FHA 203k loan process?

Question

Hi there,

I'm trying to gain a better view of the entire 203k loan process to avoid surprises for major rehab purposes. Based on my research, this could represent a basic yet inexact roadmap of all the steps. Can you please comment or clarify based on your experience? Also,  below I have some basic questions:

-Process or possible Roadmap
-Get loan pre-approval letter
-Issue formal offer
-Get offer accepted - go to contract with a 35 day term
-Property inspection
---Key areas: building with solid ductwork, plumbing, structural, electrical, etc.
-Obtain blueprint from seller (if possible)
-Negotiate with seller any discounts
-203k Consultant is selected by lender
-Agree on pricing from the 203k Consultant (Work Write-Up-WWU/SOR)
-Proposals from a certified 203k contractors; one or more have to be accepted
http://203kcontractors.com/
-203k contractor meets all timing and guideline requirements, paperwork, estimate format, MPS & MPR's, etc
-HUD consultant walks the property with the contractors bid and makes sure it checks all the boxes for FHA requirements
-Appraisal post renovation
-Lock down rate for 30 days more (optional)
-Insurance policy quotes

Who gets the certificate of occupancy and is it for?
To what degree am I supposed to pay contractors in advance?
Can you add an ADU as part of the scope of work of a rehab?
Where or how I can find 203k approved contractors?

Paul Welden · Answer

@JC Ceba

A few modifications if you don't mind ......

Contract term: should check with lender for their recommended time they need to close the loan (maybe 45-60 days) as loan closings are taking a bit longer today.

Property Inspection: not required, but it can give you more info about the property than what the 203k Consultant FHA Inspection will

Rate Lock: you can do this as soon as you get the offer accepted by the seller

The FAQ's on the Certified 203k Contractor directory have an easy to follow recommended steps for both versions of the 203k.

The CO is typically issued for the property .... not to anyone specific person.

You do NOT pay the contractors in advance! They get paid from the rehab account as work is completed and inspected.

Yes you can add an ADU.

And you already answered your own question regarding contractors... "Proposals from a certified 203k contractors; one or more have to be accepted http://203kcontractors.com/" Hope this helps!