“FHA 203K Loans”
I know it’s been a while. Kim and I have been working with our agent Shirley looking for houses with very little luck but we have found a few that we really like, but all need some work cosmetically, minor work inside like appliances, electrical, plumbing etc.
All with good bones, but are bank owned. It could be good for fha loan but need a 203 k to finish work. How does the 203k loan work? If we get an outside contractor, does the contractor have to wait for their money or is it available for payout? This is where I think we need your help as our agent really has very little knowledge about this mortgage? Any thoughts on what we do next to get the ball rolling, also do we need another pre approval? We really need to get into a house of our own!
In advance, Thanks Kim and Scott
Unfortunately not all Realtors know and understand the FHA 203K process, especially when it comes to where the renovation dollars are concerned. There are basically two different 203 K loans, one that is under $35,000 and a FULL K which means over $35,000 in renovation costs. There are many different aspects but for this purpose. I only want to address how the money is paid out.
For the under $35,000 there are usually 2 draws for the money, the first will happen shortly after the closing (even though the work is not yet completed) and the other at the end of the project when the work has been completed.
For the FULL 203K there are a minimum of 2 and there can be many more. It usually depends on the needs of the contractor. In most cases, work has to be completed before a draw is paid out. I once had a transaction that had 7 draws, but we do what we can to limit the number of inspections as there is a fee charged each time.
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