203k / Conventional Renovation Consulting
Close Your Reno Loans in 45 days!
100% national coverage for conventional loans; 75% of the nation’s market for 203k
What are 203k / Conventional Renovation Loans?
Renovation Loans combine mortgage and remodeling costs into one loan, allowing purchase of a home that needs updating, but at a lower potential cost than a move-in ready house. And by improving the home’s value, renovations can help build equity faster than buying a move-in ready house.
Our role in your renovation project is twofold:
- Prior to closing, we assist you and your contractor with establishing a construction budget for the project
- Once the loan closes we inspect for disbursements as the work is completed
Our dedicated administrative staff specialize in renovation financing and understand that accurate and complete paperwork must be delivered as quickly as possible.
We have completed more than 4,000 renovation loans and currently do more than 600 annually. We have 32 licensed consultants who are all also licensed, home inspectors. They are all experts at estimating and have substantial experience in completing complex renovation projects.
PHI can also provide feasibility studies, lender referrals, and contractor referrals if needed.
Free Feasibility Studies
Feasibility studies are extremely powerful tools. They allow you to quickly and accurately understand how much upgrading a house will cost. They provide the missing element that makes renovation loans work; the cost to upgrade. To secure a free feasibility study please contact us.
Lender Referrals
We have long-standing relationships with the industry’s leading renovation lenders and loan officers. If you need referrals to experienced lenders feel free to contact us. Many lenders and loan officers are approved to do renovation loans, not all of them have the experience required to do it well. An experienced lender will close your loan quickly without hassle and will release your renovation funds timely and accurately.
Contractor Referrals
We maintain a database of 950 Validated Contractors – Categorized by State & County, in the 17 states we cover. It is our preference that you find your own contractor. We will be responsible for releasing funds post-closing and want to avoid the perception that we’re recommending specific contractors. Therefore, please try to find a qualified contractor first, but we are happy to help.
Important Questions to Ask Before Hiring a Contractor
Is The Contractor Financially Qualified?
A financially qualified contractor has the following attributes. We strongly advise you verify these before choosing your contractor. It will be the difference between getting your upgraded house when you expect and delays beyond your control.
- Adequate working capital
- Long-standing vendor & subcontractor relationships
- A verifiable history of completing on time and on budget
- Provides accurate, complete bids
- Responds timely
Will the project be completed on time?
Negotiating a committed start and completion date with the contractor is recommended. Again, please choose a financially qualified contractor. They will have all materials on site before they’re needed and have a 3-5 person crew working on your house daily. This is the best way to assure your house is completed when you expect.
Will the project be completed within the borrower’s budget?
The budget is controlled in the collaboration with us.
Will the contractor provide the quality of work that the borrower expects?
This is best determined by visiting at least three of the contractor’s recent projects.
When searching for a contractor, we recommend asking friends, family, neighbors, and local supply houses. If you choose to use websites like Angi’s, Houzz, and Home Advisor, please do so very carefully.
A qualified contractor has the following attributes. We strongly advise you verify these before choosing your contractor.
Home inspections combined with a 203K or Homestyle Consultation will be discounted to $525
203K, Homestyle Loan Process
To start the process, we are required to do a walkthrough of the property where we will spend about 1.5 hours reviewing the proposed work, reviewing with you how the process works from start to finish, and discussing the items below. After our walkthrough, we will generate a draft specification of repairs with pricing for you to review.
If you do not have a contractor yet we can provide a contractor bid form which is the scope of work without pricing that you can use to secure contractor bids. Once both you and the contractor agree with the draft specification of repairs (SOR), we issue the final construction documents which are used to secure the final appraisal and close the loan.
Key Points Post Closing
Once your loan closes you will receive an introductory email from the draw administrator at your lender. We are cc’d on the email to alert us that your loan has closed and to expect visits to release funds to you and your contractor.
At the site visit, we will inspect for completed work. 24-48 hours after the visit you will receive the draw paperwork electronically for you and your contractor to sign. Upon receipt, the lender will issue payment via 2 party check to you and your contractor.
This is probably the most important decision you’ll make. We recommend asking friends, family, and neighbors, and perhaps considering Angie’s List, Home Advisor, Yelp, and other online services carefully. You are free to choose your contractor; the only requirement is that they are locally licensed/registered. HUD/Fannie Mae does not approve contractors. When choosing your contractor, you’ll want answers to these three questions: will the work be completed on budget, on time, and to the quality you expect? Budget is what we control together through our work. On-time performance can best be managed by setting the dedicated start and completion dates with your contractor. Quality is best determined by visiting at least 3 recently completed projects and interviewing previous clients about the contractor’s performance. Please note, in our experience completion times frequently exceed those promised by contractors.
