The FHA Renovation Mortgage Loan Program, in my opinion, is the most exciting mortgage loan program on the market. A lot can be done when a borrower uses this loan. If you are a fan of HGTV then you will love this program, every change, upgrade, addition, improvement you want to make to your current home or a home you want to buy can be used with this program.
Not all contractors are familiar with this loan program, some will not participate in the program. There are some states that require contractors to obtain a license through a state agency and others that do not.
The state license does not mean that the contractor is good or bad, it simply means that the contractor passed the test.
There are some contractors who don’t know how to break down the numbers, but they have a good eye and can give a pretty good estimate. The contractors that can do that are usually older, the FHA doesn’t allow estimates anyway. The Contractor must break down and add up the numbers.
Example:
What is the cost per foot of base board, how many feet will be needed, and the total for the item?
This is not a simple step for some contractors, but it is a requirement. FHA has 35 required line items and it’s a pretty comprehensive list. The FHA accepts any form or format as long as all 35 elements are addressed.
As the borrower, when you receive the completed form from the contractor, be sure to check the numbers to make sure they are correct. math errors will delay the closing of a loan.
For 21 years, the FHA renovation loan has been my niche product (I have a passion for this program) and whenever a borrower had problems with the contractor before the loan closed and continued with the contractor, they had problems after the loan closed.
If a contractor has difficulty adding and subtracting, they may have difficulties in other areas that won’t become clear until after the loan closes and work begins.
This renovation loan program is the most exciting loan program on the market, it is very important that anyone involved in this loan is educated. That includes the loan officer (they should know more than the borrower and agent), the borrower, the agent, the processor, the underwriter. These are the key people to close this loan.
One of the best features of this program is that the contractor’s money will be held in an interest-bearing escrow account and will be paid to you when the FHA inspector signs off on the work as completed.