Contractors and FHA 203K Loans in NC

By
Mortgage and Lending with Equity Resources NMLS 67179 Licensed in NC

FHA offers a great mortgage program for folks who want to make improvements to their home (through a refinance) or those who are purchasing a home that needs some "TLC!"  The program's official name is 203k. 

If you are not familiar with the loan, you can find basic program details, like how the FHA 203K loan works, by clicking here.  If you want to know what Improvements are Eligablie (and not Eligable) with the FHA 203K mortgage program, please click here!  This program works GREAT for folks purchasing foreclosed property!

BASIC INFO ABOUT  FINDING AND HIRING

 A CONTRACTOR TO DO WORK UNDER THE FHA 203K HOME LOAN PROGRAM:

  • All repairs/work must be completed within 3 months of the closing date.
  • Repairs must be completed by a contractor unless the borrower can
    demonstrate the required expertise/experience (ie: plumbing repairs would
    require a licensed plumber, electric work would require a licensed electrician).
  • The contractor making the repairs does not have to be a licensed general
    contractor
    ; however, he must provide a resume along with two letters of references
  • The cost of repair(s) must be reasonable.
  • The house must be "Complete" when the home is renovated! See Ineligible repairs
  • "Cost Plus" or "Time and Material" contracts are prohibited.

Use of Contractors:

  • Contractors provide estimates for the work to be done. The buyer / owner and the Contractor must both sign and date this form.
  • Contractors provide a resume and two letters of references - these can not be emails.  You need actual letters from actual people regarding the folks who are doing the work.  They can say, "I had Joe's Roofing Company replace my roof last spring and thought they did a great job, showed up on time, and were very reasonably priced.  I would recommend them for your roofing needs."  They need to be signed, dated and have a telephone number on them.
  • The Underwriter will review the contractor's credentials verifying jurisdictional requirements for licensing, bonding & insurance are met (we will need a copy of all these docs).  MEANING... you need to work with a "REAL" company.  We are going to be looking at the NC Sec. of State site to verify that this is a COMPANY.
  • Each contractor must sign a homeowner/contractor agreement. (Different from the estimate provided by the contractor - this is a FHA form we will give you) The cost estimate(s) provided must clearly state the nature and type of repair and cost for completion of the work item.  You can not have an agreement that says, "general miscellanious carpentry work  $20,000."  I need SPECIFIC details of what is going to be done.
  • If you do not provide a detailed estimate of work, the underwriter may require additional cost estimates from the borrower.  We recommend you get estimates from 3 people and keep those estimates in your folder in case the underwriter asks for them!
  • "Cost Plus" or "Time and Material" contracts are prohibited.

Self Help (borrowers completing work):

  • The borrower is required to have the necessary expertise and experience to complete the work in a satisfactory manner (ie: borrower is a licensed plumber and will complete that portion of the work).
  • The cost of labor is included in the repair/rehabilitation cost (in case the borrower is unable to complete the work and a contractor must be hired).
  • The borrower may not be compensated for his/her labor. No sweat equity.
  • The borrower must provide written estimates of the repair/rehabilitation costs as well as written estimates from the suppliers of the materials that the borrower will purchase
  • The borrower must sign and complete the self help agreement that we provide them.
  • "Cost Plus" or "Time and Material" contracts are prohibited.

Once we have all of this paperwork, the signed Estimate, the signed Contractor Agreement, the Letters of Reference - then we will submit the information to the appraiser.  It is important to know that once we submit your loan for approval - you can NOT change which contractor you use!  Get the price settled, get the best deal you can - but don't try and change the contractor after the loan has been submitted for approval! Because getting all of this paperwork takes some time - we suggest that you expect at least a 45 day closing!

FHA 203K loans are for owner occupied properties, and the maximum loan is calculated based upon the limits in your county! Click Here to find the maximum loan limit in your county!

Did you know that if you are a FIRST TIME HOMEBUYER you might qualify for an $8,000 TAX CREDIT!  To find out more about this great program, click here!

If you have questions about purchasing a home in NC, or refinancing so that you can use the FHA 203k mortgage loan program, please call Steve and Eleanor Thorne, First Financial Services, in Cary, NC  919-851-3031

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Ambassador
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Extensive, to say the least.  I've studied this product like a madman and think I know why it hasn't been utilized to its fullest extent.  It's misunderstood and fell prey to renovation products that just didn't work but were easier to "sell" and/or get to the closing table.  For those that are truly Investors in everything Real Estate, they need to take heed to the information provided here.  And from what I know, the Contractor is crucial in streamlining these transactions.

Mar 02, 2009 05:37 AM #1
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Lee & Pamela St. Peter
Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522 - Raleigh, NC
Making Connections to Success in Real Estate

Thanks Eleanor for a very comprehensive explanation of the 203/K.  With some good REO properties out there right now this will become very handy indeed!

Mar 02, 2009 06:49 AM #2
Rainmaker
575,553
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

Good program that is not used very much in our area.

Mar 02, 2009 09:53 AM #3
Rainmaker
635,293
Leesa Finley
RED Properties - Wake Forest, NC
RED Properties - Raleigh NC Real Estate

thanks again for always putting this information out there!  it's great to have someone like you that I can count on for advice and always taking such good care of my clients!

