1. Find a Lender and Get Pre-qualified
- This is the logical first step as we need to ascertain the loan amount that you may qualify for or the maximum loan amount that keeps you at your comfort level. They may be two quite different numbers. We want you to feel comfortable that your payment is clearly within your budget.
2. Find a Property
- Get with one of our 203k real estate professionals to assist you in finding a property suitable to your needs. You will probably look at several homes that need some degree of repairs. Don’t worry as all of those repairs are completed as part of the loan & rehab process. The best part is that YOU get to choose the carpet, paint, cabinets, tile and the layout of the property you are buying. You and remodel and customize the home to suit your tastes. If your real estate professional tries to steer you away from a 203k call me, please. Why wouldn’t you want to gain additional equity in a home you are buying. You only put down 3.5% but could end up with 20-25% equity by the time you move in. That is what the 203k loan program is all about.
3. Set Up Your Consultation
- Call us at 888-820-5889 to set up an appointment for a 203k Consultation.
4. Site Visit
- We will meet the you (the borrower) at the site, go over the contracts and agreements you will need to sign at the close of escrow. We will be give you copies to take home and read your at leisure, mark up and get any questions answered by your lender or our staff.
- Client signs Consultant Agreement and pays Consultant a $600 retainer fee
- We will make an inspection of the premises at that time. We walk through with the borrower and determine what “must be repaired” per the HUD Guideline, then add the borrower’s “wish list” of additional items specific to their needs & desires.
- An inspection report will be created which is the “cornerstone” of a good 203k loan project.
5. Consultant prepares a detailed Work Write-Up
- After the inspection has been made we will return to our office and create a “Job Specification & Bid Request”. This is a list of the repair items that we intend to complete on your project. This “specification” is what will allow all of the contractors who bid on your project to bid on the same list. This is important because you want them bidding “apples to apples”. Up till now there has been no real need for a contractor to visit the site because we didn’t know what work was to be completed. Note: so many times a borrower will have several contractors visit the home prior to our visit only to find they weren’t consistent with the scope of work and the bids were all very different.
- Complete construction cost analysis
- Prepare HUD required draw request forms
- Preparation of contractor bid packages
- Preparation of lender packages
6. Consultant delivers the Work Write-Up Packages
- Borrower
- Lender
- Contractor
- Once the “Job Specification & Bid Request” has been created a copy will be given to the lender and another copy to the buyer or owner who is refinancing the property. It is technically the buyer’s responsibility to see that the bid specs get out to several contractors for bid purposes.
7. Selection of a Contractor by the Borrower
- When the bids come back the borrower will choose the contractor. We are always available during this process to assist the borrower & offer suggestions as to which bid is the most appropriate for this project. Note: It isn’t always the lowest bid by the way, sometimes a bid comes in so low that it is clear they didn’t understand the specs or too low to actually complete the project.
- The Borrower selects a contractor. Borrowers should be aware that many lenders may have contractor qualification criteria. Some lenders maintain a list of contractors that have met their qualification criteria. Discuss contractor selection with your lender to learn about their contractor requirements. If you’re considering a contractor which has not yet been approved by your lender or has never done a 203(k), it is important that they are informed early on about the 203(k) concept as it applies to contractors.
8. Loan Closes
- Repair funds are placed in escrow.
- Remodeling begins.
- The contractor is notified that the loan has closed so he/she can schedule the work to begin. Once the work begins the contractor will require continuing inspections to get progress payments for the completed work. The contractor or the home owner can initiate this draw request. The lender will initiate one if you don’t do it in a timely manner.
9. Consultant Performs Draw Request Inspections
- 1st Draw – Consultant insures permits were issued.
- 2nd and 3rd Draw – Draw request inspections are performed as work progresses.
- 4th Draw – A punch list is established.
- 5th Draw – The project is closed out and warranties and lien releases collected.
