FHA 203(k) Streamlined Option

12 Replies

All,

Closing on a house soon. (yes I know this is for owner-occupied, and it will be) I need to get some work done in order for me to use the FHA option.

Questions:

1. Does someone appraise the property before and tell me what work needs to be done in order to use FHA? (that way I know how much to take out in the 203k. (I understand this is SEPARATE from home inspection)

2. Once I figure out what needs to be done (either from an appraiser, or my lender, or google), do I have to go through a legit company? Or just someone who is licensed to make the necessary repairs?

3. Does someone come and inspect all of the work after once it is completed (at least 6 months after)

4. If someone does come to inspect after, but nobody ever did before, and I find out I need to take out more money, can I restructure the 203k loan, or am I stuck paying out of pocket for additional repairs?

Info: I am in Massachusetts, looking to spend under 10k and will be using the Streamlined option.

All input would be great! Thanks

A 203K is a very structured process with before and after inspections and lots of paperwork and lots of waiting. Don't worry. They won't miss a thing. 

Congrats on the new home purchase! 

Regarding #4: In my experience, the "after" inspection is simply to verify the work identified "before" has been completed.  As @Rob Beland mentioned, they will identify the issues they want addressed up front.  You don't have to worry about them adding to the scope of work after the fact.  However, I wouldn't trust them to catch everything (as you mentioned, an actual home inspection is completely different).  

Hi Robert- I am the Director of Renovation Lending at AnnieMac Home Mortgage and I specialize in renovation loans specifically the FHA 203k and Homestyle.  I am going to answer your questions below.  I hope this helps!  

1. Does someone appraise the property before and tell me what work needs to be done in order to use FHA? (that way I know how much to take out in the 203k. (I understand this is SEPARATE from home inspection)- No- you will need to get contractor bids for the work you think needs to be done.  The appraiser will note anything that is missed and does not have the property meeting FHA minimum property standards.  Then you can address those items as well.  I however recommend (not require) the use of a FHA 203k constulatn who can do a feasibility report and save you time.  It will cost you a few hundred dollars but it will help you to get an idea of what you need to do upfront.  

2. Once I figure out what needs to be done (either from an appraiser, or my lender, or google), do I have to go through a legit company? Or just someone who is licensed to make the necessary repairs?  The repairs will need to be done by a licensed contractor with the proper insurance.  As a lender it is our job to make sure the contractor understands how the program works and how they get paid.  We screen them for you but ultimately the choice of who you use is up to you.  

3. Does someone come and inspect all of the work after once it is completed (at least 6 months after) Yes- we will send the appraiser or a fee inspector out to inspect the property.  For a $10K renovation we really would expect it done within 30-45 days- there is no reason it should take any longer.  

4. If someone does come to inspect after, but nobody ever did before, and I find out I need to take out more money, can I restructure the 203k loan, or am I stuck paying out of pocket for additional repairs?  No- once the loan is set it is set.  No changes can be made.  So as I mentioned before a FHA / HUD 203k consultant, while it maybe a small fee it is worth its wait in gold as far as I am concerned.  

Good luck and please feel free to reach out to me with any questions!  I am here to help! 

Info: I am in Massachusetts, looking to spend under 10k and will be using the Streamlined option.

@Rob Beland - anytime.  I wish I had more time to help dispel the myths and misinformation on 203k's.  There is so much of it flying around here on BP.  I love the boards and info but some much is misleading.  

Glad to hear this helps! 

Originally posted by @Jeff Onofrio :

Hi Robert- I am the Director of Renovation Lending at AnnieMac Home Mortgage and I specialize in renovation loans specifically the FHA 203k and Homestyle.  I am going to answer your questions below.  I hope this helps!  

1. Does someone appraise the property before and tell me what work needs to be done in order to use FHA? (that way I know how much to take out in the 203k. (I understand this is SEPARATE from home inspection)- No- you will need to get contractor bids for the work you think needs to be done.  The appraiser will note anything that is missed and does not have the property meeting FHA minimum property standards.  Then you can address those items as well.  I however recommend (not require) the use of a FHA 203k constulatn who can do a feasibility report and save you time.  It will cost you a few hundred dollars but it will help you to get an idea of what you need to do upfront.  

2. Once I figure out what needs to be done (either from an appraiser, or my lender, or google), do I have to go through a legit company? Or just someone who is licensed to make the necessary repairs?  The repairs will need to be done by a licensed contractor with the proper insurance.  As a lender it is our job to make sure the contractor understands how the program works and how they get paid.  We screen them for you but ultimately the choice of who you use is up to you.  

3. Does someone come and inspect all of the work after once it is completed (at least 6 months after) Yes- we will send the appraiser or a fee inspector out to inspect the property.  For a $10K renovation we really would expect it done within 30-45 days- there is no reason it should take any longer.  

4. If someone does come to inspect after, but nobody ever did before, and I find out I need to take out more money, can I restructure the 203k loan, or am I stuck paying out of pocket for additional repairs?  No- once the loan is set it is set.  No changes can be made.  So as I mentioned before a FHA / HUD 203k consultant, while it maybe a small fee it is worth its wait in gold as far as I am concerned.  

Good luck and please feel free to reach out to me with any questions!  I am here to help! 

Info: I am in Massachusetts, looking to spend under 10k and will be using the Streamlined option.

 Jeff, this is exactly what I was looking for. I can't thank you enough for how detailed you got in the responses. My current lender doesn't seem to understand the process as much as I'd hoped for. (Everyone says I should have gone to lender who specializes in 203k, but I didn't even know I was going to do that before I picked a lender, never mind what it even was!)

I think after your responses, I have a good grasp of the process and can go from there.

THANKS AGAIN! I am sending you a virtual beer for the help!

Your welcome-= virtual beers are always accepted!  LOL

@Jeff Onofrio

 there should be a separate forum dedicated to the truth that is not told by the "gurus". Its undortunately so subjective sometimes considering how much people have invested. We carry on I guess. Thanks again...

Originally posted by @Jeff Onofrio :

Your welcome-= virtual beers are always accepted!  LOL

 Awesome!! Another question - is there specific paperwork a contractor needs to fill out (in regards to a quote for job) or can it be any written quote from them?

Basically I have found a contractor to do the work, but not sure of next steps to submit the quote.

@Rob Beland - my intention is to open open a discussion where I do Q&A at designated time- I do have a full time job ;) but I love to help! 

@Robert P - all lenders have there own contractor package. I will see if I can post mine here for everyone's review.  Once the package is filled out the bid must be detailed and broken down by labor and material.  Any bid that is vague will only waste time as any good underwriter wants detail to protect you and our collateral.  

Hope this helps! 

hey @Jeff Onofrio - is there a limit on how many contractors one can use? I am looking to use two, but my lender is pushing me to only use one. I understand it can get more complicated with two, but do I HAVE to only use one, or is it just encouraged to use one, rather 2?

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