Q&A: Can I refinance my mortgage with 203k FHA or is it only for new owners?

Question by Dave: Can I refinance my mortgage with 203k FHA or is it only for new owners?
I was told by Quicken Loans that a 203k FHA was only for new home owners or purchases and done before movein but for someone like who me owns a house and wants to refinance to pay for house renovation (and sell immediately), am I eligible? I applied for HELOC and Equity loan but due to an issue with a repair that is needed, I have feelings my house will not appraise at full market value. But I need the loan to fix it but if it doesn’t appraise high enough to get a good LTV ratio, then not enough equity and value to get the loan. Catch 22!!!

203k will look at FINISHED value after the renovation but im wondering if its possible to get for a refinance?
That’s not an option to rehab slowly. This was damage to the house that occurred after the purchase due to bad luck that requires fixing if we need to sell. I’m in no mans land where we dont have enough equity to cash out and not enough cash to fix. Loan to fix it will boost the house back up to market value or higher which will allow me to repay the loan. It’s a circle that goes round and round.

Best answer:

Answer by linkus86
Quicken loans told you the truth, the FHA 203k is for purchases only, and can only be used for your primary residence (no investment properties allowed).

The other option you aren’t considering is the obvious plan to rehab slowly as you can afford to make the repairs. Next time you need to make a better plan on how to secure your rehab funds before you purchase the property.

Add your own answer in the comments!

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One Response to Q&A: Can I refinance my mortgage with 203k FHA or is it only for new owners?

  1. Art Vandelay says:

    The 203k is only for purchase transactions only, not refinances. From your question and additional details, you are in a Catch 22, but that happens sometimes. There used to be products (like high LTV second liens) that could address situations like this, but due to all the abuses of the past they are rare to nonexistent.

    I’m guessing that the unrepaired value would not pay off the loan if someone were to purchase for the unrepaired value and get their own 203k? It might be your only option if you are willing to forego any equity you may have built up.

    Not sure if any are available any more, but some cities, counties, and states would have special rehab loan programs to help keep communities occupied. Worth digging into that in the off chance there is a program in your area.

    Creative financing may be the only other option, but not recommended. Borrowing from friends or family, credit cards, or high-interest sources are just not good for you and I wouldn’t recommend them.

    In the end, in your shoes I would probably just establish a budget for the repair costs, and then find every place I could economize and pump money into that fund until I could afford the repairs. Many people don’t realize how much cash they waste or can recover. For example, go without cable and live with free OTA broadcasts for a while. There’s $ 80-100+ per month for your fund. Never eat out; huge waste of money unless you have the funds to waste. Convert to a cheaper cell phone plan, quit texting and facebooking on the phone and just use for an emergency call now and then. It can almost become a game for the whole family to come up with free or cheap alternatives to your current lifestyle elements.

    Good luck.

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