There are many aspects of the 203K loan that must be carefully followed in order to ensure that the process is done right. One of those components is the contractor’s bid. This document is a vital component of the underwriting process, which is why proper care should be taken to ensure that the bid is done right.
Find the Right Contractor
The first step is to find the right contractor. This does not mean choosing the first contractor you find on a Google search. You need one that has experience with 203K loans. This is a bit tricky though. There is no such thing as contractor certification for the 203K loan, so there is no approved list or anything of the sort. You have to do your research and find those contractors in your area that are familiar with the process. You can ask for referrals, ask contractors to see work they have completed or talk to your lender about known contractors that have done work for other loans in the lender’s portfolio.
Creating the Bid
Once you have the right contractor, he needs to create the bid for you. This bid must follow very strict guidelines or it will be rejected by the underwriter. In general, it needs to include the following:
- Contractor information, such as the name, address of his business, business license number, and phone number.
- Basic information about the buyer, including the name of each borrower and the address of the home that the work is to be completed on.
- The cost of any permits that are required by the county and/or city.
- Specific break down of all costs, including labor and materials. Nothing should be lumped together – it should line items.
- Tax must be listed separately from all other items.
- Everyone involved should sign the agreement, including the contractor and yourself.
- The agreement must state the knowledge that the work must start within 30 days of the closing date of the mortgage.
- The agreement should also state the understanding that the funds will be disbursed on a specific draw period that is specified before the loan closing.
- The agreement should state that the borrowers will be able to live in the home with the exception of a 30 day period unless other arrangements are made.
These are the general specifications of the bid; the lender may have their own requirements and the bid may go back and forth between the contractor and the underwriter several times. In order to eliminate the confusion of the process, it is best to have the Inkassolån consultant who can handle this portion of the process to ensure that the process is efficient and handled correctly. Even contractors that say they have 203K experience can get overwhelmed with the back and forth from the underwriters. Rather than risking a contractor giving up the job, let the consultant get involved to ensure that the process is done right the first time.
It is important to understand that if a contractor fails to complete the job while you are in the midst of a 203K project, it is imperative that you find another contractor right away that can complete the job in the specified time. There is a 6 month period in which all work needs to be completed. In order to avoid headaches and issues down the road, do your research to ensure that the contractor you choose is reputable and typically completes the jobs that he starts in order to ensure the legitimacy of your job.