Generally speaking, any lender that is approved to provide FHA-backed loans can provide 203K mortgages, but that does not mean you should use just any lender. The 203K process is very detailed and with one wrong turn, the entire project can turn upside down. Before you jump on board with any lender that claims to be approved to provide 203K loans, learn what you should look for to ensure that the process goes as smoothly as possible.
Look for Expertise
The best lender to use is one that has plenty of experience in the process. The mortgage industry guidelines are constantly changing and without proper knowledge of the latest FHA rules along with the 203K rules, you could be in for unpleasant surprises. Talk to any potential lenders about the number of 203K mortgages they have overseen as well as how recently they occurred. You want to work with lenders that have closed many 203K loans and have seen all different types of scenarios unfold, especially if you are thinking of using a full 203K loan with major renovations on your home.
Ask for Advice
Your lender is not required to provide you with advice regarding any changes you make to your home or the contractor that you use, but those lenders that have been through the process quite a bit will have some advice to share. This is what you want to look for as it shows expertise in the industry. Some lenders will go as far as providing a list of their approved lenders. This does not mean that you need to stick to that list, but it is a great way to start your search with those contractors that you know understand the 203K process and will help you get through it smoothly. If the lender does not have a list or any advice to provide on the entire process, it might be best to move on to another lender that has more experience in the process.
Ask about Full and Streamlined 203K Mortgages
There is a large difference between the streamline 203K and the full 203K mortgage. If you choose a lender based on the fact that they have knowledge on the 203K process without inquiring which program they have experience in, you could be in for some trouble. If you are using a full 203K loan, you need a lender with extensive experience in the process as it is very detailed. Talk to your lender, asking for specific numbers regarding the amount of streamlined and full 203K mortgages they have closed on. In addition, ask questions regarding how long the process took, what the average time to closing was, and how the loan consultant/contractor process went down. These are all important factors of the full 203K loan and will have an impact on your process.
As you can see, any FHA lender can technically provide a 203K loan, but they should have the necessary experience to help make your process go as smoothly as possible. You cannot ask too many questions when it comes to dealing with a 203K loan. Ask your lender very specific questions regarding their experience as well as in regards to any details you have to be concerned with on your own loan. When you have the answers of several lenders, you can compare apples to apples to determine which lender would be right for you in the end. Just settling on a lender that tells you they have the ability to underwrite a 203K loan could make your purchase and rehab process rather difficult. Take the time to do your due diligence in order to have a smooth process in becoming a homeowner!