What is the maximum number of draws on a 203k project?
I have had a major lender turn down a loan when our contractor requested 10 draws @$30,000 for a $300,000 construction amount.
I set in on a Denver HOC web-cast as I thought we would get some new input or incite. Sadly they were merely reading from the 1994 manual, and mis-reading this portion as so many do.
4240.4 Rev-2 states "Intermediate draws (four maximum) [and one final draw] are inspected by the HUD assigned fee (or DE staff, where applicable) inspector (see paragraph 4-9)."
It goes on to state "If the cost of rehabilitation exceeds $10,000, then additional draw inspections are authorized provided the lender and borrower agree in writing, and the number of draw inspections are shown on Form HUD 92700, 203(k) Maximum Mortgage worksheet."
That is pretty clear to me that more than 5 draws are allowed as long as everyone agrees.
The new guideline that came out 14 SEP 2015 actually states there are no more than 5 draws because they had someone unfamiliar with the program rewriting the program while being coached by someone not fully familiar with the process.
The "new guideline" has a list of the ML and handbooks that are being replaced and low and behold this 4240.4 isn't one of them, leaving it fully in force. You can actually have as many draw requests as it takes to finish the job but... ONLY 5 can be financed. The rest are paid at the time of the inspection in CASH.
We have an office in Millersville, MD
downtown 10-14-2023
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