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203k loan, need to finance a well into the loan

I'm hearing conflicting advice from my real estate agent and my bank. here is the situation. We won a bid on a HUD home for 105,555,with 1600 for escrow. the apprasial was 104,000. The house was being offered as part of the 100 dollar down program. Unfortunately we found out the house needs a well for 6,000 dollars. We still want the house and want to know if it possible or if anyone is able to do a mortgage in this situation. Thank you for your help and advice. by bishop_239_291 from , . Nov 9th 2011 Reply


Janine Bodway (jbodway)
#4 ranked lender in Montana - 42 contributions

Yes, you can apply for an FHA 203K Loan Program which will allow repairs that are needed or desired for the home to be financed into the loan amount( up to $35K ). The appraisal will need to be ordered based on " market value after completion of repairs ". So if the home is worth $104K " As-Is " then you would be able to use the appraised value after replacing the well. The maximum loan you can finance would be based on 110% of the " as-completed " market value. So even if the new well only added $6K to the value bringing it up to $110K, financing would be allowed up to $121K. FHA still requires your down payment of 3.5%. All FHA guidelines will still have to be met. I would be more than happy to accomodate your application and financing needs and you may feel free to contact me at 406-270-7282 if your property is located in the state of MT.

Nov 9th 2011
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 2,431 contributions

FHA's 203(k) loan program is perfect for what you are trying to do, except that in a 203(k), the minimum down payment is 3.5% of the purchase price, not $100. The quick explanation of the loan process is this: Home is inspected by HUD consultant to determine items that must be / want to be fixed. Scope of project and its costs are determined. Property apprasied for both its current (AS IS) value and its As Complete value. IF the costs fall within 115% (some lenders will only go to 105%) of the As Complete value, then the project costs can be rolled in. In you situation, the additional $3,600 needed for the downpayment is a pretty good chunk of the cost of the new well. A better approach your agent should take is if the property does not have potable water, it probably isn't FHA eligible and the seller (HUD in this case) should help pay for the repairs to make it eligible.

Nov 9th 2011
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William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions

You need to shop for a Mortgage Broker, not a bank.. 203K loans are a pain in the butt for someone who doesn't know how to do them.. like most banks... dealing with a mortgage broker, he is used to all types of FHA financing, including the 203K... Your loan is absolutely achievable, but it sounds like your bank doesn't want to do it... WilliamAcres.com

Nov 9th 2011
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