Work to be completed under renovation loans is broken down into required and desired items. Required items, also known as minimum property requirements, are generally health and safety issues, code issues, or elements that are no longer functional; generally, everything required to secure a municipal certificate of occupancy upon completion. Desired items are everything you wish to add above required items, with a cap of both required and desired items being the future, as repaired, appraised value of the house and your desire/ability to borrow. You can reduce/eliminate desired items to reach your budget if you wish. You cannot eliminate required items.
Renovation loans require a 10-20% contingency reserve above the construction amount. Contingency is intended to cover health and safety items that were not visible at the time of the visit. Once the project nears completion, the lender may allow it to be used for additional desired items that increase the value of the property. Any remaining contingency will pay down your mortgage balance when construction is completed.
For HomeStyle lenders will generally release a modest upfront payment which should be enough for the contractor to reach the first draw request. For 203k the lender may reimburse down payment monies or directly reimburse a supplier, for large ticket items such as windows, cabinets, mechanical equipment, etc. We recommend you check with your lender to determine their current policies on upfront monies. In general, we recommend being very conservative with providing contractors with upfront monies. Please keep in mind that high-quality contractors have strong vendor and subcontractor relationships and adequate working capital needed to reach the first draw. If your contractor is missing the above, it’s a warning sign about their ability to complete your project timely. If you need contractor referrals we may be able to help.
Available if you have not negotiated a final price with your contractor. It is the specification of repairs document without the numbers, and it assures that all potential contractors bid the same work. It prevents having to do bid leveling amongst competing bids.
Draft specifications of repairs are usually issued 2 working days after the visit. Final construction loan documents can be issued as soon as you and your contractor agree on the specification of repairs and prices.
Permits are estimated between 1% and 2% of the construction cost. We recommend you and/or your contractor consult with the local construction official to assure your project complies with all requirements for permits, inspections and sign-offs.
It is recommended that you check with your insurance broker to make sure the correct contractor and homeowner insurance is in place before work starts. We also recommend that you are listed as an additional insured and certificate holder on the contractor’s liability policy.
Mortgage payments can be added to the escrow account to cover your mortgage payments during construction. Speak with your lender for further details.
All estimates we use are builder’s grade or better unless otherwise specified.
The draw administrator at your lender is the person who issues the draw checks. You will usually receive an introductory email from the draw administrator. We are usually cc’d on the email, it lets us know you’ve closed and to expect draws. Specific questions related to your loan should be addressed to your draw administrator as policies vary slightly from lender to lender.
These will arrive 4-5 days after the signed draw is submitted to the lender. We recommend you speak with the draw administrator before the first draw to make sure the address they’re sending the check to is correct. Also, many lenders will send checks overnight. We also recommend you speak with the bank you will be depositing the funds into prior to submitting 2 party checks, especially as they’ll likely be in excess of $10,000.
Proof of permits is required to be on-site in order for the lender to issue the first draw monies.
All monies released will have 10% held back until the final draw.
You are required to start the work 30 days after closing and complete the project within 6 months. Extensions for reasonable delays may be granted by your lender. Per your loan documents in order to assure the project progresses in a timely fashion, you are required to have a draw visit every 30 days.
Funds are released based on a percentage of completion for each of the line items listed on the draw request. The schedule of values is the same one listed on the specification of repairs you closed with.
A maximum of 5 draws are permitted to be funded into your loan. The actual number of draws we will conduct is determined by you and your contractor. Most lenders permit more draws on larger projects. In order to assure that work proceeds
For HomeStyle lenders will generally release a modest upfront payment which should be enough for the contractor to reach the first draw request. For 203k the lender may reimburse down payment monies or directly reimburse a supplier, for large ticket items such as windows, cabinets, mechanical equipment, etc. We recommend you check with your lender to determine their current policies on upfront monies. In general, we recommend being very conservative with providing contractors with upfront monies. Please keep in mind that high-quality contractors have strong vendor and subcontractor relationships and adequate working capital needed to reach the first draw. If your contractor is missing the above, it’s a warning sign about their ability to complete your project timely. If you need contractor referrals we may be able to help.
Lenders allow contingency to be used for unforeseen health and safety items at any time as the project is completed. Costs for extra items are generally reimbursed only at the end of the project with the final draw. To access contingency monies and have them added to a draw, the lender requires a one-page invoice on your contractor’s letterhead detailing the additional expense prior to the draw visit. We only require invoice copies for the extras being requested. Any unused contingency at the end of construction will be paid down on your mortgage balance by the lender.
For refinancing transactions lenders generally do not permit work to start until the loan closes. It is recommended that you speak with your lender if this is an issue.
If the work stops for more than 30 days you are required to notify your lender and us and provide a reason why.
See contractor selection on the first page. You’ll want to avoid changing contractors during construction so please choose your contractor carefully after thoroughly qualifying them. If you must change contractors your lender requires us to complete a contractor termination draw to determine how much work has been completed by the terminated contractor. We strongly encourage you to arrive at an agreed-upon final amount to pay the departing contractor that we can verify for accuracy. If you require us to arbitrate between you and your contractor, additional charges at the rate of $300 per hour will apply.