About Financing and Mortgages by TheMurenTeam.com

GUIDE TO FHA REGULAR 203K LOANS / REHAB LOANS
           
           Buyer enjoys the benefits and flexibilities of FHA for qualification
  • 3.5% Down payment
  • Seller Contributions up to 6% of the sales price
  • Minimum credit score of 620
  • Repairs from $5000 but typically over $35,000  
            Eligible Work Items:
Structural repairs and alterations – includes additions to structure
Improvements in modernization – incl. kitchens and baths
Changes for aesthetic appeal – siding, doors or windows, plumbing, heat, A/C or electrical and includes new plumbing fixtures
Installation of new septic or well – must be installed prior to any other repairs
Replacement of flooring and or carpeting or tile
Energy conservation improvement- double pane windows and doors, storm windows, insulation, solar domestic hot water systems
Major landscape and site improvement- patios and terraces that improve value equal to the cost or necessary to prevent erosion. Tree removal if hazardous.
Purchase and installation of appliances including ranges, refrigerators, washer/dryer, dishwashers and microwave ovens.
Accessibility improvements for persons with disabilities.
Painting and other cosmetic repairs
Repair a swimming pool – cost must be no more that $1500.00
            Ineligible Work Items
Items that will not become a permanent part of the property
Luxury items: new swimming pool, exterior hot tubs, saunas, spas, tennis courts and barbecue pits.
 
            Rehab requirements:
Inspections required for all draws.
No relatives as contractors
“Self-help” is strongly discouraged
Homeowner-Contactor agreement required & cost estimates from contractor
All work must be completed within 6 months.
A consultant is required and will do the specification of repairs/work write-up.
If more than 3 contractors, a general contractor will be required.  
 
 
            The role of a FHA 203K Consultant
1. Meet with the home buyer and inspect the property for FHA required repairs (also known as HUD “Minimum Property Standards”).
2. The consultant and home buyer will jointly agree on a list of work items that are:
  • Mandatory to meet the loan requirements (FHA repairs),
  • Recommended improvements by the consultant,
  • Desired improvements by the borrower.
3. Draft the “Specifications of Repair” (also known as “Specs” or “Work Write-up”) which details the agreed job scope. The consultant also prepares “Contractor Bid” documents that will assist the home buyer solicit estimates from licensed contractors.
4. Once the home buyer has chosen a contractor, and has obtained the estimate, the consultant will adjust each budget item to match the contractor estimate. This will become the final draft and establish the dollar amount the home buyer needs to borrow for the renovation portion of the 203K loan.
5. The consultant will send the final report to the loan officer and home buyer. The loan officer will order the appraisal. This final report will include draw request forms and other HUD required documents.
6. Prior to settlement, the home buyer and contractor sign an agreement with the mortgage company stating the job scope and budget is acceptable. The consultant will assist if needed, but this form varies by each mortgage company.
7. The home buyer will instruct the contractor to start the renovation after settlement. The consultant performs draw inspections throughout the construction phase and files the required paperwork with the mortgage companies draw processor. The consultant will advise the home buyer and contractor throughout the process.
 
IT IS THE RESPONSIBILITY OF THE CONSULTANT TO PROTECT THE MORTGAGE AT ALL TIMES.