We started reaching out to some FHA 203k consultants that we know and also to a few other FHA 203k lenders and we asked them all to please tell us what gives them the biggest headaches and what could we tell customers upfront that would help speed along FHA 203k mortgage transactions. Drum roll please………
PERMITS, PERMITS and MORE PERMITS
Depending where you live getting permits can take up to 3 months to secure. This is extremely important factor that many lenders, contractors and clients all forget.
How important is securing the permits quickly?
Extremely. The FHA 203k renovation mortgage requires that all rehab and renovation work be completed within 6 months from the closing of your loan. So if you lose 3 months waiting for permits then you are really behind the 8 ball- its no fun when the draw administrator for your loan is calling you “reminding you politely” that you are running out of time to finish your project.
So we now know the problem- what is the fix?
For refinance transactions- since you already own the property and getting an FHA 203k rehab mortgage is exactly what you are going for- then applying for your permits before you go to closing should really be no problem. Take the time to go down to the township or municipality and find out the process and time frame. Get started early- do not wait!
For purchase transactions- this one is a little more tricky. Who wants to apply for permits on a house that you do not even own yet? Not me and I do not recommend doing this either. What I would recommend is that you contact the local municipality or township- find out there time frames. Get the applications and have your contractor fill them out so that the day you do go to closing you can already be ready to go.
The whole point of this post is to once again SET THE EXPECTATIONS for everyone involved. I cannot stress this enough- I make sure that everyone who is involved in one of my loans has the right information and knows the role they play.