The 203K Program
The 203K program is sponsored through HUD. It is a purchase-renovation program in which an all-inclusive loan serves to both acquire a real estate property and restore or upgrade the property to current martketable conditions. These programs provide financing for “fixer-uppers”, rehabs, or foreclosures in any condition and offer the opportunity to update the home. Currently, HUD only offers their 203K loans to first-time homebuyers and non-profit organizations. Some private lenders have begun to offer a conventional version of the 203K.
How The Program Works
The process begins with finding a property that is in need of $5000 or more in repairs, as well as a lender who provides a purchase-renovation program. The property can be a 1-4 unit, condo, mixed-use property, or even a manufactured home. Repairs can include structural repairs, septic or well replacement, basement waterproofing, lead-based paint stabilization or abatement, painting, adding a deck or pation, appliances, energy improvements, or upgrading any components in the home such as the roof, plumbing, floors, HVAC systems, etc.
A work write-up is then requested from a HUD-approved consultant. A work write-up is NOT the same as an inspection; home inspections are NOT needed for the 203K program. The work write-up is a detailed list of repairs, including estimated prices of materials and labor.
An appraiser is then called to provide one “as is” appraisal and a second “after improvement” appraisal. The appraiser is given the consultants work write-up plan and cost estimates to determine the market value. The lender bases their final loan amount on this after-improvement market value estimate.
After the loan and write-up are approved, the work begins and must be completed within six months of loan closing and under the supervision of the general contractor (chosen by the buyer) or, in some cases, under the direct supervision of the buyers, themselves. The consultant, at the buyer’s request, performs draw inspections to ensure the quality and progress of the work as well as to release the renovation money from escrow.
Anderson Home Inspections and the 203K Program
Anderson Home Inspection LLC is approved by HUD as a 203K consultant for this program. The job of Anderson Home Inspection is to work with the buyer to develop a work write-up that includes all the repairs needed to ensure the safety of the property and the buyer. Anderson Home Inspection essentially serves as a mediator between the buyer, the lender, and the contractors.
Additional 203K Information
Department of Housing and Urban Development – www.hud.gov/
Streamlined 203K – portal.hud.gov/hudportal/
Energy Efficient Mortgage with a 203k Loan – www.fha203-k.com/