The Section 203k Streamline Loan is an excellent source for home-remodel financing. It works as a refinance on a property you currently own, or can be used to purchase. As a purchase loan it presents the best opportunity for short sales and foreclosed properties. The key is planning and communication.
Step 1: Get pre-qualified.
It’s quick and it’s easy, and you can start here.
Step 2: Identify the property to remodel.
Once you know what you want, it is still important to be realistic with the timeline. The 203k process can take 60 days to close.
Step 3: Identify the work to be done.
The appraisal cannot be complete until it includes the bids for all requested improvements.
Step 4: Select a reliable contractor.
Contact me for a list; the challenge for the contractor is getting 50% of the bid at the closing table and the remaining 50% at the project’s completion. If there are multiple contractors, many will wait until the last contractor has completed his part.
Step 5: Get Complete Bids from each contractor.
If is going to be easier if you choose only one general contractor, but if you choose a roofer, a kitchen remodeler, a flooring contractor, etc., you will need paperwork from all of them. Review their paperwork in detail; the more detail the better. The amount of material, the type and the labor should all be individual line items. The loan can be submitted and the appraisal may be ordered once the bids are obtained.
Step 6: Begin Underwriting.
The standard FHA documentation will be required along with the bids. The appraisal can now be ordered to provide the “after-improvements” property value.
Step 7: Loan is Funded.
You will receive two-party checks that you can sign over to your contractors, one check for each bid. Remember, this will be for 50% of the bid.
Step 8: Remodeling Stage.
The work must begin within 30 days of closing and must be complete within 6 months.
Step 9: The Appraiser signs off.
When the work is complete the appraiser will inspect the property and issue a completion report.
Step 10: Title is cleared.
Once everything is complete and the title company ensures there are no mechanic liens on the property the remaining 50% will be issued to the contractors.