“How a 203K Loan Helped Us Get Our Dream Home…”

how a 203k loan helped us get our dream home

This is a post by Adaena Tray. – Anna

“How a 203K Loan Helped Us Get Our Dream Home…”

For years, my husband and I tried buying a house. Nothing ever worked out: bad inspections, bad appraisals, bad sellers, you name it. We had about five deals fall through. One was just two weeks before we were set to close…when my husband was laid off from his job. We didn’t proceed with the purchase and had to move out of our rental since new tenants were taking over. We scrambled to find another place to live. Luckily, we had some money in savings and had just the month before we paid off our last chunk of unsecured debt, so we functioned alright on my one income. After a year my husband found another job.

Once again we began looking at “real estate porn” on an almost daily basis. But by then, after the blow of a job loss, our priorities had shifted. We had become super frugal and our motto was “buy the cheapest house that we can live with.” Gone were the days of looking at homes that the bank told us we could afford. One night, my husband was doing an online search and was all “I wonder what kind of crack den you can get for under $50K?” And wouldn’t you know that’s how we found THE house. It was tiny, very low-priced, in an okay neighborhood, and ugly as sin. I could tell the place had potential though. It was a quaint 1909 gingerbread cottage in the city of Pittsburgh. When we toured it for the first time, I knew it had good bones and a ton of architectural details that could be brought back to life with a little TLC.

We ended up buying the house and taking out a 203K loan. A 203K loan is an awesome product because it rolls the cost of renovations right into your mortgage. We took out a 15-year loan for around $63,000, which included the house purchase and renovations, plus we also contributed about $20,000 towards remodeling upfront. Our teeny mortgage – which is a very small percentage of our monthly budget – means that we can set aside money for other things that are important to us and not be “house poor.” Owning this home is less expensive than any rental we’ve ever had, including our first crappy one-bedroom apartment.

For the sake of full disclosure, I will say that we are a little in debt right now because we went way over budget. We ended up having to buy far more remodeling supplies and home furnishings than we anticipated, in addition to some pricey, unplanned repairs and we had a contractor walk out on the job which ended up costing us extra money.

We have a hardcore 2-year plan for paying off this debt. It’s a short-term sacrifice for a long-term financial gain.

house remodel pittsburgh before and after

The 203K loan paid for all the professional labor and supplies, including a kitchen remodel, replacing all the electricity and most of the plumbing and more. That said, we ended up doing the non-skilled, time-intensive work on the house ourselves. For about five months straight, we toiled every day after work and on weekends to renovate the house. We’re firm believers in never paying someone to do something that you can do yourself. A few times, we overestimated our abilities, like when I checked out a DIY book from the library and tried my hand at some electrical work. Never again!

house remodel pittsburgh before and after

All in all, the house turned out BETTER than I could have ever imagined. Our home, The Itty Bitty Kitty Cottage, is the all-time top-rated exterior on HGTV’s Rate My Space website and it was featured in a local magazine too. Crazy! I can’t tell you how many hours we spent power washing the siding, painting, grouting, landscaping, hiring people from Craigslist, dealing with contractors, breaking chainsaws, making trips to Home Depot, etc. to get it looking spiffy.

There are certainly some tradeoffs to the “buy the cheapest house you can live with” philosophy. For one, our place is quite small at just 1,024 square feet. But it’s forced us to declutter, buy only what we love and creatively use space. We no longer live in the trendiest of neighborhoods. We don’t have a lot of the modern amenities of newer homes, such as a pantry, a garage or more than one bathroom. But dang, when we send out our monthly mortgage payment, I feel like a million bucks! We want to try to pay off our house ASAP. I’m 33 now…so many by the time I turn 40?

 

Have you heard about 203k loans before? Would you consider one?

15 comments

15 thoughts on ““How a 203K Loan Helped Us Get Our Dream Home…”

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  1. Adaena

    Thank you Meghan and Vicki. We love being homeowners! And I agree that the 203k loan is way underrated. I try to tell everyone I know about it!

    Reply
  2. Christina

    This just blows my mind. You could not buy a half a condo for 50k in the Vancouver, BC area, much less an entire house for that price. I don’t know how your income compares to mine, but in Vancouver, most people have no choice but to be ‘house poor’.

    Reply
    1. Adaena

      Pittsburgh does have a very low cost of living, but incomes are not nearly as high as those in Vancouver or a city like New York. The house we purchased (under 50K) was exceptionally cheap for this area because it needed so much work. Most of my friends have homes in the 100K and up range, and even that is on the low end.

      Reply
  3. Carrie Sachse

    I purchased my house in August with a 203k loan and am now mid-renovation. It can be really stressful at times (especially because I’m gone a lot for work) but I’m confident it will all be worth it! Even with the money I’ll put into the house in addition to the mortgage, my newly-renovated-to-my-taste house will still cost me more than $100,000 less than “finished” properties (read: crazy ugly ’80s interiors) in the same area. Nice to read about someone who survived this process before me – I’d never heard of 203k loans until my broker mentioned it when I fell in love with my fixer-upper.

    Reply
    1. Adaena

      That’s awesome that you’re in the process of renovating! Just know that there is a light at the end of the tunnel and, in the end, your home will be not only beautiful and customized, but also a sound financial investment. Best of luck to you!

      Reply
  4. Caitlyn

    I have been looking into doing something similar in my city for a while. I would LOVE more info about getting your mortgage. So far I keep being told that this type of mortgage is getting more and more difficult to get and fewer and fewer lenders are offering them. I finally got my credit score high enough to qualify for a regular mortgage from my credit union and then learned that they don’t offer this type of loan and I likely won’t qualify for it through another lender since my score still isn’t great. Did you have a hard time finding a lender who offered this type of loan? Did you have to have a really excellent credit score?

    Reply
    1. Adaena

      Caitlyn, our realtor told us about Wells Fargo 203k loans. They are a major lender and have experience with the product. My husband and I do have excellent credit scores, but it wasn’t always that way! We (especially me) had to rebuild our scores after overspending in college.

      Even though we had all our financial ducks in a row, the process was still VERY involved. We had to provide a ton of documentation, get contractor bids, hire a 203k loan specialist, go through numerous inspections, release funds and more. I will say that finding a contractor to do the work was a larger issue than finding the lender. We made the mistake of going with a contractor who was not familiar with the 203k loan and all the paperwork it entailed; he was the one who got frustrated (for a number of reasons) and walked out on the job! A 203k loan specialist can help identify contractors who have experience with the loan.

      Though the process is complicated and requires a lot of time and energy, I still think it’s worthwhile for those looking to renovate.

      Reply
  5. Meredith

    Your house is so cute! I love it! We plan on moving in 10 months and are going the “rent the cheapest house you can live with” route. Seeing your house makes me feel better because it is so cute and gives me hope that we won’t end up living in a “crack den”.

    Reply
  6. Beth

    I love your before & after, so cute! My husband and I are living through a 203k Full Renovation right now and it has been stressful to say the least. I am happy to see that you had a great experience.

    xx, Beth

    Reply
  7. Kristine

    Hi Adaena, I also live in Pittsburgh and I am looking for a 203K loan officer, but having trouble finding someone that is experienced. Could you offer any recommendations? Thanks!

    Reply

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