FHA 203K Rehab Loan- Part 2

Financing Options for Denver Home PurchaseIn my first blog about the FHA 203K Renovation Loan, I talked about the basics of what this loan is and what types of home rehab projects it can be used for.  Part 2 of this blog post will focus on what will happen after you are under contract on  your home and starting to figure out what renovations are in your future.

OK, the sellers accepted my offer… now what??

Timing for FHA 203K Loans

Yay!  You are under contract on your soon-to-be new home!  This is an exciting time, but it can also be a bit stressful as you’ve  got the extra burden of figuring out what you want the finished product to look like.   If there weren’t any other offers on the home,  your Realtor probably allowed for some extra time in the contract for a closing date 45-60 days out (instead of the more standard, 30 day closing).  If you’ve got the extra time, you’ll appreciate it as you’ll be busy calling contractors and getting bids for the different work that you’d like to have done under the FHA 203K loan.

Hire an FHA-Approved Denver area inspector

Chances are, you’ll know you are going to finance your purchase with an FHA 203K loan at the time that you write the offer.   That being said, you’ll save yourself some time and money by having an FHA approved inspector do the inspection on your home.   After the inspection, you’ll have the list of all of the items that need to get done per the FHA guidelines (these are things that will make it unsafe to live in your home, like a broken furnace, loose railing, or a mold issue, to name a few).  These are non-negotiable items and you are required to get these completed prior to the closing.

The rest of the renovations are really up to you, your vision, and your budget.  After collecting several bids from specialty contractors, you will decide which contractors you’d like to work with.  The contractors will be required to supply your lender with a lengthy and detailed work description, which will include pulling permits, demolition work to be done, types of materials, etc.  Any contractor that is hired is required to be licensed and bonded in the county where the house is located.

Next, the appraisal will be ordered by your lender.  The appraiser will take a look at the current condition of the home and will factor in all of the improvements (per the bids) that the new home owners plan to have done, and will come up with an “as-completed” appraised value.  The FHA 203K loan amount can be for up to 110% of the as-completed appraisal value.

One thing to note is that a 203K can only be done on a property that has a certificate of occupancy of at least one year.  So, if you are buying a new construction home, with an unfinished basement, you will NOT be able to use the 203K to get your basement finished.

Your Perfect Home, thanks to the FHA 203K Loan

After the closing, both you and  your lender will work closely with the contractors to make sure that the projects are completed according to schedule.  The contractors have a maximum of 6 months (for larger renovations) to get everything completed.  Your lender will arrange payment to the contractors on a set schedule to ensure that the project gets completed to the buyer’s satisfaction.  If there is any money left over after all of the work is done, it will be applied toward the principal of the home owner’s loan.

Are  you ready to get started on a FHA 203K renovation Loan for your Denver area home-to-be?  Click here to get pre-approved or to request any additional information about how you could benefit from an FHA 203K Renovation Loan!

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  1. FHA 203K Rehab loan | 203kContractors.CO | March 6, 2011
  1. Elmer says:

    Superb, what a website it is! This webpage gives helpful information to
    us, keep it up.

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