So I mentioned this previously, but just to reiterate, this house is a foreclosure and was stripped of everything (seriously EVERYTHING) and has also been vandalized. It sat vacant for a while and probably became a nice little hang out for some young teenagers from the neighborhood. Since it's been stripped and is considered “unlivable” by the bank, we are required to get a FHA 203-k loan which is a pain in the a$$.
Definition: The Federal Housing Administration's rehab loan product, the FHA 203(k) loan, was designed for individuals who want to rehabilitate or repair a damaged home so they can live in it as their primary residence. These loans are endorsed by the government to encourage lenders to offer what would otherwise be considered a risky loan product.
On paper, the idea of a 203-k loan seems great, however, dealing with one is not. To get this type of loan, we needed to work with a pre-approved contractor to get a quote for the necessary work that would deem the house livable. This quote amount is then added to the sale price of the home, therefore, making your mortgage higher than what you buy the house for. Blah!
Another thing to note about this loan is that all work needs to be completed within 6 months of closing. Mind you, major construction, such as tearing down walls, is not allowed during that time. The way it works is that while the house gets worked on, the bank sends an inspector out periodically to check on the work and, hopefully, gives a final sign-off when everything has been completed. Once the final approval has been granted, you are free and clear to do what you want. The frustrating part about this is that we are essentially paying to fix things that we'll be taking right out, so it's a big waste of money.
After our offer was accepted, we quickly began to work with a contractor, and he determined that the work we needed included fixing all of the plumbing (remember, all of the copper was missing), making the bathrooms in working order and constructing a "kitchen". (This means one cabinet with a sink, electrical outlets and a gas line.)
We submitted the quote to the bank for approval, and then they sent an inspector out to check that our quote covered all the work needed to make this house livable. The inspector came back and told us we needed to add painting the exterior to the scope of work. Since when is an unpainted house considered unlivable?! This was a crazy expense that Adrian and I were not expecting. Sure, we talked about painting the house, but not this soon :/
So we submit the updated quote with the exterior paint job on it, the bank talks to the inspector and the inspector comes back AGAIN with something. This time he says we need to get a new window for the garage, a gutter for the garage and also paint the garage. ARE YOU SERIOUS?!?! Was he looking at the same garage we are? Our garage is a dilapidated shack that we plan on tearing down. The most expensive paint out there couldn't even fix this thing! This is super disappointing because the garage fixes alone come in around $4,000 and we know that money is a toal waste.
So the contractor added the garage work to the quote, we submitted it to the bank again, and everything was finally approved. All this back and forth took up so much time that we wound up having to ask the selling bank for a month extension during the process. They only granted us an additional 2 weeks though. Awesome. Did I mention how much I hate the selling bank?
Definition: The Federal Housing Administration's rehab loan product, the FHA 203(k) loan, was designed for individuals who want to rehabilitate or repair a damaged home so they can live in it as their primary residence. These loans are endorsed by the government to encourage lenders to offer what would otherwise be considered a risky loan product.
On paper, the idea of a 203-k loan seems great, however, dealing with one is not. To get this type of loan, we needed to work with a pre-approved contractor to get a quote for the necessary work that would deem the house livable. This quote amount is then added to the sale price of the home, therefore, making your mortgage higher than what you buy the house for. Blah!
Another thing to note about this loan is that all work needs to be completed within 6 months of closing. Mind you, major construction, such as tearing down walls, is not allowed during that time. The way it works is that while the house gets worked on, the bank sends an inspector out periodically to check on the work and, hopefully, gives a final sign-off when everything has been completed. Once the final approval has been granted, you are free and clear to do what you want. The frustrating part about this is that we are essentially paying to fix things that we'll be taking right out, so it's a big waste of money.
After our offer was accepted, we quickly began to work with a contractor, and he determined that the work we needed included fixing all of the plumbing (remember, all of the copper was missing), making the bathrooms in working order and constructing a "kitchen". (This means one cabinet with a sink, electrical outlets and a gas line.)
We submitted the quote to the bank for approval, and then they sent an inspector out to check that our quote covered all the work needed to make this house livable. The inspector came back and told us we needed to add painting the exterior to the scope of work. Since when is an unpainted house considered unlivable?! This was a crazy expense that Adrian and I were not expecting. Sure, we talked about painting the house, but not this soon :/
So we submit the updated quote with the exterior paint job on it, the bank talks to the inspector and the inspector comes back AGAIN with something. This time he says we need to get a new window for the garage, a gutter for the garage and also paint the garage. ARE YOU SERIOUS?!?! Was he looking at the same garage we are? Our garage is a dilapidated shack that we plan on tearing down. The most expensive paint out there couldn't even fix this thing! This is super disappointing because the garage fixes alone come in around $4,000 and we know that money is a toal waste.
We aren't taking this photo at an angle...it just leans that way.
Side of garage...with holes in it.
Inside-Here you can see that the foundation is pretty messed up and the wood slats are pretty worn.
So the contractor added the garage work to the quote, we submitted it to the bank again, and everything was finally approved. All this back and forth took up so much time that we wound up having to ask the selling bank for a month extension during the process. They only granted us an additional 2 weeks though. Awesome. Did I mention how much I hate the selling bank?
Anyways, for the past 2 months, we've encountered so much stress with having to go back and forth so many times between the contractor, our bank, the inspector and the selling bank. So we are relieved everything finally worked out and came through on the last possible day. Had we not received the clear to close last Friday, we might have lost the house. I think it will be a while before we buy another house ;)
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