renovation loan. Within this program, they have the “Streamlined” version as well as the “Standard”. The FHA Streamlined Renovation version is for expenditures of up to $35,000 and works for most people. This enabled us to roll the repairs into the cost of the initial mortgage. The list of what you can receive funding is quite large. You can’t do major remodeling such as removing a load-bearing wall. The FHA Standard Renovation loan is a different animal and something for another blog.
Before we made our offer, we contacted a general contractor of our choosing and had him give us an estimate. We then felt comfortable making an offer and Fannie Mae accepted. There was some paperwork involved, but we were able to close within 45 days. Our contractor needed to show proof that he was licensed and insured and that was no big deal.
As part of the appraisal process, we needed an “as-is” appraisal and a “finished” appraisal before we could get our loan. The appraiser had our work estimate in hand so he knew what we were looking to accomplish. The finished appraisal was estimated to be $15,000 more than we would have in the house.
On the day of closing, our contractor was able to receive 50% up front to cover his initial outlay for materials. We are off to the races!! A couple of weeks have passed and great progress is being made. Our family moves to a newly painted and modernized home in a great neighborhood.
I like a story with a good ending.