203k Full Renovation Loan Guide: Permits & Draws.

Now that you are ready to move forward with construction on your house after completing Phase I & Phase II of the 203k Loan process, the lender will assign you an account manager at the bank who will answer questions and handle the payment process. You will send invoices to the account person for payment and the 203k consultant will send draw requests to them to get money back once work has been completed. Every lender is different, but ours only paid upfront materials deposits for: windows & doors and cabinets. Windows and doors are very expensive so it was helpful that they paid out that deposit upfront.

FHA-HUD-203k-loan-renovation(Our addition in progress)

One of the first things you will do is meet in person with your GC and make them a copy of a key to the house. Do a walkthrough with them and tell them what you are envisioning for the home so they have a good idea on your vision. I also sent lot of Pinterest pics for inspiration to explain what I wanted along the way.

Your GC will order a dumpster and port-o-potty for the house. You can start cleaning out any furniture, old clothing, etc. to help move along the process so its ready for demo. Our house was left with everything in it so we cleaned it out some just to feel like something was being accomplished. Our GC handled most of the major cleaning and 100% of the demo process. Make sure you leave the difficult demo to the professionals.

Obtaining Permits: ($1,100 for Architect/Engineering costs)
Architect to make final changes to plan (ours needed to change construction drawings for the carport to be a garage – $200). If plans are finalized and no changes need to be made you can just get Engineering calculations and put Engineer’s stamp on the plans ($1,100 total with the $200 to change garage on drawings). Provide final stamped plans to GC to pull permits with the city.

GC needs the HUD and your Deed documents from your closing showing you now own the house to apply for the permits (your mortgage broker can provide these). He also needs the most recent survey documents (you can scan him these, he does not need originals).

To submit all permits, GC needs you to sign Notice of Commencement forms and building permit applications (he will send you), all of which need to be notarized. He needs these to add to his permit package to submit to the city.

For permitting fees, you can send lender the permit invoice and they will make out a check to the city, mailed to you to then sign over to your GC/or pay to the city. Some building departments won’t proceed with permitting until a portion is paid but we were able to roll all permitting fees until the end of permitting so the lender only had to send one check.

Permit Process.
This varies from city to city and can take anywhere from two to six weeks. Our plans were submitted for permitting on Friday October 17th and they passed November 24th, so it took over a month for them to go through Plumbing, Electrical, Mechanical and Structural. If they have issues with your plans they can get held up in any of these departments and you might have to redo something and then resubmit them. While waiting on the permits the GC can get workers started on internal demo.

Permitting Costs: $2,906 from budget (We had budgeted $6,000 with the lender)
The leftover permit money comes off the principle of your loan, you do not get this cash back to use towards the build.

The 203k Full Renovation Draw Process
Once the GC has completed a good amount of demo he will contact the Consultant who will meet all of you at the home site. The consultant will inspect the house to ensure the proposed work has been done, taking pictures of the progress to submit to the lender. The GC will have filled out the Draw Request Form with the amount he is requesting, the Consultant will approve it and then have you both sign it. You will receive a copy of this request by email. All draw requests will have a 10% holdback from the GC, which will be released at the end of the build when they have ensured all work is completed/inspected and there are no liens on the house.

The check delivery time from the lender is between 7 – 10 days from when the draw request is made. Sometimes ours came in two days which was amazing. Checks will be made out to both you and the GC, you will need to sign them over to the GC. Unless you fronted the money, but more on that below. I had all checks sent to my work to ensure I received them as they always came in the afternoon and mail wasn’t being delivered to our home yet.

If you are lucky, the 203k Renovation Loan is as simple as this: work gets completed, draw request is put in, you receive your checks back and sign them over to your GC. Of course, nothing in life can be this simple so if you want to learn about what really goes down when things don’t go perfectly, the next post will be on time extensions and the oh-so-lovely contractor termination. For now, here are home progress pics along the way. xx, Beth



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