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understanding the 203b process

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granny031350
Established Contributor

understanding the 203b process

My daughter has just been approved by FHA to buy a Hud home in the Fraser/Roseville area of Detroit, Michigan.  She is getting this house for less than 60,000.00  However it needs work and she is getting 5000 from HUD to do this (203b loan?)
 
So my questions:
 
I just read a post about appraisals.  Hud came in and inspected the home.  At the time of the inspection, the copper plumbing was intact.  However now it is not.  All of the copper plumbing has been stripped and needs to be replaced.   How does that effect the appraisal process since water cannot be turned on!
 
Also, her Dad is going to do most of the fix up work, which her loan officer told her was ok.  This is a very nice home in a very nice location in Detroit (good schools etc) that she is getting for about 1/3 of its valued once it is repaired properly.
 
So once her bid is accepted by MCD, what are the next steps we can expect?  (no one has bid on this home at all in many months, except her now)
Message 1 of 9
8 REPLIES 8
DallasLoanGuy
Super Contributor

Re: understanding the 203b process

i believe you are describing the 203k loan.
 
some lenders handle this a little differently. they may disperse cash at close, but i doubt it. i think the money will be held in escrow until repairs are com-leted and inspected.
 
if it was already appraised, then the missing copper isnt an appraisal issue.
 
Retired Lender
Message 2 of 9
granny031350
Established Contributor

Re: understanding the 203b process

thank you.  I believe they are holding the money in escrow (I just called her and ask) and then her Dad has to submit a bill to the LO to get paid.  (he is cheap labor)  LOLOL Smiley Happy 
 
So once her bid is accepted, then the loan will close and then she can begin to repair and move in. Right? Or will FHA require additional appraisal once all the work is done?
 
 
It all sounds so easy.  We are all going to help her get this place in shape by painting and refinishing the floors while her friend replaces the furnace and air conditioning.  Her Dad is doing the plumbing and the water damage repair.
 
 
Message 3 of 9
DallasLoanGuy
Super Contributor

Re: understanding the 203b process

this doesnt sound like a 203k for certain. but, rather, an escrow holdback for repair on a regular 203b.
 
maybe the appraiser will just do a final inspection before funds are released. this could work out pretty simple.
 
the loan officer needs to explain this to you since i would only be guessing.
 
 
Retired Lender
Message 4 of 9
Anonymous
Not applicable

Re: understanding the 203b process

I know when we looked into it you could not get paid until after the work was done for a 203K loan and their was an FHA person that coordinated the repairs and had to sign off on them. 
 
Even for the work credits in escrow we are currently being required to have invoices (not estimates) from fully bonded and insured contractors for work being done (applainces, pool fencing installed, exterior fencing repairs, 2 doors replaced, floor work, and sprinklers repaired.)  All in all it is about 9000.    
Message 5 of 9
DallasLoanGuy
Super Contributor

Re: understanding the 203b process



mickie08 wrote:
I know when we looked into it you could not get paid until after the work was done for a 203K loan and their was an FHA person that coordinated the repairs and had to sign off on them.  there is a streamline version of the 203k now. no fha coord.
 
Even for the work credits in escrow we are currently being required to have invoices (not estimates) from fully bonded and insured contractors for work being done (applainces, pool fencing installed, exterior fencing repairs, 2 doors replaced, floor work, and sprinklers repaired.)  All in all it is about 9000.    



Retired Lender
Message 6 of 9
Anonymous
Not applicable

Re: understanding the 203b process

That is cool.  Is it also true that those loans are really hard to close?
Message 7 of 9
granny031350
Established Contributor

Re: understanding the 203b process

I guess we will find out here soon.  Hers is the streamlined line as it is much faster and less hassle, I guess.
 
Message 8 of 9
DallasLoanGuy
Super Contributor

Re: understanding the 203b process



mickie08 wrote:
That is cool.  Is it also true that those loans are really hard to close?


not really. just a few extra steps with the inspections.
other than that, the u/w treats them like any other fha loan.
 
it can be approved thru automated underwriting.

 
Retired Lender
Message 9 of 9
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