Michael Grace

Hello everyone, I said it before and I'll say it again. Most will tell to see a Realtor first, “and I agree”. However, try getting a consultant involved first and see what happens. I will give you a scenario I had 2 months ago. A first time buyer called me from Michigan. They saw my postings all over the internet. The sweet women said she found a house that needed a lot of work but she had a vision of what it could look like. Before I let her go too far and before I sent her to a Realtor and lender, I asked her a few preliminary questions and as it turned out her and her husband’s income was to low and their credit scores were both under 510. You would think that I shot their dreams right through the heart but I did let them know about a great credit counseling service in Michigan and they should make an appointment to see them. Well, their scores where raised to 640, 660 and the husband push for a promotion and their combined income now meets the minimum criteria. As a consultant I believe that whatever helps we can provide for those not understanding how the system works is a big benefit to those less fortunate. I read horror stories and I’m shocked at what I’m hearing. The 203 is a great program for first time buyers and refinancing. I guess because the 203(k) is all I do and understand the process so well it’s hard for to hear negative dialog about it. It is important do work with professionals that are experienced with 203K I make the process easier for all involved, the homebuyer, realtor, lender and appraiser. There are many aspects of this program that can adversely affect the good qualities of its purpose. The sharper the lender, appraiser and consultant….. the better results.

One of the biggest misconceptions about the FHA 203K loan process is that it is a difficult and time consuming. It is not with an experienced consultant. All the associated paper work is handled by the consultant then forwarded to the loan officer for underwriting.

To better understand the process, it is best to know there are two different types of FHA 203K loans:

The FHA 203K Streamline: This loan is for repairs under $35,000 that do not involve any kind of structural renovations. For Streamline 203K's, the lender may release 35-50% upfront and 50% when the work is completed. The lender will require a final inspection to make sure the work is complete. However, be sure that the maximum of $35,000 is enough to complete the work you want to have done. Some folks like using the streamline because you do not have to obtain the services of a 203(k) consultant. However, you do not want to run short of funds before the work is actually complete. This can sometimes happen with unforeseen damages during the construction process. In some cases you may only go back to the lender for an additional $2,000. This is depends on your lender and the circumstances. $35,000 is sufficient for minor work, i.e. new appliances, Kitchen and bathroom upgrades (not complete renovations) in most cases. Regardless of the scope of work, be sure that at the end of the estimating process, $35,000.00 will be sufficient.

Full FHA 203K: loans exceeding $35,000 in repairs, the process becomes slightly more intricate. Many times on these when you are doing more extensive repair you will want to involve a 203(k) consultant. He is the key to the project's success. Primarily, the 203(k) consultant is all that is required. The Consultants role is clearly defined at the initial consultation. Obviously, the process can vary from loan to loan and the need to retain an Architect or Engineer could arise depending on the complexity of the project. The 203(k) consultant will work with all parties involved with the project. The consultant will be very knowledgeable about both 203(k) programs so he/her is that right place to start if you are interested in this program. Your Realtor can help you locate one or you can go to HUD's website also at www.HUD.gov or www.your203home.com

End Result of the 203K Process

The end result of any process can differs from project to project, but when done correctly, a 203K loan home buyers can successfully use a 203K financing to create a custom designed home with substantial equity from day one. And don't forget, you can refinance your existing loan with the 203(k). The key to the success is the 203(k) consultant.