The first step one should take with a 203k or any purchase is getting pre-qualified. That means doing a little research and finding an experienced professional to work with. This is especially important with the 203k program since experience can be the difference in turn times and a successful closing.
Once you have talked to a mortgage professional you will know what you can afford. At that point it’s time to work with a Real Estate agent to find a home and make an offer.
Once your offer is accepted, I will meet with you to sign the loan application and disclosures, collect necessary documentation from you, and talk about the goals with the home. At this point I will send out the appraiser or 203k inspector to give us insight on what needs to be done. The borrower should also be doing research on contractors at this point. I want them to be ready to go when the time comes to get the bids for the work that the appraiser, 203k consultant, and the borrower will need done to complete the transaction. Whether you are doing a streamline or full 203k, you’ll want to make sure you give yourself plenty of time to get all of the bids completed and approved. I’ll recommend 45-60 days on all purchase contracts. This will give all parties involved plenty of time to get their estimates done and will allow for everyone to get on the same page. Remember, once those bids are in to us as a lender, they will still need to be reviewed by us and the 203k inspector if you are doing the full 203k program.
It’s important to work with contractors who are fast and reliable. I will have the ability to help you find approved 203k contractors if you need help. I also strongly recommend using a general contractor if you are improving a property that will need work from various types of trades. This will help save time because I can work directly with one person for all estimates and issues rather than trying to track down an individual in a sea of companies if there is something that needs to be addressed.
Once the estimates have been completed and approved. I will underwrite the loan. This is where patience is a virtue. Underwriters will have a lot thrown at them with one loan and will need time to review the documents and bids. At this point I’ll either get a full approval and stipulations that will need to be met prior to the loan approval. 9 times out of 10 it’s the latter, so be prepared as much as you can be. If your loan officer is experienced, they will be able to keep you equipped to handle these extra stipulations.
Once the loan has been cleared, I will actually close the loan and the property becomes yours. Now it’s time for us to roll up our sleeves and do the dirty work so to speak. You will need the contractors to start their work within 30 days of closing. There will be checks in place to make sure everything is being done in a timely manner. The contractors will get paid half of their estimates within the first 35 days or so. Remember I have to get all of the draws in line and I will prepare the contractors for this. The final payout to the contractor will be paid once the work is completed and the final cost is figured. Remember the appraiser and 203k inspector will have the final say in the approval of completion.