203k LEASONS I LEARNED THE HARD WAY!!!

[Oscar Navarro]

1) Having a contractor with 203k experience is crucial. If its his first 203k, you are in trouble.

2) When doing the 203k draw request, make sure it makes sense. Example: you have $50K to rehab the house. your draw request says that you will spend $12,500 for "cabinetry", $9,500 for "bathroom accessories", and $10,000 for "decorations"... but you go ahead and start changing the plumbing, electric, and put a new HVAC.... well, the bank wont give you any money until you get to the $12,500 cabinets, or the $9,500 bathroom accessories.

3) The bank will keep 10% of each draw until the end.

4) The contingency reserve can be requested at "anytime"; HOWEVER, Unless your bank feels the changes in the work were necessary, they wont give you the money till the end.

5) Choose right your contractor before the loan closes... If you have to change it after the closing of the house, the old contractor will have to sign a release form (and he may want to take his time) and the new contractor has to be approved by the bank (which can also take a while).

6) Know exactly how is the consultant going to get paid. AND if he will charge you extra for "additional" inspections.

The 203K should be a very good program for someone that wants to buy a primary house that needs work. Just be careful to not go over the budget, have a contractor that understands he wont get paid until the work is done, make sure the draw requests MAKE SENSE, and understand how the bank will disburse the money. Otherwise you will be like me, funding your rehab with credit card cash advances and personal loans.

Hope this helps.