Going 203(k)? GREAT! But it's time to make a call...
The very first thing to do is call the 203(k) Consultant. The 203(k) Consultant is your guide into the loan, and will assemble the FHA/HUD package to get you past underwriting. As a professional 203(k) Consultant, I handle a lot of these loans, which is your assurance that I know exactly what to provide to the Lender and how to work with the Contractor. Unfortunately, its been my experience that a lot of misinformation exists on the web about this program, and it is VERY IMPORTANT to have clarity and direction when you are first considering the property ~ so don't hesitate to call when you are thinking about going under contract.
The 203(k) WHAT loan?
There are TWO primary types of 203(k) loans, and as I am discovering, the Consultant is being required on more and more Streamline loans - not just the Full 203(k). It's important to pin this down before you get too far with your Lender, as time can be of the essence if you are in due diligence. Note that all lenders are not equal in this arena. You want a Lender who has been closing 203(k) loans for a while now, and has worked out all the office-drama that these seem to generate.
The 203(k) Streamline:
The 203k Streamline program is intended for uncomplicated rehabilitation or improvements to a home for which permit drawings, consultants, engineers or architects are NOT required. This program allows discretionary improvements and/or repairs shown below:
- Repair/Replacement of roofs, gutters, down spouts and diverters.
- Replacement of existing HVAC systems-- unless it's a theft situation where tertiary damage has occurred.
- Repairs to plumbing fixtures, and very minor electrical items
- Repair/Replacement of flooring.
- Minor interior remodeling, such as kitchens and bathrooms, which do NOT involve structural alterations.
- All surfaces must be in stable condition in order to be painted.
- Weatherization: windows, doors, insulation, weather stripping, caulking or new siding.
- Appliances: including ranges, refrigerators, washers/dryers, dishwashers, microwaves and hoods.
- Accessibility improvements for persons with disabilities.
- Lead-based paint stabilization or abatement of lead-based paint - interior and exterior.
- Repairs to decks, patios and porches.
- Basement finishing and remodeling, which do not involve structural alterations.
- Basement waterproofing.
- Septic system repair or replacement.
Mortgagors may NOT use the 203(k) Streamline loan program to finance any required repairs arising from the appraisal that do not appear on the list of Streamlined 203k eligible work Items or that would:
- Necessitate an FHA 203(k) Consultant to develop a Specification of Repairs aka Work Write-Up.
- Require plans or architectural exhibits.
- Require a plan reviewer.
- Require more than six months to complete.
- Result in work not starting within 30 days after loan closing - or cause the homeowner to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted.
The Full 203(k):This program is generally for more aggressive remodeling and alterations, items listed are not eligible for financing under the Streamlined 203k loan program.
- Major rehabilitation or major remodeling, such as the relocation of load-bearing partition walls.
- New construction, such as room additions or attached structures.
- Repair of structural damage to load bearing partitions or floor systems.
- Repairs requiring detailed drawings or architectural exhibits - or any permit drawings.
- Landscaping or similar site improvements that correct an inherent flaw with water flow.
- Any repair or improvement requiring a work schedule longer than six (6) months.
- Rehabilitation activities that require more than two (2) payments per specialized contractor.
It is important to note that certain types of theft can turn a Streamline into a Full K loan. Regardless, you are going to need a professional Contractor - who has completed the Contractor Validation Package for the Lender... and you will more than likely need PERMIT DRAWINGS for the City or County in order to pull a permit.
So, take a deep breath, and know that when the Consultant hits the scene - things tend to smooth out and accelerate toward a closing table!
It is important to call the Consultant early, but not before the property is under contract. Sometime I can do a free walk-thru if the property is close by, and answer questions about what's up ahead. Feel free to link to me directly... www.GravityConsultingGroup.com, or just call 404.680.5773 for Christopher Colvin.