I get a lot of calls from Georgia Realtor’s about the FHA 203K program. There’s a lot of bad info floating around out there as well as a number of misconceptions about how 203K Loans work. The following post is for my Realtor friends to help you when you are guiding your buyers through the Atlanta market looking for a property that is perfect for 203K financing.

Step 1 — Finding the Property

When you are property hunting with your clients and you will need to keep a few things in mind. First, is the scope and type of renovation that property will need. If the property requires a major rehab be aware that the process of getting that loan into submission will take a good bit longer. For renovations over $35,000 or with anything structural (like removing walls or whole additions) you add a few more steps to the process which lengthens the 203K process quite a bit. There is a specific flow that has to be followed on the full FHA 203K and it normally looks like this:

1. Home Inspection by FHA 203K Consultant
2. FHA Consultants Write-Up
3. Meeting with Architect & Architectural Drawings (not needed on ALL Full 203K Loans)
4. Architectural Drawings Provided to Contractor for Contractor Bids
5. Contractor & Consultant Work to Match Renovation Costs
6. Final Contractor Bid & Drawings Provided to Appraisal for After Repair Value (or Subject To) Appraisal.
7. Loan Submission

Not until each one of those steps has been completed can submit the loan. As you can say, that is a lot of third party stuff which can put a drag on the process. If you want to shorten the process then you will need to look at properties that need only cosmetic work that will total less than $35,000 which will qualify for the FHA 203K Streamline. On the Streamline 203K the process is more manageable, it looks a little like this:

1. Home Inspection
2. Contractor Bids
3. Final Contractor Bid to Appraiser for ARV Appraisal
4. Loan Submission

On that scenario you don’t need a consultant or an architect, that speeds up the process quite a bit and makes it possible to close in 30 days or less.

Step 2 — The Offer

When you make the offer on a property that needs renovation financing it is important to ask for extra contingency periods to allow for time let the Home Inspector, FHA Consultant (if required) and Contractor do their thing. I usually get my Realtors to try for 21 days so we can make sure all the numbers work together.

If you are doing the full 203K then the contract period will need to be 60 days most likely, if doing the Streamline 203K then 30 - 45 will usually work. As ALWAYS consultant your lender before making an offer to determine how long they will need.

As with any FHA loan, the FHA 203K will require some specific disclosures (FHA Amendatory Clause) that will need seller and agent signatures. They should be presented during the offer process. You also need to indicate that you are using a FHA 203K loan.

Step 3 — Under Contract, Time for Loan Submission

On a FHA 203K transaction you may need to be available a little more than you normally would to let the buyer into the property. On typical transactions you may just need to be available for the home inspection, but on 203K transactions you’ll have contractors and possibly FHA consultants and architects to let in the property as well. All of these things need to be done as fast as possible so the loan can close on time. Let me say from experience that it can sometimes be a tedious task getting contractors to complete the needed paperwork after they walk through. The quicker you can get them in to to do that walk through the better.

Hopefully, you won’t have much to do for a couple weeks while the lender gets the loan clear to close. There are a lot of details to coordinate for us when we submit a 203K Loan and sometimes we may call for you help with getting a slow contractor to turn in some paperwork. Two people nagging is always more successful than one!

Step 4 — The Closing

Closing is just as it would be on any other transaction. You’ll get your paycheck as will I. We DO NOT have to wait until the renovation is complete and all the back end work will be handled by the company servicing the loan.

I know that some Loan Officers and some Realtors don’t like FHA 203K loans because they are a little more complicated, a little more work and takes a little more time. However, on quite a few of my 203K loans the home buyer is walking into 20% or more equity with only 3% down. That makes for a HAPPY home buyer and happy home buyers make for referrals. They understand the effort that we put in on that transaction for them and they will reward us for our hard work. You’d be surprised how eager home buyers are to talk of their success in creating a ton of equity in what all their friends think is a down market. You’ll be getting calls in no time from them wanting to do the same exact thing!

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net