If you’ve been thinking of purchasing or refinancing a home that is in need of repairs, the Federal Housing Administration (FHA) 203(k) rehab loan might be of interest.
There are two types of 203(k) mortgages: streamlined and standard. The streamlined version is for smaller projects and is a less-involved process.
Purchase and refinance transactions work similarly to one another in that the process starts with both an appraisal of the after-improved condition, and contractor estimates. Once values
are determined, and the existing structure plus the improvement costs will support those values, the next step involves an FHA consultant.
The consultant, required by all 203(k) lenders, oversees the project on behalf of both the lender and the buyer, or in the case of a refinance, the homeowner.
Once the FHA consultant has inspected the property and reviewed the project plan, the loan process moves forward.
The verification process includes checking out the general contractor who will be doing or overseeing the work, and ensuring that the contractor has a line of credit. Third parties must be doing the work, as opposed to you or people you know in the trades, so the lender knows the work is getting done by qualified people and that the draws that the lender sends are being used for their intended purposes. Draws are given out at certain points in the process, and some money is withheld until the end to make sure all the work is done. Contact your us if you would like more us to refer you to a mortgage professional for more details.