Home Purchase w/ Remodel Loan

Home Purchase w/ Remodel Loan

Remodel Loan

Basic understanding of our remodeling loan process is a good way to get plugged into what is required from you the homeowner during the process of the loan.

Let’s get started!

Locate Your Property

You locate a fixer-upper, handi-man special or foreclosed property and execute a sales contract after doing a feasibility analysis of the property with their Realtor. The contract should state that you are seeking a FHA 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by FHA or the lender.

Contact Lender

Then you contact your lender (only certain lenders offer this program, our company is an approved lender) and arrange for a contractor to submit a proposal showing the scope of work to be done, including a detailed cost estimate on each repair or improvement of the project.

Appraisal & Loan

The appraisal is performed to determine the value of the property after renovation.

You will have to pass the lender’s credit-worthiness test (credit score requirements are now at 620- this month), the loan closes for the amount of the purchase price of the property, the remodeling costs and the allowable closing costs. The amount of the loan will also include a contingency reserve of 10% to 20% of the total remodeling costs and is used to cover any extra work not included in the original proposal.

Loan Closing

At closing, the seller of the property is paid and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.

The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments put into the cost of rehabilitation if the property is not going to be occupied during construction. This is a great feature for homes that need lots of work.

Time to Remodel

Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of the job, 10% of each draw is held back; this money is paid after the lender determines there will be no liens on the property after completion.

FHA Loans in NC & SC

Remember that these loans are available in Columbia, SC area up to $303,750. This opens the door for the vast majority of homes in South Carolina (in some SC areas loans can be lower dollar amounts). During a time of economic downturn programs like the 203k loan will help keep contractors working and help families that need money for repairs and improvements while keeping payments affordable. If you have a scenario with a prospective client that you need to get pre-approved please don’t hesitate to call. I can help walk them thru the process and see if they qualify for the 203k loan.

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