FHA 203k Renovation Loan Step-By-Step
You just signed a contract to buy a home, but it needs a few alterations. Or did you decide to renovate your existing home? No problem. Here’s everything you need to know about renovation financing.

STEP ONE ~ Contractor Selection

  • Do your research and select a reputable residential contractor(s)
  • Ensure your contractor is licensed (per local/state regulations), insured and has references
  • Obtain written contractor estimates to complete your project
  • Contact your local municipality and determine what permits are required for your project
  • If applicable, a plan review must be obtained by an approved HUD Consultant

STEP TWO ~ Loan Application

  • Loan Originator discusses financing options and documentation needed with you
  • Loan Originator provides you with your Good Faith Estimate
  • Loan Originator sends application to processing
  • Appraisal is ordered on your behalf

STEP THREE ~ Loan Processing

  • Loan Processor prepares file for underwriting
  • Loan Processor contacts you when file goes to credit review with expected decision time
  • You receive the Federal Truth-in-Lending (TIL) disclosure

STEP FOUR ~ Loan Credit Review

  • Loan Underwriter reviews the project and the contractor(s) for acceptance
  • Loan Underwriter reviews the complete loan file and makes a credit decision
  • Loan Underwriter returns loan to Loan Processor who will contact you regarding a credit decision

STEP FIVE ~ Loan Processing

  • Upon approval, Loan Processor will contact you to review the commitment letter and final conditions for closing
  • All conditions must be provided and cleared prior to scheduling loan closing

Now, you are ready to close your loan and begin the actual project.

STEP SIX ~ Loan Closing

  • Attorney/Settlement Agent reviews the loan file
  • Attorney/Settlement Agent schedules closing date with you and reviews funds needed to close as well as any items needed at closing
  • On closing date, you will sign your paperwork to complete the loan closing

STEP SEVEN ~ Renovation Begins

  • You will receive a welcome kit and a call from your Draw Administrator within 5 days of closing
  • Within 30 days of closing, the project must start according to the approved plan
  • As per the rehabilitation loan agreement, the project must be completed within 6 months

STEP EIGHT ~ Making Payments

  • Your 1st monthly payment will be due on the 1st day of the 2nd full month after closing, and then every month thereafter
  • The fully-amortizing payments are based on the total loan amount including rehab monies

STEP NINE ~ Obtaining a Draw

  • Any required building permits must be in place prior to the first draw
  • When a stage of the plan is complete, call to request a draw
  • Your Draw Administrator will require an inspection to be performed
  • Upon satisfactory receipt of the above, a check will be written jointly to you and your contractor and sent to you.

STEP TEN ~ Project Completion

  • The draw process is repeated for each stage until the loan is fully disbursed and the project is complete
  • A final inspection and title update is obtained by the Draw Administrator
  • If applicable, a Certificate of Occupancy/final municipal inspection is required for any permits previously issued

For more information on FHA 203k renovation loans click here