Can I get a FHA (203k) loan on a house with code violations?

I am house shopping and I found a house that is 200k-250k below value. I went to the property today and I knew it had work to be done. The Realtor told me that there were code violations and she doubted that I would be able to get a loan with a house that needs a a fair amount of work done. Does anyone know if I would be able to get a FHA(203k) loan? Also all the code violations are outside the house. I currently have roughly 60k in my possesion I was planning on putting 35k down and the rest to fix it up.

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  • 8 years ago
    Best Answer

    Code violations make you ineligible for FHA mortgage. It must pass inspection and meet all building, zoning, etc, codes. You would need to put at least 20% down and have enough left for repairs, correction of all code violations to be considered for conventional financing. Talk to your banker informally first to see what they might be able to do and under what conditions.

    For the special 203k loans from FHA, you really need to work the numbers! These can be tough to get, especially since the RE is continuing to decline.

    What is actual appraised value for the home in its current condition? What its price was at some prior time on the market is completely irrelevant. You also need to know how much it will cost to correct all violations and any other work you plan, then what it will be worth when completed.

    E.g. current market value in current state = $150,000, plus repair costs of $50,000 to bring it to code and salability = $200,000 cost. Need to be worth at least $250,000-300,000 upon completion to make it worth your while doing all that work, and give the bankers something to chew on.

  • If you are 200-250 below value you have a great deal. The 203k loan is the way to go here. Save your cash, you'll need it later. You just need 3.5% down to get the 203k. Roll the rehab into the loan. If your Realtor tells you that you can't get a loan on the property, ignore them or get a new Realtor.

    But do your homework first. Locate a contractor as Paul Weldon mentioned below, the 203k Contractor.com site is excellent. Contractors can cause a myriad of problems on this loan, and having a trained contractor who knows the loan is half the battle. Prior to writing the contract to purchase, meet with your contractor at the property for a bid and list of repair items that need to be done. Than call your lender with these items to make sure they are o.k. with them. Some lenders won't do certain repairs ie..slab repair. Also keep in mind the appraiser or HUD Consultant (if your repair amount is >$35k or involves structural issues a HUD Consultant will be involved) may find other necessary repairs that will have to be added to your repair amount. Don't be afraid of this loan, just get a 203k experienced contractor and lender and keep your lines of communication open.

  • Anonymous
    8 years ago

    Yes, you can get an FHA 203k loan on a property that has existing code violations. In fact, the FHA 203k loan can be used to buy a home as a primary residence in its current AS-IS condition, even if it's unlivable, include the cost to rehab/renovate/repair it into your mortgage, close on the property and perform the renovations AFTER you own it. What a brilliant way to buy a fixer-upper! You can even include appliances and other personal improvements into the 203k loan.

    Just don't forget to use a Certified 203k Contractor for the renovations.

    There is a great FAQ section on the 203k at http://203kContractors.com/faqs.

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    3 years ago

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    RE :Can I get a FHA (203k) loan on a house with code violations?

    I am house shopping and I found a house that is 200k-250k below value. I went to the property today and I knew it had work to be done. The Realtor told me that there were code violations and she doubted that I would be able to get a loan with a house that needs a a fair amount of work done. Does anyone know if I would be able to get a FHA(203k) loan? Also all the code violations are outside the house. I currently have roughly 60k in my possesion I was planning on putting 35k down and the rest to fix it up.

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    Source(s): For Credit and finance solutions I visit this website where you can find all the solutions. http://INSURANCEANDFINANCETIPS.INFO/index.html?src...
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  • 4 years ago

    As a loan officer able to do loans in all 50 states if you don't have anything in judgment on your cr and have a score of at least 57* you can be approved for a home loan. Doing the loan the way your describing is so much more complicated than what it needs to be. I would be happy to guide you through the process even if you do not use my services.

  • 8 years ago

    If the home has code issues most lenders will not lend on the home. It would be a cash deal or no deal. One way to do it is to get a hard money lender. Then fix the problems and then get the new fha loan.

  • 8 years ago

    Can you come up with 10% down?

    That way you can do a conventional loan.

    Of course closing costs, some taxes and some insurance (same with FHA)

    FHA home has to be in ready to move in condition with everything working

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