203(k) help!

[Nicholas Armstrong]

Hey guys! I've found a lovely duplex in my area (just outside the Birmingham AL area) It is in a B neighborhood and it is listed at 30k. I am considering house hacking this property. But it needs a lot of work and I would like to get a 203(k) loan. Is there a minimum loan amount for a 203(k) loan? Any help would be greatly appreciated!

[Steven Gesis]

Originally posted by @Nicholas Armstrong:

@Steven Gesis

Do you have any recommendations on how to put together a good team in reference to the 203(k) loan?

 Nicholas, you will need the following (4) elements in place to make this work effectively:

(1) Contractor

• Competent
  
  • Financial Capacity to carry your project
  • Creative solutions
  • Administrative capacity
  • Vetted and Trusted Subs can GC your entire project 
  • Well Defined Scope of Work
  • Extensive field knowledge both application and product
  • Presentation
• Experienced / Track Record - How many completed in past 12 Months?
  • You will want to be fairly reasonable about the capacity and track record - from experience you will want to work with someone that at-least does 10+ projects / yr. - these are complex and have a large administrative demand, so you can be reasonable about the capacity and track record. Granted if they complete more than 10 /yr. - I can assure you, you have found someone you want to build a great relationship with and get them voting for you and working with you the entire way. Trust me after completing and being apart of 100's of these projects, I can safely tell you, it's not easy, its draining and takes a-lot of moving parts to complete. 
• Capacity
  • These are high paced projects and they have time restrictions, you want to know you are working with a skilled well oiled logistics team, you want to have a dedicated project manager not just an estimator running your job. Set a hierarchy, be proficient and diligent in communicating to be able to deliver a mutually accepted product and insure you meet the lenders requirements.

**Handy tip to find a reputable and well vetted contractor for 203k

~A simple google search and page 1 results should spit out some sophisticated results for 203k contracts, do not use any of the websites they couple you with handy men etc. You want something reputable. Based on my experience the contractors that show up on page 1 results typically have a sophisticated enough operation that they can take you from A-Z and hit all the aforementioned checkboxes fairly easily.  (i.e. google search : CITY X 203k contractor) 

~You can also try a good reputable resource www.203kcontractors.com - they vet and verify financials, references etc. (You still want to do all your due diligence as stated above. Do your own homework, if you engage with someone and you establish a good mutual understanding stick with them)

(2) Banker / LO / Mortgage Broker

• Experienced
  • Knows all he loan products, understands the paperwork, has a proven track record of completed loans. You can PM me and I can send you some more information about an awesome reference, I want to share publicly, but I will reserve it for private PM only. You can verify how much volume each lender is doing in your area. If they have a large volume you can be certain it is for the right reasons. 
  • (3) Immediate Products
  • FHA 203k Limited/Streamline
  • No Structural Work Permitted
  • Max $35K - Fee's -  Contingency 10-20% = Max Budget $29,500ish
  • No Min.
  • No HUD Consultant Required
  • Must complete all health & safety and mandatory FHA repairs
  • Any electives are acceptable 
  • 3.5% Down Payment Gov't Backed - PMI - Lowest Interest
  • FHA 203k Standard / Full
    • Structural Permitted (Addition, Load Bearing Walls)
    • No Max - $5K Min
    • HUD Consultant Required
    • Must complete all health & safety and mandatory FHA repairs
    • Any electives are acceptable 
    • No Upfront Payment to GC
    • 3.5% Down Payment Gov't Backed - PMI - Lowest Interest
  • Conventional Renovation
    • No Limit
    • No HUD Consultant Required
    • Not as extensive for mandatory repair items
    • 20% down - NO PMI
    • Any electives are acceptable 
    • Can do structural and additions

~Again, you should just do a simple google search first for a 203k lender in your area, and you should be able to populate and define someone from page 1 results. Once you got someone with good rates, lock it down, at the end of the day, as long as they are experienced with this loan product and 100% understand the product its all about the deal you get on your rate at that point.

(3) Home Inspector / HUD Consultant

• Experienced & Multi-Faceted
  • If you can lock down a home inspector who can also act as your HUD consultant this is a big win.
  • This gives you ultimate flexibility, a dual licensing like this allows you the opportunity to get the hard bones information about the home and if you decide you want to pursue, you  can turn on or turn off the feasibility report requirement and or scope of work / work write up.
  • Reputable - ask for a sample of a Work Write Up and a Sample of the Feasibility Report, you want a tangible product so you have a tangible contract, you want someone who is within the bounds of market rate on their feasibility report, you want someone who is detail oriented. 

~You should ask your lender for a reputable inspector or HUD Consultant - even better ask your contractor, either one of them sold be able to reduce a reference of 1-3 solid HUD Consultants do nt go wandering around or shopping around for this if you need it. You want someone who understands the paperwork and is well established, this can make or break your deal. This is also a good time to test the experience level of your contractor and/or banker. Am established contractor or loan officer will be able to spit out an immediate answer.

(4) Realtor

• Experienced - you want some with a good eye for opportunity, that has worked with clients on this type of product / acquisition.  They can make or break your deal, its simple if they understand the function of this product they understand the inventory they are looking to present to you and the value after improvement. Its not a perfect science but it makes it a whole lot easier and will save you a lot of time, grief, and heart ache. Set realistic expectations with your realtor. FEAR NO Renovation! Lastly you want to make sure they do not break your deal due to a lack of experience.
  • Just ask the relator questions, as them to give you examples of deal and clients they worked with, the sizer and scope. Do not whatever you do allow your realtor to become your contractor. Keep all these worlds separate everyone on your team has a specialty designation, allow them to be masters int heir craft, do not cross pollinate them. I am not saying do not share information, I am saying let the realtor do the realtor thing, let contractor do the contractor thing etc.

If you have not noticed, the common theme is experience, we are hunting for experience, we want to utilize the knowledge these professionals in their respected field have established through making mistakes and overcoming challenges. Help yourself by simply screening and doing an awesome job on vetting your partners. Consider this a business venture, however, in this business venture at the end of your transaction the banker and realtor collect their commission and they are gone, it is just you and the contractor + (HUD Consultant sometimes). Build excellent relationships with your broker and relator, establish extraordinary relationship with your contractor and HUDn consultant life will be much easier once the keys are yours.

Hope this helps, if you have any questions just PM me, Im happy to help.