The Section 203(k) Renovation Loan

 

The Section 203(k) Program is an FHA loan program for the rehabilitation and repair of single family properties.

 

Most mortgage financing plans provide only permanent financing. The lender will not close the loan unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

 

When a home buyer wants to purchase a house in need of repair or modernization, you usually have to obtain:

 

1.  Short term financing to purchase the dwelling;

 

2.  Additional financing to do the rehabilitation construction

 

3.  Permanent mortgage financing when the work is completed, to pay off the interim loans with a permanent mortgage.

 

The Section 203(k) program was designed to address this situation. The borrower gets one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property.

 

To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property after the rehabilitation is complete, taking into account the cost of the rehabilitation.

 

The 203(k) Consultant

 

The 203(k) consultant is someone who has been designated by HUD field Office for the purpose of completing the Work Write-Up/Cost Estimate and the required architectural exhibits for the borrower.

 

 

The fees a Consultant may charge are established by HUD. You will pay the same amount, for Consultant services, no matter which Consultant you choose to work with.

 

All consultants are not the same, a poor consultant may cost the same as a good consultant in fees paid, but could cost you a lot more in terms of lost time and frustration.

 

Questions to consider when choosing your Consultant

 

1. How long have you been an approved Consultant?

2. What lenders do you work with?

3. Are your reports broken down into both labor and material?

4. How many 203k Consultant inspections have you completed?

 

Hiring the right consultant will make your 203(k) experience much easier in the long run!