Renovation loan FAQ
Can you replace large items like well/septic or AC Systems?
Yes, you can replace most large projects in a standard K, such as well/septic and HVAC systems. There are limitations in some circumstance regarding septic or well repairs when property is less then one acre, but it is possible. We would need specific information on your project to help determine eligibility. Also, HUD can require hookup to public utilities if they are accessible to the property.
How many appraisals are required?
Typically only one appraisal is required; unless an underwriter calls for a second appraisal due to a property flip in the last 90 days. HUD has since tightened up their “Flip policies” this year. Ask us how we have help you with you loan options with this
Can I use gift funds or down payment assistance on the FHA 203k loan?
Unfortunately you can not use Bond monies with FHA 203k but some down payment assistance as well as Gift/Borrowed funds is allowed.
Can we use the “$100 dollar down” program on HUD properties with 203k?
Yes, HUD has a special program that allows you to use an FHA loan and apply to have your down payment reduced from 3.5% to one hundred dollars. This is allowed on 203k.
Can you do a 203k on a For Sale by Owner, Bank REO, or Short sale?
Yes, you can use an FHA 203k loan on just about any property for primary residential use. Conventional products allow for other occupancy types, such as rental/investment property and second homes.
Can I use my own contractor?
Certain restrictions apply but if your contractor is licensed/ insured in your state you would most likely be able to use the contractor of your choice. This precludes blood relatives.
Is there a limit on the amount or type of construction?
There is a product type and solution for everything. This includes everything from simple cosmetic changes, additions, structural damage, relocating a home to a new lot, converting multi-family to single family and razing a home to the foundation and rebuilding the structure.
There are products for almost anything you can imagine for a 1-4 unit residential or mixed use property.
Is there a loan type that can help finance renovation on Investor properties?
HomePath and Homestyle are two product types that can help you renovate homes with loans for the purchase price and the construction for investors.
What does the time frame look like for closing and the renovation process?
Typically the process is about 45 days from contract to closing. You can be better prepared with having already selected a contractor and having your credit documentation and cut down the time necessary for the process dramatically.
Are there any special inspections required on 203k loans?
Contrary to belief there are not any up front inspections required by HUD for FHA 203k. If you are doing a Consultant K (standard) you will need the Consultant to perform a write up for the closing. However; I do recommend getting a HUD consultant out to the property for a preliminary inspection (cost is 150-400 dollars) to get a simple list of repairs that would be required and a ball park for costs of repairs. This s sometimes helpful in the beginning if you do not have your contractor limned up or want to just do minimal repairs to pass FHA property requirements.
Can we put on an addition with these loans?
You can move a house, Raze it to the foundation and rebuild, add square footage, complete construction, and repair structural damage with these loan programs.
Is this loan restricted to single family properties?
No You can use this product on Modular, Mobile, 1-4 unit multi family, Mixed use space, and can even convert property from one use to another.
What are contingency reserves?
There may be some unforeseen repairs that need to be addressed while starting a project that were not anticipated. To make sure that the borrower has sufficient funds to finish construction the lender uses 10-20% of the repair budget to place into contingency for your use. If these funds are not used they go back onto the principle balance of your loan.
Can I do my own work?
Yes, if you are a licensed contractor. Self-help is a product that can be used in special case by case circumstance and you need to work with your loan officer to determine if your project would meet eligability for this.
What is a 203k plan review?
This is a conversation the borrower needs to have with the consultant if the project seems reasonable with the project obstacles up front before they jump into a 203k loan process
What is a 203k Consultation?
A Certified HUD consultants’ services and from Minimal Property Standards Evaluation upfront to the Drawn inspections, and all of the subsequent write ups for renovation before and after closing are considered the Consultative services of a HUD consultant.