Navigating the FHA 203k Loan Process

With 2017 comes a new beginning for me and my family! After uprooting our lives over three years ago to move in with my mother who suffered from dementia, it is time for us to leave behind a life in limbo and start a new adventure. Over the holidays we put an offer in on a home that is in need of some TLC. We are looking forward to diverting our energies into a creative home-improvement project that will give us the fresh start we need. I figure I watch enough HGTV and have been through enough homes as a Realtor, I should have no problem with this!! (who am I kidding!)

Thought it would be fun and informative to chronicle the progress and lessons learned along the way. I look forward to updating you along the way!

So, here are a few details…..we are purchasing using an FHA 203k loan. This type of loan rolls into a single loan the cost of purchasing the property in its current state as well as providing for funds to be used for renovations. While these loans are incredibly helpful for these kinds of projects, here is what you need to know…..you have to be willing to get a lot of homework completed in a short period of time and make some decisions up front.

In a conventional lending scenario, you make an offer and have 10 days (or so) to complete inspections and begin to get your financing in place. With an FHA 203k loan, there are a few caveats and additional steps that are needed. First, the inspector has to be an approved FHA inspector (your lender should be able to provide some references). The inspector will not only inspect the property based on FHA requirements but will also conduct a feasibility analysis to ensure that your intended renovations will improve the property value in a manner that will justify the additional loan amount.

The inspector will want to have cost estimates and plans from your contractor prior to the inspection date. Therefore, having a vision for what you want to complete for renovations is critically important upfront. Also note that your contractor will have to be pre-approved by the lender.

Here is a link to a helpful video that explains more....

Here we are on day 3 of 2017 and it is amazing that we have made such progress. Thanks to the help of my sister Beth (and Pinterest), we have a good handle on the bathroom and flooring plans. On to the kitchen!

Understanding the FHA 203k loan process before you get started looking for your dream home is critical to navigating the process successfully.