Construction Home Loans

remodel means to change the structure or form. Rehab means to restore, repair

Contractors provide draw schedule, inspections are done, and money is then dispersed. The exception is 203k Limited and HomeStyle. The 203k Limited does allow for full payment to contractor up-front. The homestyle can do an up-front reimbursement to contractor for 50% of material.

 

 

VA Remodel

 

HBFS Home Fixer

$5,000.  Up to $10k with exceptions.

 

FHA 203k

203kS

FHA home loans can be used to purchase or refinance. They can also be used to remodel or rehab a loan.

 

FHA 203k Limited

Is this the same as streamlined?

The contractor can get paid 50% of the project up-front.  (i.e. doesn’t need to wait for inspections and draw schedule).  That’s 50% of the project, not the material.  203k Limited goes up to $30k, doesn’t require a FHA consultant, and doesn’t have the draw requests. It’s easier on the contractor and the rehab process.  Underwriting is the same as a normal 203k.

 

VA Renovation

This can’t be structural in nature, only cosmetic improvements. There’s a $30k(ish) cap for the actual renovation work. VA’s actual cap is $35k but that includes fees and a contingency reserve.

The VA renovation product does not allow for up-front payments to contractors. Instead, contractors will be paid based on a draw schedule that they provide. After each draw there is an inspection done by a third-party Inspector to ensure the work was fully completed. This keeps contractors on pace and on budget.

Inspection fees are $200 per draw. The contractor determines the number of draws. There can be up to 3 draws: the first at 20% completion, the second draw at 60% completion, and the last draw at 100% completion. The inspection fee(s) will be rolled into the loan amount.

There is also a 10% to 15% contingency that needs to be accounted for in the $35,000 VA cap limits. The contingency will be 10% if the utilities are on and functional; otherwise it’s 15%. For example, let’s assume a there’s a project with $30k in construction costs, the utilities are on and working, and the contractor will need three draws. This means there will be a $3,000 (10%) added to the loan amount for the contingency.

 

HomeStyle

The only program that does an up-front reimbursement to contractor for 50% of material.

 

 

 

Home Path

 

New Construction Loan

The two methods to financing the building of a new home are the “one-time close” and the “two-time close.” The two-time close is more traditional than the one-time close.

 

Two-Time Close

The “traditional” route involves acquiring an interim construction loan to construct the home and then refinancing that loan into a permanent mortgage once the construction is completed.

 

Interim Construction Loan

 

 

One-Time Close

 

Home Improvement 2nds