04-02-2011 08:01 PM
We're considering a 203K loan to fix up a home. Does anyone know if it takes longer for approval on these types of loans than a regular, conventional loan? We have alread sold our home (closes in May) and don't have a lot of time to mess around waiting on an approval.
04-02-2011 09:45 PM
yes, it does require more time. there is more documentation and more underwriting. there is a high failure rate when the agents involved and the lender do not understand the program. it works best when the seller/listing agent, buyer/buyer's agent, and lender work together to "structure" the contract and file for underwriting
Michael P. Lindekugel, MBA – Finance, CDPE
Director Special Assets Division | Sr Program Manager
RE/MAX Metro Realty, Inc
04-03-2011 10:52 PM
The 203(K) programs take at least 60 days to close. First, only work with a banker who has closed these many times before. You need a local HUD inspector to give you a list of "must do" fixes, then you need a contractor (or multiple contractors) to bid on this job, and any other items you might want done. Also, terms are changing this month, and all the rates are going up.
It is may more complicated than conventional financing or just paying out of pocket for the work.
04-04-2011 02:05 PM
Knock on wood but we'll be closing on our home w/ a streamlined 203(k) on the 15th. Our lender (James Reese@ Cornerstone) could close sooner if we needed or wanted and the 15th will be just about 30 days from when we submitted our loan app. Our loan is probably not the best metric since i had already done the >90% of the 203(k) legwork ahead of time and had a rough rennovation budget and GC ready to go before we even came to final terms with the seller.
To be safe i would give yourself 45days for a streamlined and 60 for a regular.
04-14-2011 12:33 PM - last edited on 02-18-2012 05:43 AM by GabeV
It does take longer and depends on what type of 203k you're doing. A 203k Streamline may take 7 days longer to close and the Standard 203k (for repairs over $35k) will take another week or so. They key is to work with a contractor who understands the loan. I would recommend going to 203k contractors.com. They have trained the contractors on how this loan works an they have contractors all over the place. A lot of contractors don't like this loan, because they don't get paid right away and they don't fill out the HUD forms and bids correctly or it's illedgible. This causes delays. Contractors get paid in increments with this loan, not all at once so they're turned off.
A contractor who's familiar with the process makes the process smoother.
Here's another tip. Use a HUD consultant who is also licensed to do home inspections. Regardless if you're doing a 203k Streamline or a 203k Standard I would recommend using the consultant who is also trained on the 203k. Do your inspection up front. This way the HUD consultant will inspect the property (as a normal home inspector would) but keep an eye out for possible health and safety issues that may cause issues with the 203k. A normal inspector doesn't know the 203k so not knowing the nuances can hurt. Some Realtors will advise you to do the inspection at the end of the buying process. This is not a good idea with a 203k. You want to know of any problems upfront, not at the end. Insist on this.
So this way you have two people, the contractor, and the HUD Consultant, looking out for you.
I wouldn't depend on your Realtor for advice, most of them don't understand the 203k process and know just enough to mess things up! Just insist on the up front home inspection and use the HUD Consultant. Their fee is about the same as a normal home inspector. You can go to HUD.gov (I believe) and you can do a search for HUD consultants and you can click on your state, again just make sure they're licensed as a home inspector.
I wish you the best in your endeavor. This loan is nothing to be afraid of, just try to use a contractor and other people familiar with the 203k and most of the wrinkles will iron out.
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