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Is there a way to build equity in a 203K loan?

by sherwin.alacine130 from Tarzana, California. Oct 12th 2015 Reply


William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,797 contributions

A few years ago, it was difficult with some loan products to build equity because they were negatively amortized, meaning, each month, the payment you were obligated to pay did not cover the months interest and did not include any principal, so your balance increased each month.. very difficult to obtain equity on this type of loan, however the good news is this type of loan is no longer offered.. but with a home renovation loan, it's possible you could have equity right away.. as Brian pointed out... if your ARV is higher than your actual costs to do the improvements, then you win... But my suggestion would be to not use an FHA loan product for home renovation.. the Conventional HomeStyle renovation loan is much better.. with conventional, there is no upfront mortgage insurance, if the ARV puts you at 80% or lower loan to value, there is no monthly mortgage insurance and if you are not at 80% and you have to pay MI, then the MI is cancelable.. Also with Conventional, you are not limited to what repairs/improvements you can do, and your not required to hire a consultant.. Not the case with FHA, Monthly and upfront MI is required and the monthly is there for the life of the loan.. you have to have an FHA consultant (at your expense), and you are limited to what the consultant says is necessary/required. 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. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Oct 12th 2015
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