203K mortgage and renovations

[Zaid Badabwan]

Hello

I have made an offer to a property using 203K loan to buy and renovate the property. I have come to know that the contractor should be approved, and I have some questions:

1. Can I take only the purchase part of the loan, and use other funding for renovation? and in this case can I do the renovations myself?

2. If the answer to question 1 is NO, and I had to stick to the approved contractor, then can I do parts of the renovations, or buy the material and deliver them to the contractor to reduce cost?

3. Any advise to reduce renovation cost?

[Doug Smith]

Hey Zaid, I'm in Tampa too. I'm going under the assumption that you're talking about a property you intend to occupy and not an investment property. If it's investment related, it's not what a 203K is intended for. If it is owner oc, you'll want to discuss this with your lender as there are "standard" and "limited" programs, but they'll have the actual guidelines that they work under. Here is a very high overview answer to your questions. 

1. 1) It is possible to use other funding for the renovation part of the project. With the "limited" option, you would be responsible for securing alternative funding for the renovations, and you can choose to do the renovations yourself if you have the necessary skills and qualifications, but the scope of the renovations allowed under a limited 203K loan is more restricted compared to a Standard 203K loan.
2. 2) If you decide to go with a Standard 203K loan, you may still be able to contribute to the renovation process, but a contractor will need to do the vast majority of the work. While you won't be able to perform the entire renovation yourself, you might be able to complete certain tasks or provide materials to the contractor. The specific details of what you can do will depend on the lender's guidelines and the contractor's agreement.

3. 3) When you try to reduce costs, just make sure you're not getting in over your head. I'm sure you've heard the proverb "if you think its expensive to hire a professiona, try hiring an amateur". Make sure you stick with stuff that you're qualified to do. You might be a GC for all I know, or you might be totally inept with a paintbrush. I'll leave that to you. 
   

4. Chat with your lender about the specific requirements and guidelines of the 203K loan program they are offering. They'll know the guidelines. hope this helps.