FHA 203(k) Streamlined Option

[Robert P.]

All,

Closing on a house soon. (yes I know this is for owner-occupied, and it will be) I need to get some work done in order for me to use the FHA option.

Questions:

1. Does someone appraise the property before and tell me what work needs to be done in order to use FHA? (that way I know how much to take out in the 203k. (I understand this is SEPARATE from home inspection)

2. Once I figure out what needs to be done (either from an appraiser, or my lender, or google), do I have to go through a legit company? Or just someone who is licensed to make the necessary repairs?

3. Does someone come and inspect all of the work after once it is completed (at least 6 months after)

4. If someone does come to inspect after, but nobody ever did before, and I find out I need to take out more money, can I restructure the 203k loan, or am I stuck paying out of pocket for additional repairs?

Info: I am in Massachusetts, looking to spend under 10k and will be using the Streamlined option.

All input would be great! Thanks

[Jeff Onofrio]

Hi Robert- I am the Director of Renovation Lending at AnnieMac Home Mortgage and I specialize in renovation loans specifically the FHA 203k and Homestyle.  I am going to answer your questions below.  I hope this helps!  

1. Does someone appraise the property before and tell me what work needs to be done in order to use FHA? (that way I know how much to take out in the 203k. (I understand this is SEPARATE from home inspection)- No- you will need to get contractor bids for the work you think needs to be done.  The appraiser will note anything that is missed and does not have the property meeting FHA minimum property standards.  Then you can address those items as well.  I however recommend (not require) the use of a FHA 203k constulatn who can do a feasibility report and save you time.  It will cost you a few hundred dollars but it will help you to get an idea of what you need to do upfront.  

2. Once I figure out what needs to be done (either from an appraiser, or my lender, or google), do I have to go through a legit company? Or just someone who is licensed to make the necessary repairs?  The repairs will need to be done by a licensed contractor with the proper insurance.  As a lender it is our job to make sure the contractor understands how the program works and how they get paid.  We screen them for you but ultimately the choice of who you use is up to you.  

3. Does someone come and inspect all of the work after once it is completed (at least 6 months after) Yes- we will send the appraiser or a fee inspector out to inspect the property.  For a $10K renovation we really would expect it done within 30-45 days- there is no reason it should take any longer.  

4. If someone does come to inspect after, but nobody ever did before, and I find out I need to take out more money, can I restructure the 203k loan, or am I stuck paying out of pocket for additional repairs?  No- once the loan is set it is set.  No changes can be made.  So as I mentioned before a FHA / HUD 203k consultant, while it maybe a small fee it is worth its wait in gold as far as I am concerned.  

Good luck and please feel free to reach out to me with any questions!  I am here to help! 

Info: I am in Massachusetts, looking to spend under 10k and will be using the Streamlined option.