Getting 203k loan - does electric need to be entirely up to code?

Asked by Meghan, 20724 Thu May 28, 2009

We would like to put a contract on a 100 yr old home that needs some work. We're getting a FHA 203k loan to do the rehab. What I'd like to know is -- will FHA/the bank require us to use the loan money to bring the electrical entirely up to code? I'm planning on getting an electrician to give an estimate on what's needed to make it safe, of course. But I'd like to know if it's required or if I can fix it over time.

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Gary Smith’s answer
Gary Smith, Other Pro, Ridgeland, MS
Sun May 30, 2010
I assume you are going to hire the services of a professional home inspector before making any kind of real estate purchase. If so, great! I think you're making the right move. He/she will help determine if your electrical issues are considered a safety concern. As mentioned already in some of the answers, safety is one of the required repair items/issues under the 203K Program and they're required to be repaired by a licensed contractor.

You, as the buyer, will not be allowed to repair the electrical issues unless you can prove to the lender and their underwriting department that you are qualified to make the repairs (example: you are a licensed electrician), and...you'll want to be sure your lender will allow "self help". Not all lenders allow the buyer to work on the rehab. Check with your lender of choice.

Gary Smith - 203K Consultant
Web Reference:  http://www.my203k.info
0 votes
Ed Fallon, M…, , West Chester, PA
Tue Jun 2, 2009
I would also recommend that you engage the services of an HUD approved FHA 203K consultant if the work is extensive, especially if it is not a streamline 203k loan. I've included a link to search for one near you. The paperwork for the 203k can be overwhelming, especially for a contractor, and a good 203k consultant can shorten your processing time, and work with you all the way through the completion of your home.
0 votes
Robert Chome…, , San Diego, CA
Thu May 28, 2009
If the electrical is not cited by the appraiser as being needed to bring up to code, you won't have to do it. The lender will only make you fix what is pointed out by the appraiser in the appraisal. I'm not sure if you are doing a streamline 203k or a full 203k. But electrical work will force you into doing a full 203k which requires a FHA 203k consultant to help with the bids and manage the project..
Web Reference:  http://socalfhahomeloans.com
0 votes
Luke Allison, , Asheville, NC
Thu May 28, 2009
Pretty much. I think you will learn more as you go through the process. But my best suggestion would be to do as much work on the home with your 203k loan as possible. You are simply adding equity to the home anyway and making your home that much more desirable for you. Obviously you want to borrow an amount that you are ultimately comfortable with but if what you borrow is not a problem then by all means do as much to your home as you want. You don't want to be stuck in a situation where you run out of funds or desire to make an additional repair after the close and you don't have any room to do it.

If you have any questions, please feel free to contact me.
Luke Allison
Bank of America Home Loans
828-777-8828
luke.allison@bankofamerica.com
0 votes
Meghan, Home Buyer, 20724
Thu May 28, 2009
Oh sure, we're getting a 203k and perfectly willing to fix the problems that arise as we get the inspections done. Thank you for the info -- if it's a "health and safety concern" then they'll need it fixed, if not they won't have a problem (if I understood correctly).
0 votes
Luke Allison, , Asheville, NC
Thu May 28, 2009
FHA will require that the home have no "health or safety concerns." If the FHA appraiser deems that the electrical is a concern, then FHA will most likely require that the work be done - either via a 203k loan or possibly an escrow holdback. You will probably find out more info as you move forward with the loan process, but please be flexible. On a 100 year old home, you never know what surprises you are going to get hit with.
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