Someone who does Crossfit.
Someone who recently became a vegan.
Someone who just had a baby.
Someone buying a home.
Do you know what all these people have in common? They will all talk about this aspect of their life to anyone who will listen; mostly about the good stuff but sometimes you get a person who has gone through a terrible ordeal and whether they mean to deter you from trying crossfit, a vegan diet, or buying a home, they sometimes do just that. The tricky part about the home buying process is that although the steps are the same for everyone, getting to each step can vary depending on an individual’s circumstances. That’s why we are addressing some of the mortgage myths out there, particularly when it relates to the FHA 203k Loan. In fact, out of all the loan programs this one might have the largest number of falsities floating around out there, let us help you separate fact from fiction as we examine 5 myths about the FHA 203k Loan
Myth # 1:
There is a lot of paperwork for the 203k Loan.
Let’s be honest with each other, there is a lot of paperwork involved when getting a mortgage… period. No matter what type of loan you will be asked to provide required paperwork and additional information the lender asks for. There is additional paperwork needed for the 203k loan but is it mounds and mounds more? No, not at all.
Sellers won’t accept that kind of financing.
Many sellers and realtors believe that they will not be paid until the renovation project has been completed. However, this is untrue. All the renovation/upgrade work is done after closing when both the seller and realtor are paid.
In fact, it can benefit a stubborn seller or help sell a bank owned property because the home is sold “as-is” meaning, repairs don’t need to be made prior to the closing of the sale. Not even a conventional loan can offer that, with a conventional loan any health or safety violation of any kind must be fixed prior to closing.
Only FHA approved contractors can be used.
FHA approved contractors are not a real thing. The FHA does not have a list of contractors you must use or a list of those who you can’t. It’s true, you may come across contractors that advertise their experience with 203k but that does not make them a preferred or approved FHA contractor. Hiring a contractor who has gone through the process of a 203k is a good idea because he or she is familiar and can help talk through things but the FHA is not going to turn down your loan due to your choice of contractor.
FHA 203k loans are only for homes needing major repairs.
Almost all homes qualify for 203k financing except for homes built within the last 12 months. Homes in need of major work and homes with minor changes- like new cabinets or interior paint can qualify. In fact, the 203k Loan is a great solution as a refinance for properties which don’t have a lot of equity in them.
It takes several months to close a 203k Loan.
The process to close a 203k Loan should not take any longer than 45-60 days. If you are working with an inexperienced lender, the FHA 203k or any other kind of a home loan can be a long, drawn out process. However, if you are working with an experienced 203k team and both the homebuyer and realtor do what is required the FHA 203k will run smoothly. If you are considering a 203k Loan, be sure to have a consultation with your mortgage banker at the start to ensure everyone is on the same page!
Still have concerns or questions? Check out our video and website for more information on 203k Loans