Very few things in this world are perfect. There is always a bit of negative with any product or service. However, one or two bad experiences can taint an otherwise exceptional service. Here are four common myths about the FHA 203k loan that are simply not true.
Myth #1 Takes too long to close the loan – Some people have claimed that with the inspections, repairs and follow up inspections that it took their mortgage loan over 7 months to close. However, with an experienced mortgage lender and a reputable contractor you should be able to close on the loan within 45 to 60 days.
Myth #2 There is too much paperwork – Granted, an FHA loan has more paperwork than a conventional loan. However, in essence you are doing two loans in one; you are buying a home and you are taking out a loan to do some major renovation to the house. Normally, two mortgages would be a ton of paperwork. So, borrowers have to be reasonable on this point.
Myth #3 It does not make sense to borrow money for paint, carpet, etc. and then pay for 30 years on it – If you choose a good property in the right neighborhood, you will actually be building your equity from the beginning. For instance, if you find a home that can be bought for $95,000 and needs approximately $25,000 in repairs then you are borrowing $120,000 in total. If your home is worth $130,000 or more as soon as the repairs are made then you have built up $10,000 in instant equity.
Myth #4 Dealing with repair bids is too troublesome – This is why you should work with a builder or contractor that has experience with FHA guidelines. These people understand what is allowed by FHA and what is off limits. They can inspect the home and give you a bid that should meet the rules of the FHA and get passed by the FHA appraiser when the work is finished.