As a 203k contractor in California, I am well versed on the process. Depending on the amount of the repairs, there are 2 somewhat different processes, but in simplest terms, for example, you want to buy a PRIMARY Residence (owner occupancy is a requirement) that needs work. You want to finance 100k of purchase and another 25k of repairs. The appraiser will appraise based upon future value with the repairs. as long as the loan to value ratio of the future value is good, the 100k will fund the purchase and you will close escrow. Then, as work is completed, there is a verification step and the 25k will be released as needed to pay the contractors.
Hope that is somewhat clear :). It's a government process, so a tad convuluted
Andrew Adams is probably the most experienced 203K lender in the country with Wells Fargo Home Mortgage and there is absolutely no one in any state that I would trust more with originating one. He has some useful information in his blog that should answer all your questions.
See: Austin Real Estate Secrets
NMLS # 6395
Financing Kentucky One Home at a Time
I answer questions about financing real estate based on my decades of experience dealing with mortgage underwriters. This answer is my personal opinion, has not been reviewed or approved by the company I work for. I do not offer legal or tax advice, if you need answers from an attorney or CPA find one knowledgeable in your local market.
the Streamline and Standard. This way Lender will provide a letter of approval with amount
you qualified for and explain both loans. With this information you will be able to proceed to...
Step 2: Find an experienced Realtor that knows both 203(k) loans and s/he will help you find the right
property within your price range.
Step 3: Obtain an full inspection of the property to determine condition of plumbing, electrical, central
air and heat system, foundation, roof, etc. Inspection report will pretty much dictate what
repairs and improvements are needed and/or recommended.
Step 4: a. If going Streamline 203(k) obtain bid from a general contractor to expedite or can obtain
bids from individual contractors, such as from electrician, plumber, etc.
b. If going 203(k) Standard because property needs structural repairs or repairs exceed $35K,
contact a 203(k) Consultant first as consultant will be required to be on board. Consultant
will provide buyer a list of all required repairs. Buyer uses list to obtain bid from contractor.
Email me at FHAInspections@austin.rr.com for more information on how to utilize the HUD's 203(k) Purchase Renovation Loan Programs as I am an approved 203(k) Consultant here in Austin.
I hope all these answers are helping you, but you might want to start working with a good Realtor as it seems like you have a lot of questions about a lot of different areas, and on a forum like this you are getting varying answers, some that I've noticed are more accurate than others. A good Realtor will be better able to help analyze your needs and get you going in the right directionâ€¦
Joe Jarusinsky, Realtor/Master Instructor, Keller Williams Realty, Austin's #1 Real Estate Company, Call 512-261-4415