203k loans, some questions?

[Craig Chrzanowski]

Hello all,

I've found a house I believe could work with a 203k type of loan. its is government owned but in a nice suburb with good bones, a newer roof and seems like asolid starting point. It's Large two family that Id like to house hack. I'm running numbers on the BP calculator based on if I didn't live there which is my intention down the line and the numbers look pretty good. In the meantime if all goes well my living expenses would be cut significantly, allowing me to save up my next down payment even faster for the next property.

My understanding of the process in basic form

Make offer on house / get offer accepted (as is sale price not including repairs)

Get inspections, ARV appraisals

Get estimates on repairs of those things deemed needed to be repaired

Provide paperwork to mortgage provider showing purchase price, ARV appraisals, costs of repairs

If all goes to plan and all the numbers look right they okay the closing

Upon closing work can start and the contractor(s) are paid based on the completion of the agreed upon items. The pay comes from a draw fund and paperwork must be submitted for each payment.

Am I on the right track here? I've never bought a house this way before so I'm still wrapping my head around it. I'd love to hook up with either a lending professional with considerable expertise in these types of transactions and also a contractor who has done this before and is comfortable with the process. I've owned homes and done some contracting type work. I'm just trying to make sure I'm not missing some vital step. Thanks in advance.

[Dan Leyden]

Here's the 203k process in easy terms:

Find Property

Bid on property/Get under agreement

Inspection- if expected renovation are over $35,000 you will need a hud consultant.

Have a contractor quote the job - work with the 203k consultant on the "must fix" items and the "want to fix" items. 

Give quote to lender. You can only have one main contractor, needs to be written with materials and labor broken out. 

Lender appraises property taking into consideration the renovations. 

Close on the property. Don't expect a 30 day close, typically takes 45-60 depending on how quickly you get the scope of work to the lender. 

Contractor starts work. As work is done, money is disbursed. Work, then pay. 

If you'd like a lender recommendation let me know!