FHA 203k Streamline loan, FHA 203k Standard loan, Fannie Homestyle

By
Real Estate Agent with Duval Realty of Jax
  • On FHA 203k or Fannie HomePath Renovation loans, what happens to the money for repairs after closing?
    Depending on the version of the loan there are different scenarios.
    • FHA 203k Streamline loan  – 50% of the repair money is paid at closing with a 2-party check to the contractor and homeowner. The remaining funds are held in escrow by our concierge draw team. When the work is completed, there is a final inspection to ensure the job was completed in workmanlike manner AND there is a final title update to ensure there are NO liens from the contractor before issuing the final 50% check.
    • FHA 203k Standard loan – There are NO upfront monies. After closing, the funds are held by our concierge draw team. The contractor can have up to 5 draws on the repair funds. There is an inspection for each draw and there is also a 10% holdback on each draw until the final title update is clear upon completion of the job.
    • Fannie Mae HomePath Renovation / Homestyle Renovation loan – There are NO upfront monies. After closing, the funds are held by our concierge draw team. The contractor can have up to 5 draws on the repair funds. There is an inspection for each draw and there is also a 10% holdback on each draw until the final title update is clear upon completion of the job.
  • While every renovation loan can present a different scenario for inspections, process etc., we receive many questions for the basic structure of the product. Here is a short, generic summary of a renovation loan on an “As-Is” property:
    1. Home goes under contract “As-Is”
    2. Buyer has home inspection, WDO inspection, feasibility inspection, etc.
    3. Items are identified that MUST be addressed for the home to meet minimum property standards AND the buyer decides what improvements he/she WANTS to make on the home.
    4. A general contractor provides a Detailed Scope of Work with line items breaking out labor and materials for each item.
    5. The appraisal is ordered – The Scope of Work is uploaded for the appraiser who includes it in the appraisal and assigns value based on the work being done.
      NO WORK IS DONE UNTIL AFTER CLOSING.
    6. The loan closes. The renovation monies are put in escrow with our draw center. Some FHA loans pay 50% of the costs right at closing.
    7. When the work is complete, an inspection is ordered to ensure the work was done in workmanlike manner. In addition, a final title update is done to ensure there are no liens on the property before the contractor is paid the remaining funds.
  • How much additional out-of-pocket cost is there on a FHA 203k loan vs. a traditional FHA or conventional loan? Minimal. The “Cost of Renovation” including inspections, title updates, etc. is financed into the loan with the work. Therefore, the only real additional hard costs are – Slightly higher appraisal fee, increased lenders title insurance premiums and transfer tax adjustments per loan amount.
ex: On a $150,000 home the total difference in out-of-pocket cost might be $260.

 

 

 

Leave a Comment

Comments (0)

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?