When you decide you want a renovation loan so that you can purchase a less expensive home and fix it up the way you want it, you have several choices. The FHA 203K loan provides the most flexibility and ease of the entire process. Even though it might seem like there are a great number of people with a say in what and how you do things, it is a seamless process that goes off without a hitch when you use professionals that are experienced with 203K loans. Following is a list of the most important people you want to make sure you use during the process for a successful outcome.
The first step is finding a lender experienced with 203K loans. Not every FHA approved lender deals with a large number of the rehab loans, so make sure you ask before you start the process. Just because a lender is approved to offer the loans, does not mean that they have a lot of experience in them. If you find a lender that has only a little experience, it is best to shop around to find one that knows all of the nuances of the process so that you can ensure a seamless process.
You need an inspector that is going to inspect the property not only for things that are wrong with it that prevent it from meeting the city or county code, but also things that you may want to change to make them more convenient. According to my friend, who runs a mold removal Maryland company, the inspector will let you know major things like, if you have termite or mold damage or if there is a crack in the foundation. He can also let you know things like the plumbing is rather aged and will need to be replaced soon by an emergency plumber, or the windows are not very energy efficient. These are things you will want to know so that you can ensure that you use your 203K loan funds wisely.
If you are using a full 203K loan, which means the rehab costs are more than $35,000 or you are making structural changes, then you need a 203K consultant. You should use this professional for his purpose to get the most out of the process. He is your eyes and ears throughout the entire process and he has your back the entire time. If you use him to his full extent, he can do things like negotiate with contractors, help you pick the most reputable contractor, provide opinions on changes you wish to make on the home, and help you decide if certain changes are worth the money. This professional will oversee the funds on your loan, disbursing them as necessary and will also do the legwork to ensure that there are no liens on your property before the contractor receives his final payment.
The contractors are a necessary component of your 203K loan as well. Unless you have adequate experience in the type of work you wish to do to the home, you are not able to do it yourself. The lender requires the use of a reputable contractor with the appropriate credentials and experience. It is best to run a few contractors past the lender so that he can help you choose the one best suited for the job based on the charges he provides and the experience he brings to the table. Remember that you are on a time schedule with this type of loan – all work needs to be started within 30 days of the loan closing and finished within 6 months of that date. If you choose a contractor that does not understand the 203K loan process or does not have good references that can attest to his timeliness, you could run into problems, so make sure you choose wisely.
These 4 people are the crux of the 203K loan process. They are the people that can make or break the loan for you, so make sure you do your research and shop around. Don’t just settle for anyone that says they can get the job done for you – make sure they are reputable and experienced in this loan type to ensure the outcome you desire.