Secondarily the consultant will monitor the construction phases, report his/her findings to your financial institution and will help insure the mortgage lending affiliate that their money is in fact being spent for the purpose stated on the "Work Write-up".
The appraised value of the property will be dependent on the planned improvements. For this reason the consultant is a very early key player and team member.
Ask for references from past clients and lending companies who have worked with the consultant.
FHA 203K Loan - How the Program Can Be Used:
This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:
Â· To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
Â· To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
Â· To refinance existing indebtedness and rehabilitate a dwelling;
To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.
To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.
Visit this website for the consultant roster: https://entp.hud.gov/idapp/html/f17cnsltdata.cfm
Visit this website for more information about the 203K program: http://www.fhainfo.com/fha203k3.htm
You mentioned that some of the components have already been removed. At least some demolition and removal costs have been handled for you. That should lower your budget a tad bit.
Also, when considering replace appliances look into Energy Star Rated products. You may qualify for more savings via tax deductions by installing qualified energy efficient products.
There's really nothing in the kitchen right now (the cabinets, sinks, stoves, etc have been removed) nor anything in the bathrooms (tub, shower, sink, vanity, toilet, etc are gone) and we would need to refinish the floors, and thats just the beginning. Its a significant process either way and we would need a higher coverage that the streamlined doesn't offer.
I don't necessarily mind the paper work as long as its not confusing, misleading, and bureaucratic for bureaucracy sake.
Also thanks for all the insights, I'm actually shocked that such good information has been exchanged online. Its a new medium and its good to see the real estate industry so accepting of it. Makes the process a little less painful.
Please visit my website or call me at 630-963-6020
President of Spartan Construction & Design, Inc.
Long Realty Company
using this type of loan. However, I've have heard about it. This type of loan
203(k) will allow the buyer/purchaser to use part of the monies/funds for
repairs and renovation. This type of loan is being used more due to the
As is back owned and short sales that is currently on the market.
Lot of this properties are in need some of serious repairs.
I hope I have answered your question, the best of luck!
"Are all the 203k consultants the same or are there ones you want to watch out for?"
All 203(k) consultants are NOT the same! I recall a 203(k) transaction that I did many years ago in Bethlehem, PA. It was the my very FIRST experience with a 203(k) loand, the very FIRST GMAC 203(k) loan placed nationally, it involved about $40,000 in repairs overall, and it was a HUD home.
The consultant turned the transaction into a nightmare on many levels and almost bankrupt the general contractor. It was the mortgage company's FIRST experience with a 203(k) loan and their help was minimal.
Deadlines with HUD Homes transactions are critical. Still, the consultant had a problem reconciling his numbers and held up the transaction for TWO WEEKS to reconcile a TWENTY-FIVE CENT discrepancy on his spreadsheet!
His had outrageous estimates ... I remember he costed a walkway handrail at $2,000 when the contractor's bid for labor and materials was less than $100. It took a week to convince the consultant that the lower charge was reasonable and accurate.
On a final inspection he added a closet in the living room as a required piece of work ... he NEVER included it prior to that date ... and then he found sundry other things that he "forgot" to include in his initial estimate of required work ... and it became necessary for the contractor to complete these jobs before he could be paid. Following that experience I seriously vetted all FHA 203(k) loan consultants prior to working with a transaction involving that type of loan. UNKNOWNS are ill advised.
The Streamline product is easier to execute, less expensive, and is often accomplished without the need to hire an FHA 203(k) consultant.
I published a blog post, "Easy As 1 - 2 - 3 Rehab Financing" that you can find at the link below.
Are all the 203k consultants the same or are there ones you want to watch out for?
Gary - I might take you up on that offer. It would be good to know what the consultants are looking for and what to expect along those terms. Part of our fear is to start going forward and putting money into getting blue prints, plans, inspections started only to find out our expectations were way off. Granted MS and IL are different states, but I'm sure some of the regulation (wiring, insulation, etc) has national codes.
Wayne - I would definitely be interesting in getting in touch with the lender. We have agent working with us, but I tend not to like people 'doing the research for me'. Much rather find out and get detailed explanations to my questions from the source then second hand. The private loan would also be an interest as well. The reality is the house has to have significant work done, so any program that would mortgage the house at the closing price and provide $50k-$80k for repairs is what we are looking for.
One of my problems with the 203k is that it doesn't seem clear the exact time line of events. My main problem is not knowing when certain things take place or how. For example when does the 203k consultant come in and what needs to be completed before he can finalize the before - after price? How are blueprints, designs, etc compiled before the 7 days before closing when your allow to inspect the house? Does the 203k loan get approved before the closing or is there some lingering unknown at the time of closing? To me it seems like there is only so much that can be done without having the ability to inspect the house and only being able to do it 7 days before closing seems fairly risky. Not to mention we would also have to get village approval as well before renovation can start.
I guess what I really need is a pre-approval analysis and determination if this is the right option or if its to high risk. Too many homes are foreclosing and I want to make financially sure its a viable option before sinking too much out of pocket money into it.
I've already compiled a rough (+/- 1') blue prints base on some measurements we took when we visited the house, with some wiring and plumbing schematics that I was able to see. I also have a decent write up of what needs to be altered and vague cost analysis. Kinda hard to underestimate on the house as well, since the work that would need to be done covers pretty much every thing except the flooring, exterior walls, and some of the wiring, plumbing, windows, and interior walls.
Can the 203K consultant do the inspection prior to the 7 day window or better yet before an offer is even made?
I love the idea (don't like the waiting for another inspection before money is issued), but there doesn't seem to be that much information or people that have gone though it out there.
Thanks again for all the input, its been very helpful so far.
I met a lender last week that offers a very competitive private loan (portfolio) product, which has less paperwork and similar terms. If you're looking into a 203K you should talk to them as well.
I am happy to put you in touch with them.
Best of Luck
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Also any information on if some work is done by owner instead of contractor how does payout occur.
If anyone has gone through the ropes or knows a good resource it would be greatly appreciated.