Monday, March 14, 2011

Various 203k learnings.

Editors Note: Written October 12th, 2010

I will probably update this as we go along the process, but figured I would try and combine them all together in one post for those looking to undertake this for the first time.

1. Get a good bank rep. We used Sean Thompson of Wells Fargo, and he made a somewhat daunting task seem easy. He's since moved on to prospect mortgages, but we stayed with Wells, one of the reasons I picked him off the internet was that he was from a "real" bank. You have to understand that in Canada, there are only 4 banks, its not regulated (I don;t think) we just dont do mom and pop banks in Canada...

2. Know the difference between a streamlined and regular 203k. In reality they take as much time to close, so there is no real difference between them. The one thing is with a regular one you need a hud inspection which costs 600$ (depending on how much you plan on spending, they have fixed rates so from 35-50k its 600$). If you do this instead of a home inspection (they will find similar things but you can't sue them) you will be out 200$ more.
- Streamline: Limit is 35k, you can't borrow any more without getting into the regular program.
- Regular: No limit up to appraised value of the property after improvements. Requires a hud consultant and their fees are fixed and mandated by the government so find one you like.

3. You can finance mortgage payments. This was huge for us, I was tossing and turning for a couple of nights before I asked Sean and he confirmed that if the work is not done in a timely manner, you can finance a mortgage payment or two. Now what this means is you are losing money available to you to renovate, you are NOT deferring your mortgage payment. Also due to interest, you will end up paying 2X the amount of each payment, so you obviously don't want to do it forever.

4. They are really picky... they will find stuff that you would just walk past like the fact that the lock in one of the bedrooms was missing from the window. I mean ok, I'd fix that on a weekend project, but it will be required to be fixed before you move in. Don't think you can buy a house as a fixer upper project and do it under the 203k program, as they will require you fix everything before moving in.

5. You can't do most of the work yourself. Unless you are a licensed contractor, plumber, electrician, you can't do any of the work yourself. You could paint, but you will still have to keep the budgetted amount for paint in the loan until complete, just in case you suck and someone else has to do it for you.

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