My New 203k Blog

• There are 2 different 203k loans, full and streamlined.  I do both, most companies only offer the streamlined.  The full allows for unlimited repairs and can be structural in nature.  The streamlined allows for a repair amount of $35,000 of a non-structural nature.  The full 203k required the assistance of a 203k consultant.  The consultant is FHA approved and will provide us with a Scope of Work that will be used to get a bid from a General Contractor (GC).  The Streamlined 203k does not require a consultant nor a GC, rather we can use individual specialized contractors for each portion of the job.  
• The streamlined version is used about 90% of the time and is very easy and effective when orchestrated by a professional who regularly handles these loans.
• The faster we have the bids for the work, the faster the loan will close.  A StreamlinedK with a single bid done quickly can be done in 30 days.  Add some time if dealing with an REO though as their title companies tend to hold up closing for a week or two.
• We do not allow the borrower to specifically do the repairs.  If a borrower works for a company that does the type of work needed then we can get a bid from the company to do the work.  Who they send out to do the work is up to them and is not documented by us.
• If appliances are being included into the repair escrow there is a small issue.  If the bid is from Lowe's, Home Depot, or any other big box store they are going to require that the items be paid for prior to delivery.  With a Streamlined 203k though we will only disburse 1/2 of the money (total bid) at the time of closing.  If that is not enough to buy the appliances and get the other work started then the borrower may need to pay the difference to the store (keep receipt).  We will then reimburse the amount paid with the last 1/2 of the money that gets disbursed once all the repairs are completed.
• We have a minimum $50,000 total loan amount (purchase price + repair amount - down payment) at Mason-McDuffie Mortgage.  So if you are buying a property for less than $50k then we will need to add enough in repairs to get us over the $50k limit.
• With all 203k loans we will add a minimum of 15% contingency reserve to the repair escrow for cost overruns.  With Full 203k's and properties where the utilities are turned off at the time of inspection we will add 20%.
• When dealing with mold remediation or foundation issues we generally need the bid to be inflated to account for unforeseen issues.  We will ask the contractor to give us a "worst case" bid and then add some to it.  The last thing anyone needs is for work to start, realize the problem is much worst than thought, and not have enough money to properly repair the issue.  If we overestimate the cost then whatever money is remaining in the repair escrow will be used to lower the loan amount.