1. What is 203K – It is a renovation loan programs sponsored by HUD and insured by FHA. While all lenders require property to be in move in condition; working bathrooms, no mold, all piping present most sellers won’t allow the buyer to fix these deficiencies before closing. 203K renovation loan allows a buyer to close on a purchase of a new home in need of repairs BEFORE having the repairs done to the home.
2. Streamline 203K – When the cost of renovation is less than $35,000 the buyer can apply for streamline 203K loan. The main feature of this loan is that a HUD consultant will not be required to review the plans and specs proposed by the contractor. That saves time and money!
3. Contractor validation is required – unless the buyer works with a nationally recognized home improvement source (Home Depot, Lowe’s) a contractor validation is required. The validation process checks the contractor references, credit history, business credit, etc. Once the contractor is validated, he’s approved with us for a full year.
4. Documents needed for 203K – Other than the usual credit documents (credit report, paychecks, W-2, bank statements, etc.) a work write-up will be needed too. That should include: narrative scope of work to be done, architectural plans, permits, specifications, draw requests, contingency reserves, and number of inspections needed.
5. Duration of renovation – Once the buyers closes on the home they have 30 days to start work and must finish it within 6 months.

Oren Orkin is a mortgage broker for Wells Fargo and a regular contributor.   For more information on 203K's or other mortgage needs, he can be reached at Oren.Orkin@wellsfargo.com