Hiring a General Contractor is the most important step in putting together your rehabilitation FHA 203K Loan. The final bid contract estimate will be the ultimate driver in determining what your after improved equity situation will actually be. The numbers are crucial in putting together a project with enough after improved value, so that you can, eventually, in my opinion, refinance out of this loan in six months, and potentially drop the mortgage insurance with 80% LTV into a conventional loan.
But what happens when your General Contractor is taking too long to get you a bid? What happens when your General Contractor wants up front money to start the project? What happens when you find out your General Contractor has liens and judgments against him? Uninsured? Gets you on the hook, then does not call back? Gives you a bid that is high and excessive? Well, in my opinion, all of this will make you go crazy. It should be an amazing experience buying a rehabilitation loan, because of all the benefits it has to offer. Having a shady General Contractor on your project will not only delay things, causing you potentially to be out of contract, but also they can really screw the numbers out of proportion if you are not dealing with a reputable General Contractor.
While HUD does not recommend General Contractors, it is the job of the homebuyer to find out whom they would like to use for their project. A good mortgage broker should also be resourceful to you, to help you find the right General Contractor for the job. The following are tips in helping you identify good general contractors and avoiding the other who are not qualified
This is one of the strongest ways to find out more about your General Contractor, and what people are saying about them. There are numerous review sites that operate at the hyper local level, where customers can voice their experiences, opinions, and reviews of the companies who they do business with. I love SOCIAL MEDIA, because nothing compliments my business more, then a satisfied customer, or people who know me, and like me, and trust me. Here are some examples of review sites. See if you can find your General Contractor here, and see if they have some third party testimonials.
This is an important tip because your mortgage broker is in full command of aligning all of these pieces together, ensuring that you get to the closing table, happy, and on time. Many mortgage brokers will tell you that they have experience doing 203K loans, and end up costing you additional thousands in lost time and money, because were incorrect in putting everything together. Demand your mortgage broker give you testimonials of previous clients that they have worked with, who closed a 203K Loan with them. If they are honest, and say that this is their first one, well that is fair too. Just make sure they are competent enough and reliable enough to put it all together. A good 203K broker, should also, have about 3-4 General Contractor names for you, of 203K Certified contractors, to help save you the time in finding the right one.