Closing with 203K - Advice Please!!

[Matthew Amabile]

Hi,

I am currently in attorney review on a 4 bedroom multifamily home. I am purchasing through a 203k reno loan and I have heard these can be a tricky loan to navigate. I have heard HUD inspections, getting certified contractors, appraising, etc. can be an arduous process. Any tips for someone jumping into the ring with the 203k in a week or two?

[Paul Welden]

Select your partners wisely - Realtor, Lender, 203k Consultant, and Contractor

REALTOR - it's recommended to work with one that has done a 203k in the past so they know what verbiage HUD wants to be added to the purchase offer contract and how to structure the deal

Lender - advice you to select a lender with verified 203k experience; the lender is the quarterback in the process, controlling the rules, paperwork, processes, procedures, and if the lender does not have sufficient experience with the 203k, your entire process can look like the Cleveland Browns on a Sunday afternoon

203k Consultant - the lender is responsible for selecting the 203k Consultant (refer to Lender paragraph above); this person determines the scope of work and pricing for the project

Contractor - strongly advise you to select a Certified 203k Contractor; this person does not set the pricing (see 203k Consultant info above) but does need to know the different versions of the 203k, payment methods, timelines, paperwork, and processes; definitely don't want to work with a contractor who is going to "wing it" on a 203k. 

You're only as strong as your weakest link. So, select your partners wisely. 

On a Standard 203k, you can add up to 6 months of mortgage payments (PITI) into the loan if the property will not be habitable during the rehab. This can ease the cost of paying for 2 housing payments during the rehab.

Allow 30-60 days closing time for the loan.

Most 203k consultant's pricing is for builder basic materials.

Getting permits and some materials can delay the process. Also, the availability of some contractors and their subs can cause a few delays. 

Be patient and remember that your partners are also interested in getting to the finish line just like you.