St. Louis Mortgage Help

How to Write a FHA 203K Purchase Contract

October 26th, 2011 2:29 PM by Bob Rutledge

In you’re a Real Estate Agent chances you are in some capacity, working with Foreclosures, Short Sales or other types of distressed property.

If you’re not working that market yet then maybe you want to add it to your bag of tricks! If you work that market then you and your clients could be better serve if you have an understanding of the mortgage products that are needed to finance that purchase.

The king of distressed property mortgage loans is clearly the FHA 203K Loan! Before I get into the details on what you need to expect, how you write the 203K offer and the other caveats to FHA 203K financing, I want to say one thing – please WORK WITH AN EXPERIENCED RENOVATION LOAN OFFICER. Now that we have that out of the way, on to the task at hand.

Writing a FHA 203K Purchase Offer

  • Put FHA 203K in the Purchase Contract – Many lenders require this to be there, but it also lets the seller and/or listing agent know that those property condition issues that have killed deals in the past are NOT going to be an issue this time around.
  • Provide for a Longer Contingency Period – Best practice says allow for enough time to get the Home Inspection AND a Contractor Bid. 70% of my clients underestimate the the cost of the renovation initially. Keep the mortgage contingency as close to the closing date as possible.
  • Give 45 Days to Get Closed – 203K Loans have additional 3rd party items to work through, give some additional time for the buyer to get a couple contractors to the house AND give the contractors time to price accurately.

What to Expect During Your FHA 203K Transaction

  • Expect the Appraisal to Come Later in the Process than You Are Used To – FHA 203K Appraisals are based on after repair value. Because of this we must have the contractors bid in hand to give to the appraiser before we can order the Appraisal
  • Expect to Provide More Access to the Property – Inspectors, Contractors and the HUD Consultants will all need access to the property.
  • Keep CALM – There’s more going on with a 203K Loan. There are more 3rd parties activities going on with can cause potential for delays. If you have chosen an experienced loan officer who knows the FHA 203k process well you’ll be fine even with a delay or two.
  • All in all FHA 203K loans are not that much more difficult from the Real Estate agent side. This is especially the case if you have chosen an experienced RENOVATION SPECIALIST to work with. Can I recommend a good, very reliable and highly experience FHA 203k Specialist to you?

Now, get out there and sell someone a foreclosure already! By the way, FHA 203K Loans are not just for distressed property, you can use them on move in ready homes as well. Don’t limit yourself, sometimes your buyers need some help seeing the vision.

Need a FHA 203K PRE-APPROVAL? It’s one small click away

If there is anything I can do to help with a home buyer or a seller using the FHA 203k to buy a new home or sell their home please do not hesitate to contact me.

Posted in:General
Posted by Bob Rutledge on October 26th, 2011 2:29 PM


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New American Funding 12321 Olive Blvd, ste 150
St. Louis, MO 63141