I have recently discovered BiggerPockets.com as the go-to source for real estate information. I was wondering if anyone is familiar with the process of getting financing via FHA 203k and if there is a checklist of things we can do while waiting.
Here is where we are in the process: My wife and I found a house in St Pete, FL. This will be our first house. We put an offer in and got accepted. One of the requirements was to get a 203k renovation loan along with the FHA loan. We just signed a ton of paperwork with our mortgage broker yesterday. We only have 49 days to close and the mortgage broker said it might take up to 60 days. There is a $100 fee for each extra day past the 49th. The seller is a bank.
We already had an inspection done, which revealed some issues with a flat roof over the one room addition, which used to be a garage = no leaks, just old. The main roof has another 5 years, so we might be able to keep the main roof and only change the flat roof. Other issues are: AC outdoor unit trips the breaker - it might be the capacitor; 2 joists under the house need replacing; and some minor plumbing, painting, carpet and tile removal, as well as some small window replacing must be done.
We just don't like to sit around and wait, but want to get involved as much as possible. The mortgage broker did not recommend that we do any of the work ourselves, and we should just incorporate everything in the loan.
We will definitely have to hire people for the bigger projects, but meanwhile, I could change the capacitor and see if that's the issue with the AC. I could also replace the 3 small broken windows. But, since the house is not ours yet, are there any negative consequences we should be aware of, other than potentially wasting $100 bucks or so in fixing these small issues?
Is there a checklist we can use to get things done while we wait? We would really like to close on time.
Thanks everyone for your input!
You're generally not allowed to touch anything on the REO until after you own it. Your mtg broker will be your best guide. Obviously you need contractor quotes for the rehab portion of the loan, and find a GC approved by your lender.
Thanks Wayne. How do I find a good GC?
Do you have an inspection period or have you had an inspection period? Having an inspection performed by a professional should answer your question(s) regarding the (HVAC), much less expensive than trial and error. Contact a number of local contractors, who do renovation work for quotes. Each person you speak with will provide you with additional information and provide you with a more clear picture of what you are looking at for repairs and cost. Then you can decide what work you may want to farm out and what you want to tackle on your own, after the property is in your name. Remember building permit(s) are required for all work subject to building code requirements and only deal with state licensed and insured building contractors.
We are in the process of a 203k loan. Closing takes anywhere from 45 to 60 days. If you and everyone are diligent it could take as few as 30 days. The bank is going to look at your credit and require formal letters of anything that looks out of the ordinary. They will need bank statements and statements of liquid funds along with tax information and w2s. We already owned our home and took out a loan for adding a major addition so the case is a little different. Your mortgage loan officer will walk you through the process.
Also as mentioned in previous post you definitely already want to have a contractor lined up and an estimate in your hand of the cost of all the repairs before you apply for the loan.
Also as mentioned in previous post you definitely already want to have a contractor lined up and an estimate in your hand of the cost of all the repairs before you apply for the loan. The bank will probably need to see copies of all the estimates from the GC.
Thank you Tom and Jennifer. I appreciate your thoughts. Our mortgage broker recommended an FHA consultant. We're waiting to schedule an appointment with him. He is going to guide us through the next few steps. Meanwhile, I will start getting quotes from contractors. I'm gonna use Angie's List and perhaps I'll take the advice to visit Home Depot at 6 am :)
Originally posted by @Dan M.:
Thanks Wayne. How do I find a good GC?
There are several sites that list contractors who specialize in dealing with 203K loans and rehabs:
I just purchased an REO property that needs work. You will not be "officially" allowed to do any work until day after closing and the home is yours. Get your contractors and bids lined up during inspection period. Read the contract carefully, on mine the Bank has the right to remove the lockbox after the inspection period. I sweet talked the listing agent to leave hers up till closing to still get in and get bids for work. Your Realtor should have good references for contractors and be able to get them in to look.
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