This is a multi part diary of 2 buyers as they walk through the purchase of their “new” home. I use “new” loosely – It’s new to them but this home is in dire need of repair both inside and out. In the interest of full disclosure – I’m not the realtor here – I’m the Mom – And I live on the east coast and my son and his wife live on the west coast – Southern CA. SO I’m the referring realtor and watching the process very closely and learning every step of the way.
The buying “process” on this house requires a construction loan – a 203k construction loan – For those of you familiar with this loan product, it is NOT the streamlined version as the buyers need $80,000 in repairs (A streamlined 203k requires that the max is less than $35,000 – It’s less complicated and does not require a consultant to oversee the project.)
So if you’ve been following this blog ( and to read from the start feel free to check out the 203k loan diary ) last installment we were wondering if we could beat the foreclosure process (Yes a short sale too!) – Well they did – Last week, they managed to complete all the requirements to secure the 203k Loan and were able to close on the property. Of course it’s not “live-able” but they own it – So now the real fun starts as they start the re-hab.
So some points about this process -
1) The FHA 203k Rehab Loan is a fully disbursed loan which allows the buyers to finance the cost of rehabilitation with one loan.
2) It is fully disbursed at closing. The mortgage amount is based on the appraisal “after value” of the property – so they base the value on what the house will look like AFTER all repairs are done – Funds for the renovation, of course, are held in escrow until work is complete and signed off by consultant and owners.
3) In order to determine “after value” appraisal – a contractor has to be hired to help quantify what rehab will be done (This loan product is not only for repairs – you could use a 203k to do a remodel even if the house is in good condition). AND if you exceed $35k in upgrades, you will need to hire a consultant to help with the process complete the repair specs for the appraiser - You will also need to find contractors to actually complete the work.
4) DO HIRE A CONTRACTOR THAT UNDERSTANDS AND IS WILLING TO WORK WITH THE 203k PROCESS !! (not easy to find)
5) Be ready for a lot of work to complete this process – but know when you’re done – you will be rewarded – (we hope!)
So my son and his wife are now in the construction phase – I’m hoping to have some before and after pics next time I post. Please know that if you’d like to know more about the process, feel free to call or email.