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HUD tries to sell the 203K rehab loan as this great opportunity for people to rehab their communities, get rid of blight, etc...HELP THE POOR GET A HOME...(yah right!)
Well, I was just forced to apply for one of these because the shower in a house with 2 bedrooms and 2 baths had water damage and a broken glass sliding door. About $5,000 to fix it all.
To get this loan I'd have to accept:
a 203K consultant (if you can find one, i called 4 people and found 2 had phones disconnected, one was going to charge me $500 to start and i had to bring a blank check for her to finish the job and the other one sounded like they've been living in a cave for 50 years). Not only that, but since this is an FHA LOAN, the consultant would go around the house and point out things that any other person buying a regular home wouldn't have to fix in order to obtain the loan (lead paint mitigation $9,000+...etc)
1.5% in higher interest rate (apparently the lender is taking a huge risk on me buying a 360K home that needs $5,000 in repairs. OR...if i pay $8,000 in points I can bring my interest rate down to be STILL .5% higher than average rate (and this is with stellar credit)
1.5% of mortgage price in pre-paid mortgage insurance PLUS $140 a month for a minimum of FIVE YEARS. Yes, I have less than 20% dawnpayment, and that necessitates them to gouge me more, because without the pre- fee paying off my mortgage will be just too easy.
When I saw that my closing costs on $339,000 loan were going to be $27,000...all for 5,000K of work...well... I was so angry I even wasted my time to try and rehab anything...
I was also extremely angry at the mortgage broker, whom i asked specifically that the loan would be 6.5% with ZERO POINTS...an hour before I handed over my cashers check it turned out it was 6.5% with me paying two points because this loan, for the 5,000 extra I had to borrow was SOOOOOOOOOOOOOOOOOOO LABOR INTENSIVE.
7%+ in closing costs + $4,000 pre-paid mortgage insurance + monthly PMI+ $700 in "consultant" cost all because of a shower.
I hope this housing thing goes down another 50%...so the banks are paying people to rehab homes
Possibly, the Loan Officer didn't want to work with you. If that were the case, I wish he would have used words to say as much.
I originate 203K loans in Minneapolis. I will confirm what someone else said about FHA 203K streamline limit of $35,000 (and a possible $2,000 bump up for energy efficient improvements) and a consultant isn't required, however one could retain a consultant.
The lender might have been figuring your loan with the up front mortgage insurance component to be paid at closing rather than financed. It is an option, but I haven't seen anyone take it.
Sorry you had so much difficulty. A 203K streamline isn't so tough to do and the cost isn't much more than a standard FHA insured loan, perhaps 1/2 discount point or less on a loan the size you contemplated.
You were just forced into taking this loan? Someone held a gun to your head and said you must buy this house with this loan? If you didn't like it, you should have walked away.
I processed 203K loans . I think the biggest problem with the 203k Loan is how it is being sold upfront. Understand the Buyer signs a contract. The appraiser comes out does an inspection and surprise it isn't "as is" it is marked "subject to repairs". Now instead of going Conventional or FHA regular your seller wont pay the repairs likely because it is HUD owned property. So now the Buyer must pay for a new appraisal,from a certified 203k appraiser $ more money out of pocket, find a consultant to write up repairs $ and have all paperwork redone. Oh yes and possibly have a structural engineer come out $ more money. By the way I hope you have your closing costs saved somewhere.
Put yourself in the shoes of the average person. They do not work in real estate like we do. They do not know all the programs. They are stressed enough purchasing a home. They are excited to finally get a home, get out of rent but surprise now you have a higher rate, you signed a contract on a property,gave your EM deposit and you have already invested money. Do you walk away?
I worked for Countrywide Home Loans and the 203K program was suspended. Most of the loans were being sent to corporate to be signed off on. It is not an easy as it use to be. People need to be better educated especially the Loan officers. Tell your borrowers these loans will not close in 30 days. Try closer to 45-60 days if you are lucky. Give them the facts.
It use to be a great program but Investors are scared to purchase them now. It is much harder to sell. Which in the end hurts all of us because it can be a great program if people are educated and understand it is not your regular loan nor purchase. Streamline or Full.
I am in currently working with a lender for the 203k non-streamlined loan. Does anyone know if the "Loan Origination (1%)" and "Loan Discount (.5%)" fees are negotiable or are they mandated by FHA? Also, is a $400 administration fee too much?
The fees are negotiable, but I would say, depending upon the rate they are offering, and whether it is fixed or adjustable, you are getting a reasonable deal.
Signed- TK. 20 years in mortgage lending in California without resorting to distortions, exaggerations or fraud. I work for one the the largest direct lenders in America.
Ok I am currently in the process of purchasing a home 104K using 203K. I do not like it at all. The timing is moving great. The fees are horrible. I am paying $10,000 in closing costs for a 104K house and yes I backed out the MIP upfront already. This is about 10% Now the consultant went in and added in higher costs of repairs and since the rehab portion is based on his estimate my loan will be going up by about $7000 which means higher closing costs. I am not at all happy with this program and I am using a great mortgage person.
I have been in the mortgage business for over 20 years. I have done many of the 203k loans and it is a great option that is available if you do not have the time or funds to do the repairs before it closes. When we did these loans, we read the manual, or the memo's and knew what was required and that it was done properly so that in the end HUD would insure the loan - which made underwriting time shorter because we knew what we were doing, and would also protect us as the lender.
However, there are many loan consultants who may sell that product and not truly know the guidelines and how the loan works. Some are just sales people who will tell you anything even when they really do not have the answers. I am so sorry for those of you who have not been educated about how the program works and feel they have been taken for a ride. Unfortunately, this happens on all loans, not just the 203k.
I am sure that there are still some very good loan consultants out there folks - - but be sure that for every good one - - there are probably 5 bad ones who will tell you anything to close a loan.
I don't mean to be negative - it is the truth and any of you in the mortgage business - especially in a broker office - know it is true. In my next life I hope to come back as an advocate for the mortgage client.
Any of us in the mortgage business know that there are the mortgage specialists who are truly knowledgeable and working in the best interest of their client - - and the others who are working on their best interest and what they will get paid - - even at the expense of their client.
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203 K loan fees
