203k Work

3630 Views 8 Replies 1 Participant Last post by mtmtnman, Dec 31, 2011

Discussion Starter · Apr 21, 2011

If I could contribute one thing I know would help others in this forum it would be this:

203k repair work pays good, go get it

What is a 203k loan? Remember the good ole days when you could get a home equity loan and spend the money however you pleased? A 203k loan is the same thing except the bank actively monitors how it's spent. They actually have to inspect the property before, after and approve the bids from the contractor. The home owner has to sign off on it but the bank pays the contractor directly. I'm fuzzy on how to qualify for a 203k loan but I'm thinking the house must qualify first, such as it's hard to sell. Finally, the loan doesnt affect the loan to appraised value ratio. So if you buy a 100k house, get a loan for 80k maxing out your loan:value ratio, you still can get another 30k in 203k money.

We completed our 4th 203k loan repair, and made about 35% profit on it. Each job was 10k to 30k. We got 30% upfront, I didnt ask for a 2nd draw, and got paid within 30 days for the final 70%. The subs carried the cost so I essentially was only a deal maker.

If I'm the last person to know how awesome this is, sorry, I'm in the P&P business, not rocket science.

We got the work from Wells Fargo. It was a bitch getting on board and took about 3 months of pressure/work but finally got it. We spent about 5k on a box of fliers to give out, got our webpage looking better and I've been giving a single bid per day.

We are trying with other banks but it's frustrating trying to get anywhere. We know of 3 bankers in our entire city that actively push this loan and many loan officers at their same banks dont even know what a 203k loan is. The loan officers I've worked with think they have hit the gold mine, and are back to the glory days again.

I wear company logo shirt and visor, dress nice, use my laser range finder which they think is just freaking crazy sophisticated. "Honey, lets go with Foothills, he must be smart..."

My success rate is hard to determine so far because some could still work out but I'm guessing I'm around 30%. Either they don't do the loan at all or they are going with one of two competing contractors.

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Discussion Starter · #2 · Dec 30, 2011

I agree. 203k renovation loans is where it's at and it's only going to get bigger. Everyone buying a foreclosure will need some type of repair or upgrades. More foreclosures mean more potential 203k loans.
Actually the house can be in any condition. And virtually any type of upgrade is possible from basic repairs to make the house habitable to full room additions.
I have been doing these jobs for 2 years with very little competition. Most contractors don't know what a 203k is and they don't like how much paperwork is involved. Usually I get the job because the home owner tells me I'm the only guy who called back or bothered to show up.
If you want to learn more about what a 203k is and how to get jobs like this. Feel free to contact me or visit my website. My link is in my profile.

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Discussion Starter · #3 · Dec 30, 2011

203k loans are based on the REPAIRED Appraised value.

Example: You buy a house, any house that can qualify for an FHA Insured Mortgage. This is an FHA loan program.

Let's say the purchase price is 150K. With the desired repairs / upgrades the Appraiser determines and the Lender agrees that the home would be worth 225K with the repairs / upgrades desired by the purchaser.

As long as the purchasure(s) qualify for a loan of 225K and there is 75K being used for repairs / upgrades it is possible for them to get a loan for the entire 225k. The 75k is kept in escrow by the lender upon settlement / closing on the property and is then disbursed in accordance with the agreed upon draw schedule established prior to settlement.

If you only need 40k in repairs, thats all you'll get for repairs / upgrades regardless of what the house is worth. In this example the would be a total loan of 190K.

These loans are for homeowners only.

If my memory serves me well, I believe that nearly ALL of the closing cost can be rolled into the loan also.

They've been around forever. they just aren't widely known.

The paperwork is a PIA on both sides of the equation.

You MUST be a LICENSED Contractor to participate in this program. THE HOMEOWNER canNOT be the one doing the work, period.

There are completion times established on this loan. I believe all work must be completed within 6 months.

There are other aspects to the program, but this is it in a nutshell.

It's not an easy area to get into.

Hope this helps.

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Discussion Starter · #4 · Dec 30, 2011

I've only been called on one of these loans but had to pass because my guys were too busy to handle it. I'll have to give it a shot next time.

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Discussion Starter · #5 · Dec 30, 2011

On these 203k Loans doesn't the house have to be FHA Approved before the loan is made? We had a house in Des Moines that needed $30,000 worth of mold remediation and rebuild cost but wouldn't qualify for the FHA Program due to mold....duh....

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Discussion Starter · #6 · Dec 30, 2011

FremontREO said:
On these 203k Loans doesn't the house have to be FHA Approved before the loan is made? We had a house in Des Moines that needed $30,000 worth of mold remediation and rebuild cost but wouldn't qualify for the FHA Program due to mold....duh....

Mold MAY be a specific exclusion. Although I can't remember for certain. The cranial archives aren't what they use to be:sad:

It may have been disqualified because the lender doesn't do these types of loans. Not all FHA lenders do these loans. OR the required repairs would have been greater than the increased appraised value with the repairs thus not enough could be financed to cover the cost. Would have to know more details. As you know, the DEVIL's in the details.

Regarding other work. based on the scope of work to be performed as long as it meets FHA standards upon completion of the work and all other qualifying items are met an FHA loan can be done.

It's a rehab / repair loan in nature that is simply a glorified FHA loan to allow for work to bring it up to FHA standards. Thus, upon completion of the contracted work and sign off by everybody it converts to a standard FHA loan.

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mtmtnman

· #7 · Dec 30, 2011

They are not working so well here. Most buyers are cash poor and a 203K required 3.5% cash down. Most HUDS here are going RD (Rural Development)

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Discussion Starter · #8 · Dec 30, 2011

mtmtnman said:
They are not working so well here. Most buyers are cash poor and a 203K required 3.5% cash down. Most HUDS here are going RD (Rural Development)

RD loans are good loans also.

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mtmtnman

· #9 · Dec 31, 2011

DreamWeaver said:
RD loans are good loans also.

Home has to be in pretty good shape to go RD though.............

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