Rehab & Home Improvement Loans
Kevin Woodard is Central Ohio's Realtor that Specializes in Finding for his clients & assisting them through a 203k Rehab Loan. He holds a degree in Construction Systems Management from the Ohio State University, is a licensed contractor who has the construction experience and knowledge necessary in purchasing a home that will go FHA 203k. With the 203k Kevin has partnered up with Ohio Capital Mortgage to successfully close 203k deals. A list of contractors can also be provided upon request.
Why wouldn't you choose a Real Estate Agent to represent you that has the construction experience needed in properly assisting you in purchasing a home in need of repairs or updating?
The FHA 203k loan in Ohio allows buyers the ability to finance major or minor upgrades on a new home without having to take out separate short term or risky
How many times have you viewed a property and wished you could replace the carpet or update the kitchen? Or worse case you find out there are foundation issues. With the 203k loan you may and finance the costs and custom design your dream home.
This is also a great loan for seller’s wishing to market their home to potential buyers and a perfect solution for a buyer with limited disposable cash.
Here are a few details of the loan:
- Allows repair/renovation costs can be rolled into the loan
- Major items (such as foundation and roof work) ARE allowed
- Low down payment (3.5%) and the seller can pay up to 6% towards closing costs
- Close before rehab/repair work being – this allows the seller and the agent to be paid upfront
- Only one closing – money is disbursed on a draw schedule after closing
- Loan can go up to 110% of “after-improved value” from appraisal
- Buyer can include optional renovations
- The work is supervised by the General Contractor and the 203k Consultant. Draw requests are made by the 203k Consultant and he/she will also perform the final inspection. Generally speaking these projects are completed in 90 days or less.
- It used to be that you bought a home and then applied for a
home equityloan to fix it up, resulting in two loans. But many lenders won't make rehab loans. Some won't fund equity loans at closing, especially if there is no equity.
- A Streamlined 203K loan is figured into the original loan balance, resulting in one loan.
- It can be an adjustable-rate or fixed-rate mortgage.
- The mortgage balance can exceed the purchase price of the property.
- Borrowers are not required to hire professional consultants, licensed engineers or architects.
- The appraiser or home inspector can put together a list of recommended repairs / improvements.
Type of work for a Streamline 203k:
- Upgrade central air/heat
- Repair termite or moisture damage/mold
- Remodeled kitchen and baths
- Changes to eliminate obsolescence and reduce maintenance
- Modernize plumbing, heating, AC and electrical systems
- Install or repair well or septic systems
- Roofing, gutters, downspouts
- Flooring, tiling and carpeting
- Energy conservation improvements
- Major landscaping
- Improvements for accessibility
- New appliances
- Interior and exterior painting
- Swimming Pool repairs (not to exceed $1,500)
- Most of any other improvements or wanted items not listed above
Under the 203k section of the
So, you can imagine that the process is a bit more involved. This program also requires that you obtain a 203k Consultant. The Consultant is someone that is knowledgeable about construction and/or rehab and who knows the 203k program.
They will come to the property and meet with you to discuss the anticipated improvements you want to make to the house. They will inspect the property for any health and safety issues required to be included in the rehab and will then provide you with a “Work Write-up” for the project based on the work you would like to have done. This will also be the person who handles all of the draw request and inspections along the way.
Think of the Complete 203k as a mini construction or “one time close construction” loan program where your contractor can ask for as many as 5 draws, and each draw request will need to have an inspector come out to make sure the work has been completed for that draw request prior to any monies being paid.
Because it is more involved than a standard loan, there are more costs involved.
Type of work for a Complete 203k:
- Any Foundation Issue
- Some Structural Alterations and Additions can be done with an Engineers Drawing and Approval
- Other improvements that are a PERMANENT part of the real estate
What is the role of the HUD 203k consultant?
- To do a Property Inspection/Report
- To work with you discussing your renovation needs
- To prepare a Work Write-up and any required architectural and/other exhibits
- To do Draw Inspections, Change Orders and Final Inspection
- To be a liaison between you, the lender and your contractor
- To insure that work is completed in a timely and professional manner
- To watch over the monies spent on behalf of you and your lender
The Contingency Reserve
- 10% to 20% depending on the work involved
- Used for unforeseen repairs
- With upfront lender approval this money may be used for extras such as appliances
- At the end, any left over money will become a principle reduction
How are the Contractors paid?
There is no up-front money to the contractor on the Full 203k. The first check will be cut only after the work has begun and the consultant has performed the first inspection. In Ohio work may begin 3 days after closing and funding.
Contractors can have a maximum of 5 draws altogether. The HUD consultant will divide the work into draws depending on the scope of work to be done.
You may do the framing first, then the heating and electric, then the drywall for example. If each of those were in separate draw schedules, the contractor would get paid for each of those as they are completed and depending upon which draw they were to be counted in.
The consultant will go out to see that the work described under the first draw has been completed and will submit a request for that draw. For each of these draws a 10% contingency is held. Again, this is just to be sure there are no surprises and that all of the work is completed correctly.
Special Conditions & Terms
- No minimum loan balance required.
- Borrowers must occupy the property.
- Property cannot be vacant for more than 30 days.
- Work must be completed within six months.
- Work must be professional.
- If job requires a permit, borrowers must get a permit and a sign-off.
- Work must commence within 30 days from closing.