Mar 02, 2009 10:17 PM #4
Anonymous
erwin gruber

We are doing an 203k loan right now but i have to say as good as it sounds on paper as bad it is in realaty. first our inspector is permanetly late with his Paperwork second the bank (Bank of America) keeps screwing up the checks all the time ( the last one 3 time in ac row) .for a fact i know that we are not the only one having this problem because we got paperwork from other people with ur adress one it send to our adress,people waiting fro thwere checks!!! it is a nightmare ! And on top of that you have to deal with contractors,  i lived in more that 15 countries in my live but i never have seen more contactors in any other country so disorganized and arogant that here , i am sorry to say this.they need a reality check , all of them.   

Mar 10, 2009 04:16 AM #5
Rainmaker
613,229
Mike Young
203kOnLine.com, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Sorry you are having a bad experience but for you and others that may do a 203k in the future... you need a team. One member of your team is not enough for your project to fly smoothly. Find a team that already exists and insert yourself into that team to form YOUR TEAM. Cary Mortgage has been around the block on the 203k and you should have none of these problems working with one of their teams. I've done well over 2500 and we have had less than 5 that were considered problem deals. The problems we did have were about the contractor not performing... you clearly need to find a good one.

Mar 17, 2009 02:12 AM #6
Ambassador
273,238
Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058

Erwin and Mike:  This is a great point! Having the entire team (not just the buyer, or the contractor or the lender is critical) for a smooth closing! Bringing everyone in the "loop" early in the process is critical to setting and meeting everyone's expectation!

Thanks for stopping by!

 

 

Mar 17, 2009 06:02 AM #7
Anonymous
Holly harris

I am ready to close on a house in the next 2 weeks. I was approved for an FHA loan but when the house was appraised, the appraiser informed me that it will not qualify for FHA...so I'm interested in a 203K.  The issue was termite damage (seller has agreed to treat, but existing damage is apparently extensive). Please let me know if you can assist me immdiately.  If you'll leave me a telephone number, I'll call you as soon as I hear from you. Scheduled closing date for this house is 21 AUG 09.  Can you help me?

v/r
CPT Harris

Aug 10, 2009 05:46 PM #8
Anonymous
Sarah

We just signed on a 203k with Bank of America (three weeks ago) and have not been able to get a contact there...the 1800 number just says to call back later and we have contractors working now who are about to stop and leave us in a lurch because we cannot figure out how to get the first draw. Any advice?

Sep 28, 2009 09:50 AM #9
Ambassador
273,238
Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058

Sarah - if you closed with an attorney - ask them for help.  The first draw was part of the initial money at closing!  You and the contractors signed draw papers and BofA should have sent the Attorney 1/2 of the total cost of the construction to the closing.  If you closed with an Escrow / Title company contact them - as they should have your funds!

Sep 28, 2009 09:56 AM #10
Rainmaker
613,229
Mike Young
203kOnLine.com, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

I don't see why the attorney can't cut that check either. That is the idea of the program. I am very disappointed in BofA as they just funded 50% of a streamlined loan right at 90 days after it closed. The work will only take a week and a half... the borrower has been living in the home for 90 days all the time it needed work that could have been completed 75 days ago with 50% of the money up front like the program was designed to do. If you can get the attorney to do that you will be a heroin.

Nov 30, 2009 11:39 AM #11
Ambassador
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Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058
Mike - I understand that just like USDA offices are on a delay, BofA has had some volume related delays too. We do not sell loans to them, so I don't have any direct experience with that particular problem. Fannie Mae now offers 2 different renovation loans - so maybe that will also help relieve the pressure on those struggling with the FHA process.
Nov 30, 2009 10:55 PM #12
Anonymous
Carla Jones

Ive heard on other blogs that BofA owes the patron money if the renovation money isnt dispersed in a timely manner, is this true? Cause my family and I have been closed on our house for 2 months and no money. Our house is gutted and we have no money to put it back together. Ur advice would be apprechiated.

Thanks,

Carla

Dec 17, 2009 09:56 AM #13
Anonymous
cindy l stevens

I am a contractor. we did our work in the first 24 hours of receiving the first draw. It is 5 months later and we still have not recieved a final check for our work. sometimes it is not the contractors that is hard to work with. The owner does not care less if we get paid. Her house is finished. The loan was sold and both banks are ignoring us. Bank of america and Prospect mortgage. They owe the general contractor 20k for his final work and they owe us 2,500.

These 203k loans are a nightmare for the contractors, especialy when the real estate agent, Veronica Correa from Better homes, says it is not her problem. She got paid and the escrow closed. That is all she cared about. we will never help another family again with a 203k. we will never help this agent either. all she cares about is her pay check.

Jan 25, 2010 10:54 AM #14
Ambassador
273,238
Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058

First off - Carla did not get a 203k loan, contacted her.

 

Cindy - I'm sorry you've had a problem. This is a good program, and it does help tons of families get their homes renovated. I will do my best to obtain a contact for you, and I will leave it on this post. I'm assuming this was not a streamlined loan, as those only allow a total payout of $35,000.  

 

Jan 26, 2010 06:19 AM #16
Anonymous
Rayna Mike

We specialize in 203 K program, FHA and Fannie Mae. We have a special department that does only 203k. We have been in business for 22 years and are a direct lender. Please call us or email us and we'll send you a book on the program.

 

Office number is 818-949-8424.


We are licensed in 10 states, SC,NC, GA,TX, FL< De, MD,VA,CA and PA.

 

Looking forward to  your questions.

 

Rayna Mike

 

Dec 14, 2010 05:48 AM #18
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