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203k vs. Conventional Rehab

What are the advantages of a conventional rehab loan over the FHA 203(k) loan? by RKline_462_853 from Sandy, Utah. Aug 7th 2012 Reply


Let me clarify something from my previous answer. On the conventional rehab, you likely would be required to have 20-30% equity under most of the programs I've seen available, therefore you avoid mortgage insurance because of the required equity position. The 203K advantage here is that you have the option to put as little as 3.5% down and even borrow up to 110% of the value of the property to make improvements. Each has their pros and cons; a lot depends on your specific situation as to what is considered an advantage.

Aug 7th 2012
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Most rehab loans conventionally will require a greater amount of equity available to do the loan than a FHA 203K. With FHA, you will need to determine which 203K product is right for you. If nothing requiring a permit or an architect, then a 203Ks will allow up to $35000 of eligible repairs and the maximum LTV on a refinance transaction is 97.75% of the LESSER of the sum of the existing mortgage debt + total rehabilitation costs + borrower paid closing costs + Pre-paids + discount on total loan amount - discount on repair costs - FHA MIP refund OR the lesser of the sum of the "as is" value + the total rehabilitation/repairs costs or 110% of the after improved value. Gary W SMith - MLO#53963; First Priority Financial (253) 536-5626; ext.304

Aug 7th 2012
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The biggest advantage of conventional rehab vs FHA is the lenders.. Very, very few lenders will do the conventional rehab.. just about everyone out there does do the FHA 203K.. The rate will be lower on FHA, and when you add back in the mortgage insurance, you will be pretty close to what you would get going conventional. Both of these will be troublesome, and anyone who tells you differently is inexperienced in doing rehab loans. But FHA is going to be less of a headache then conventional.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Aug 7th 2012
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Conventional re-habs ( HomePath Renovation) loans are a royal pain in the rear. First of all there are only a handful of lenders, nationally that will consider them. FHA 203k on the other hand are complex, yet easy to originate, process and fund. Because FHA has set the standards, it is easy to get your project estimated and approved. If the property is NOT going to be your primary residence, then you can't do FHA, otherwise it is the only way to go. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com 888-889-9950

Aug 8th 2012
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The only advantage of a conventional rehab is probably less fees such as the FHA rehab has an upfront and monthly mortgage insurance premium and you wouldn't have that with the conventional rehab but you would have to put down more money and the rate would be a little higher than on the FHA.

Aug 7th 2012
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There really is no advantage of a conventional rehab loan for an owner-occupied home. Especially when you consider the loan-to-value conventional rehab loan will be based on today's unrepaired value and an FHA 203(k) Rehabilitation Loan will lend based on 110% of subject-to-repairs value.

Aug 7th 2012
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