Angel,

Here is some information about the FHA 203k rehab loan you asked about.

http://www.gpxconnect.com/fha-203k-rehab-loans

While not "all" requirements are listed, it will give you a good understanding of what the process entails.

If you choose to move forward with a 203k loan, be sure that your lender (and sales associate) understands the program and what can and cannot be included for repairs.

Hope this helps!

Denton Ward
Dutra Cerro Graden
http://www.dcgdev.com

The Harris Company, REA/C
203k Consultant and Real Estate Broker
or try the LOoP, CSE http://www.theloopcse.com

As an FHA Fee Inspector I can offer a little insight into the 203k loan. This is a great program but has limitations and rules you must follow. This program does not work for folks who want extra money and have dad and uncle Joe fix the place up.

FIrst, you need an approved contractor. The contractor must be familiar with the program and maintain certain insurance policies such as general liability and workers' comp. You can act as a contractor but must purchase these insurance policies. All sub-contractors must be licensed if necessary. Plumbers, electricians and furnace/air-conditioner techs must be licensed in Illinois.

As for the money, the contractor will itemize the cost of repairs and once the repairs are made the contractor will request the money from the lender. The lender will release funds after there is proof the reparis meet FHA criteria. For big jobs Draw Inspections (periodic payments from the lender) may be required, it depends on the lender. To ensure the repairs meet FHA criteria an FHA Fee Inspector will inspect the work, at your expense, and submit paperwork and photos to the lender. For large jobs that require Draw Inspections you may need more than one inspection.

You are allowed to finance up to $35,000 in repairs in addition to the purchase price.

The seller is paid and the the funds for repairs are held in escrow and paid out to the contractor as the work is completed.

Contact me at 213-680-2692 / Elaine

FHA 203(k) Renovation Loan:

An important tool for community and neighborhood revitalization, the FHA 203(k) loan offers flexible qualifying and low down payments:

FHA down payment (3%)
Flexible credit qualifying
Finance up to 6 months of mortgage payments
Purchase or Refinance and Improve all in one loan
The 203(k) loan program offers borrowers the resources to rehabilitate a home that may be in need of repair, either the home that they currently live in, or a fixer-upper. One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home.

. The FHA 203(k) loan is available to borrowers of all income levels, to homeowners who plan to OCCUPY the house, and the home is 1 to 4 units.

203K Eligible Borrowers:
Owner Occupants - Purchase - Refinance
Eligible Properties:

Single family dwellings
Condominium
Townhouse
Mixed Use (Storefront)
1-4 Unit buildings- This loan can be used to increase or decrease the number of units.( For example if you have a 2 family building that you want to convert to a large one family, the costs involved can be part of the loan. )
Structural Alteration and Reconstruction:
Elimination of health/safety hazards
Changes for cosmetic appeal
Plumbing, heating air conditioning, and electrical upgrades
Well and/or septic repairs
Roofing, gutters and downspouts
Flooring, tiling and carpeting
Energy conservation improvements

Let me know if you'd like futher information


Will
Wells Fargo Home Mortgage

They are based off of future value and cost of the repairs or improvements for owner occupied purchases. Feel free to contact me to find out more about how they work and other conventional options if your thinking of buying a fixer upper.