What is the typical experience of working with a Mortgage Broker for a 203k rehab loan?

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I am trying to get a 203k rehab loan through a broker. I tried to talk to Wells Fargo but they were charging ridiculous interest rates (2.2% over the 30 yr fixed rate i was getting) and a mandatory 2.5 points in fees which was making no sense at all.

However I was doubtful if a broker could help me, especially on just 1 point in Origination and a interest rate which was same as the 30 yr fixed (after the rehab period). First of all the GFE that was sent out to me by him just had the broker cost estimates and clearly mentioned that it was not a commitment for a loan. Then the entire funding has been delayed inspite of some detailed paperwork i had done in advance for the rehab – contractors, projects, layouts etc. The broker tells me that the lender is busy with the refi rush as the interest rates have come down. It sounds legitimate but I thought sale assets were preferred over refi’s. I have never met anyone from the Lending institution (PMAC Mortgage in SoCal – Anyone heard of it?). Is it normal for the process to work like this (borrower not meeting lender)? Are delays normal in 203k? What are the typical costs you pay for a 203 k loan?

Would appreciate if you can share your experience of funding a 203k loan or such loan through a broker.

My fiance and I are looking at a house that we want to but with a FHA loan. The house needs updated alot so we offered to pay the seller full asking price if he gave us 10k to re Model.
Well he counter offered with full asking price and 5k to remodel.
5 is not going to be enough. I just know it.

I don’t know much about this kinda stuff so my question is..will we be able to offer him more then asking price so we can get 10k and he still gets what he wants out of the house?
Or is that against and FHA loan rules? Will FHA say that the house isn’t worth what we offer?
The price we want to offer is 10k less then we were pre approved for.
The mortgage guy said we could try to get a FHA 203k loan.
But I don’t know what this is and how it will help.
Can some onepleasee help?
I know that they give you money for rehab but don’t you have to have the money upfront or a credit card to cover the cost then get reimbursed by them?
Say the asking price is 154,900 and we offered to pay full and get 10k back. The seller counter offers full asking price and 5k back.
Can I call my realtor and say I want to offer 160k & get 10k back so he still comes out at 150k?

Will it matter if the FHA aprasier says the house is only worth 154,900?

5 Comments
  1. Reply
    Ed Atun
    February 10, 2011 at 8:59 pm

    It was a nightmare. Every single contractor and every repair must be approved by someone other than you.
    And the banks have gotten cheated so many times that they now charge high fees because they assume you are trying to scam them..

  2. Reply
    golferwhoworks
    February 10, 2011 at 9:13 pm

    203K loans do take longer as the lender investigates every thing from the contractor and his insurance down to all estimated cost. They are not easy loans to get done so with all they have to do in making this work the fees they charge are correct as man power is not cheap. Do you work for free? You just have to understand that the mortgage once the renovations have been done can be streamlined and many of these fees will be a tax preferenced item when you do your taxes
    I am a mortgage banker in TN & KY

  3. Reply
    Expert Realtor
    February 10, 2011 at 9:54 pm

    You are correct on one thing: Purchase money mortgages (sales) do take priority over refi’s, in fact, loan officers make a ton more on them with regards of commission.

    I think the problem is that you were dealing with the loan officer that doesn’t really know how they work…not many people use them because 203K loans are a paperwork nightmare even under the best of circumstances.

    You need to find a loan officer that does quite a few of them and can review with you the pros and cons of a 203K loan…there are far more cons than pros…I can personally attest to.

    Federal lending guidelines states that the GFE and the TIL has to be sent to you within 3 days of making a formal mortgage application….so every lender is going to do this that you talk to, but it will NEVER be a loan commitment…it is a disclosure that is required under federal law.

    Do not deal with ANY loan officer that will not meet you face to face…period.

    That is bad business.

  4. Reply
    diana
    February 10, 2011 at 10:13 pm

    its not against fha rules, the fha appraiser will determine whether the home is worth that amount though. a friend of mine offered $ 30,000 more than the asking price as long as the house was repaired and fha financed it.

  5. Reply
    golferwhoworks
    February 10, 2011 at 11:09 pm

    203 k loan is a rehab loan that can be used in a purchase to bring the house up to standards. Now FHA will not allow a complete remodel of your wants just what the home requires. They will place these funds in escrow till the work is completed and then release these funds once a final inspection is done. So you will need contracts or estimates in the file to submit with the purchase

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