Renovation loans are all about proving you with the financing to purchase or refinance your first loan and then including the money for the renovations all in one low interest loan. We even have programs for Manufactured Homes.
In any case if you would like to be part of the show CALL 888-627-6008 toll free and ask your renovation question
Got a call from a long-time client. They were asking if I had a list of contractors in the area of their new home. I asked why and they informed me that they had been having trouble getting a contractor to bid their project for two months now, everyone was busy in Napa due to the fires.
Frankly that question surprised me as that is what we do, bid jobs. They knew that yet when I expressed that sentiment I was told “it isn’t for a loan we are paying for this project renovation with our own funds…
I was shocked. Had they called us, they would have had a bid in about five days or less depending on the size of the project. They would be two months ahead of where they are.
What they thought was “why should we pay a consultant” when we could just get contractor bids… Right…. NOT! That is the same as saying they don’t believe we do anything for our fee. That is so far from the truth as this other client found out.
We were asked to do a consultation and put a bid together to install a new foundation in her 100-year old home and create a partial second story addition… we bid $159,000 + contingency for this project and we did it all in five days. Bingo, that is a big deal. You may not realize it but it actually is a very big deal.
Why, because you know in five days if this project is going to be viable and fit the budget with accurate numbers you can depend on.
As the story goes, the client told us not to get bids from anyone as she had a contractor selected. No problem… yes, it is, you would always want at least two bids and preferably three. What if the one you get is not a reliable bid. Well that is exactly what happened in this case. Her contractor took five weeks to come up with a bid of $298,000 + contingency for what I had bid at $159,000 + contingency.
She actually looked at me and asked if we knew what we were doing? I just suggested we get another bid and asked her to look in the phone book or ask friends for suggestions and she found one, in about three more weeks she had a bid that matched mine… it came in at $161,000 and she asked if she should talk them down to the $159,000 that I bid. Holy cow. I said “actually this is a very good bid, and you shouldn’t start the relationship with trying to reduce the contractor bid in this case.” I mean he did beat the heck out of your first contractor’s bid and was less than a half percent different than my bid.
I saved her $137,000 and she is worried about another $2,000.00
While most of the 203k’s go off without a hitch from time to time you may find yourself with nobody to talk to on your side that understands the 203K program. If you have a problem renovation project and don’t mind discussing it on live radio please call in. If you want to do it privately we have helped lots of people so far and the initial call is totally FREE, contact us a www.203k911.com
1)How many draw inspections can you have on an FHA 203k project?
This has been a misconception for the past ten years or so. It wasn't in 1994 – 2000 then someone with authority misread the guideline and they were in charge and thus they started the misconception.
This has been one of my pet peeves for years. In 2014 I received a call from someone at HUD as they were revising the guideline and preparing the 4000.1 handbook. I asked that they please clarify that there can be more than 5 draws on a 203k project...
The answer they provided shocked me. I was told “there can only be five draws on a 203k”. Wow, totally shocked me. I then asked if they could show me in the guideline where it states that. Of course, they couldn't so I did, I provided that excerpt from the guideline and ask that they read it to me... they read “no more than five draws are allowed” when I asked... when you went to school did they always teach you to read starting in the middle of a sentence? Please read the entire sentence.
The entire sentence said, and I'll paraphrase “On a project of $10,000 in construction cost, no more than five draws are allowed.” So, if I have a project of $400,000 in construction I most certainly can and will have more than five draws. I did one project with a construction cost of $544,000 and it took 13 draws. We don't just have five draws, they started saying that only five draws could be financed in the loan. That means that with the sixth draw we have to collect cash at the time of the inspection. Many projects will have 6-8 draw inspections.
In any case HUD is always right and under the new guideline they now say "There can only be five draws". It isn't what they mean however. Remember that FHA is just an insurance company and they change the rules as they see losses due to the current rule. So, having said that what they seem to mean is that they will only finance 5 draw inspections for a project.
If additional draws are to be completed they can be paid for by the borrower or homeowner or some lenders will allow a change order asking that it be paid from the contingency reserve.
So the answer to the question is that there are only five draw inspections allowed to be financed into the loan.
2) I'm a non profit organization, can I use the Good Neighbor Next Door program?
Yes and no. Yes if you read the guideline no if you come to the reality of finding a lender to do the loan. Turns out that the program has no lenders currently willing to work with non profit organizations, sorry to say.
3) Can I build an ADU using the 203K?
An ADU is an auxiliary dwelling unit. Many counties throughout the country have allowed ADU’s to be added to their single family residential zoned properties because as the demographics changed and there are more older people living longer lives who are able to live at home longer, their family may choose to keep them on site in another unit on their property.
As our generation gets older laws are being passed here and there to allow the second units where the property is zoned for single-family home, they can still add an ADU.
Does the ADU make this a duplex?
Not necessarily. In most cases your adding additional living area, an additional separated living area but not adding secondary meters. In that case it would not be counted as a duplex.
If the zoning would allow a separate meter of gas and electric then it very well could be treated as a duplex. What would be the advantage? Well the loan limit for one goes up substantially for two units versus one unit.
The most likely scenario is a unit without a full kitchen for your in-law(s).