Archive for July, 2014

It has been toooooo long since my last post, and this post today is quite different from my usual topics, but I wanted to share a bit of information that my husband and I have learned in the process of buying our house. I’m hoping this info might help someone out there who is considering a 203k loan!

Mike and I closed on our first house a few weeks ago, and we are loving it! We spent a TON of time house-shopping; I’d say we walked through somewhere between 80 and 100 houses. (Thankfully, my dad is a Realtor, so he was patient with helping us find a house.) The house we are finally living in is actually the fifth house we attempted to buy; shopping for foreclosed houses has the possibility of being a huge disappointment, as you have to pick your bid without knowing how many other people are bidding and what amounts they are bidding. We opted for a 203k loan on our house, as we got a really great deal on the house and wanted to do some repairs. A 203k loan allows the homeowner to add extra money onto the mortgage to cover the cost of repairs. If you are considering a 203k loan, you should know these things:

1. You do not receive the money for your repairs at your closing. It took about a week and a half after our closing for us to receive our check in the mail. We were hoping to receive it sooner, as we had put ourselves and our contractor on somewhat of a tight schedule for moving and completing the repairs. If you’re renting an apartment or house while waiting for your new house’s repairs to be finished, be sure to give yourself some wiggle room if possible (if your landlord is willing to be a little flexible on your move-out date).

2. The first check will only cover half of your estimated costs of repairs. We knew this information before receiving our first check, and our contractor is flexible regarding the fact that he will not get paid for his labor until everything is finished. However, the cost of just the supplies for repairing your house may come out to more than that first check covers. You may also end up with sub-contractors who are unwilling to wait to get paid until your second check arrives. Consequently, you either need to pick a contractor “with deep pockets” who can cover supply and labor costs for a while (as our mortgage company suggested) or you will need to have your own cash or a credit card to cover the extras until you get paid back by the second check from the loan company. You will not receive the second check until after the repairs are completely done and your house has been inspected to make sure you actually did what you said you were going to do with the loan money.

3. If you change what type of repairs you are going to do, you must notify the loan company and provide them with a new estimate. For example, Mike and I initially wanted laminate wood floors in the living room, hallway, and kitchen, but then we closed on the house and found out there was hardwood flooring underneath the carpet in the living room and hallway. We decided to refinish the hardwood and ended up picking a different flooring for the kitchen. The loan company needed to know that we had changed our minds regarding our flooring (it’s their money we’re spending, after all). They try to make sure the house will not decrease in value due to the homeowner’s new decision.

4. The loan company figures an extra 20% into the repair portion of your mortgage to help cover the cost of unforeseen problems. If you end up not using this extra percentage, they just pay that portion off on your mortgage. We had been doing pretty well with our loan money, even staying slightly under-budget on some things, but last Thursday changed all of that. We had water backing up into our basement and had to call out a plumber, who gave us some bad news. Fortunately, it looks as though the extra percentage in our loan will cover the cost of fixing this problem.

There are, of course, MANY rules when it comes to 203k loans, and the rules can change at any time. I just wanted to share what I thought was some important information about this type of loan to help you decide if it’s the right choice for you.

**WRITING UPDATE: I hate admitting that I have not kept up very well with my five hours of “new” writing each week, but it’s the truth. 😦 I am, however, still trying to publish my second novel by the end of this year.**