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Old 06-16-2009, 12:22 PM
 
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If you're doing a 203K loan does all the work/fixing up have to be completed prior to closing on the house?
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Old 06-16-2009, 12:25 PM
 
Location: Summerville, SC
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No, you close first and then fix up the house, though there will be a deadline for how long you have to complete the work. Ours is 90 days from closing.
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Old 06-16-2009, 12:36 PM
 
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You have to START the work within 30 days of closing, the work CANNOT STOP ("go idle") for more than 30 consecutive days and the work must be completed as SCHEDULED not to exceed 6 months.

All-in-all VERY reasonable and when done by people that know what they are doing it really can be a HUGE BOOST to an area. You can take a house that "needs work" and make it one of the best values in a neighborhood.

FHA 203k mortgage loan rehab guidelines and requirements
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Old 06-16-2009, 12:45 PM
 
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even if the house won't currently pass an FHA appraisal? There are several items that pose safety issues.
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Old 06-16-2009, 01:01 PM
 
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As long as the property / home is "habitable" the 203K loan proceeds can be used to address safety issues.

Generally "habitability" means the home is granted an occupancy permit from the local authorities. The normal FHA inspection standards do NOT apply, although if there are serious hazards (no working sewers, issues with drinking water, electrical problems, furnance issues...) the local authorities would not grant an occupancy permit.

FHA 203k loan rehab guidelines and requirements
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Old 06-17-2009, 06:40 AM
 
Location: Summerville, SC
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Keep in mind that lenders today are tightening up FHA requirements. Off the top of my head, my lender requires work to be COMPLETED within three months (as opposed to six required by FHA), and EVERYTHING has to be signed off by a licensed-by-the-state contractor. Even simple things such as appliance installation, I believe.

We're having the roof and windows replaced by our contractor, and we are installing the new cabinets and appliances (some minor plumbing and electrical which we are perfectly capable of doing), but our contractor is going to come back and sign off on them after he inspects them.

The trick is, keep in mind you get money in disbursements. You don't get the whole amount at the closing table - I believe you have to have an FHA inspector come in midway to check your progress, and then give you the rest of the amount.
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Old 06-17-2009, 09:37 AM
 
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Hi there - everything posted here is correct. Begin the work within 30 days of closing and complete the work no later than 6 months after closing (although, if you need an extension, apply for it and it will generally be granted). You will only get 5 payout dispersments (Draw Requests) to your contractor, each withholding 10%. Once a payout is requested by the contractor, an FHA Consultant (can be the same one who did your work writeup) will stop by and make sure that the work is completed that is being paid for. My experience is that they are pretty reasonable about this... So you pay the FHA Consultant his fee (if there is one), and then the draw request will be formally submitted and your escrow will pay the consultant directly. After the final Draw Request, and after the FHA Consultant confirms that ALL work has been completed, the final 10% will be paid to your contractor and they'll be paid in full. For me, the last draw must be made within 35 days of work being completed.

Your appraisal can generally be done after the FHA completes your work writeup, so they will know to do a 'current appraisal' value and and 'after work appraisal' values. Since the house is being bought as a 203k loan, you are essentially guaranteeing FHA that anything that is wrong with the house (safety and health related issues) will be taken care of immediately within closing on your house. This means you don't have to worry about it 'not passing' approval because you will be repairing those items anyway.

Habitability is another issue, but also covered by the 203k. If the house is habitable, you can move in right away and have the work done while you live there. If the house isn't habitable, you can figure in the cost of your monthly mortgage (incl all taxes, MIP, and insurance) so you can make your payments and live elsewhere until the house is habitable. I think (double check this one) you can finance up to 6 months of mortgage payments, but it may only be 3 months...

Isn't this fun???
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Old 09-06-2009, 10:02 PM
 
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I read that if the house is uninhabitable you can roll you mortgage payments in to the back of the loan until the work is done and it is deemed Habitable.( for up to 6 months )
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Old 09-06-2009, 10:04 PM
 
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p.s. stay away from Bank of America!!!!!
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Old 06-19-2012, 07:00 PM
 
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I know this is an old thread, but has anyone ever been turned down for an extension (due to work not being completed within 6 months) and thus had their lender declare the loan in default and proceed with foreclosure proceedings? I'm just really anxious about the whole situation and the irony of perhaps being foreclosed-on when I have made all my mortgage payments either early or on time (some with principal prepayment).
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