Call 1-888-299-4484

Calendar

February 2012
M T W T F S S
« Oct    
 12345
6789101112
13141516171819
20212223242526
272829  

Steps of the Process

203(k) Approved Lenders most often require a Home Inspector plus a Contractor (usually a General Contractor) for 203(k) loans so this section will assume both are needed in the steps of your process.  For more information regarding exceptions and specific rules please see the MORE INFO section.

For a Refinance:

  1. Preliminary Feasibility Analysis.  The homeowner should get at least general idea about what improvements are desired and/or needed.  This can be specific by using a contractor’s estimate or it could be a general idea but some information should be obtained to use to then find out if the borrower qualifies for the 203(k) loan.
  2. Contact a 203(k) Approved Lender.  [For an Approved 203(k) Lender click here or call 888-299-4484] It is time to see if you might qualify for a loan before spending money and time on the process.  A lender should prequalify the borrower based on income, credit merit, etc, as well as to assist with any of the following as necessary as well:
    • Estimating the value and future value of the home (after improvements, rehab, upgrades, additions, etc)
    • Finding a Home Inspector [or “Consultant” - see DEFINITIONS under the MORE INFO Section – see also #4 and HUD’s approved Consultant List at https://entp.hud.gov/idapp/html/f17cnsltdata.cfm ]
    • Finding a Construction Company or Contractor if needed
    • Estimating Monthly loan payments to be sure they are affordable
    • Explaining the process, answering questions
    • For an Approved 203(k) Lender click here or call 888-299-4484
  3. Homeowner Prepares Work Write-up & Cost Estimate. Usually this is done with the help of or by the General Contractor (or Contractor, or whichever is required by the lender).  The Consultant can also help with this and/or with finding a Contractor to do the estimate and actual improvements.
  4. Fee Consultant Property Inspection. The Consultant (or ‘Home Inspector”) usually does a full inspection at this time.  The homeowner and the Contractor meet the Consultant at the home to make sure that the architectural exhibits are acceptable and to provide the lender with the appropriate report needed.  More information about the Consultant can be found in the DEFINITIONS section and the FIND A HOME INSPECTOR segment of the MORE INFO section.
  5. Appraisal Performed on Property (Future Value Appr)
  6. Loan is Underwritten by Lender, Borrower signs loan documents with a Notary, Loan Funds/Closes
  7. Home Improvements or Rehabilitation Work Begins. After the loan closes, the mortgage proceeds are disbursed to pay off the current lender and the Rehabilitation Escrow Account is established.  Permits are obtained and construction can begin.  The homeowner usually has up to six months to complete the work.
  8. Releases From Escrow Account (Draws).  As construction progresses funds are released after work is inspected by a HUD Approved Inspector, usually the Home Inspector him/herself.  Three draws are normal and a maximum of five are allowed.  The inspector reviews the Draw Request (form HUD 9746-A) that is prepared by the Contractor & Borrower.
  9. Completion of Work/Final Inspection. When all work is completed the borrower submits a letter stating that the work has been completed satisfactorily and ready for final inspection.  The Home Inspector/Consultant must agree then the final draw is released to the contractor(s).  If there are any funds left in the account from the Contingency Reserve or mortgage payment reserves the lender must apply the funds to prepay the mortgage principal down.

 

For a Purchase:  The steps are basically the same for a purchase with a couple of exceptions.  First a borrower should find a lender to get PreApproved for a loan so the homebuyer knows how what price homes they can afford to shop for.  If there is a chance of needing a 203(k) Loan it might be best to find an Approved 203(k) Loan Lender up front since the also tend to other optional purchase loans such as conventional and FHA.

[For an Approved 203(k) Lender click here or call 888-299-4484]

 

Next the homebuyer should locate a real estate professional such as a Real Estate Agent or Broker, who could help the homebuyer locate a home.  The real estate professional could also help the homebuyer estimate the current value of the home once it is found, estimate the cost of potential repairs, additions, or improvements needed, and possibly aid in the estimated value of what the property would be worth after the improvements are completed (future value).

[For an Approved 203K Lender click here or call 888-299-4484]