Buying and Remodeling: What You Need to Know
Buying and remodeling a “fixer upper” can be a really fun challenge, if you’re into that kind of project. And even if you don’t like to do the work yourself, you can hire a contractor, tell them your vision and let them do it all for you.
But what happens when you need to do a remodel, but you don’t have the cash to pay for it out of pocket? Well, then you need a REHAB Mortgage, or a 203K. If you are buying and remodeling a house, you will want to use the 203K loan to both purchase and remodel. If you already own the home, you will do the 203K as a refinance. Remember to include enough money in the loan amount to cover ALL of the construction expenses.
Buying and Remodeling: What you need to know
In order to qualify for a 203K loan, you must hire contractors who are licensed in the city/county that the house is located in. If they’re not, that’s not going to be acceptable. You can’t cut corners here. If you want to cut corners have them do the least amount of work that is required. But you can’t cut corners on your contractors. You have to use licensed contractors with bids on anything the appraiser is going to require.
Minimum repairs required
Sometimes if you’re not sure what the minimum requirements will be, we’ll go ahead and order an appraisal. We’ll see what the appraiser comes back with. Then decide if we need to do a 203K or what’s the minimum we need to do on that.
You’ll want to make sure the bids are prepared accurately, because if they’re not, that’s what holds things up in underwriting. The contractor prepares the bids. Your need to have a breakdown of type of windows, labor costs and the type of materials that are being put in all included in the bids.
Collecting the loan payout
The bank disperses 50% of the money to you up front. Then you collect the rest after the house has been inspected.
Work with me
As your lender it is my job to make sure you understand all of the details of your REHAB Mortgage. It is my goal to ensure that you get the house and we do it properly.
For questions about which type of loan is best for you, read: Understanding Various Home Loan Programs or give me a call at (303)818-0699