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HUD mandates an extra level of scrutiny for the 203(k), requiring borrowers of the full version to hire a HUD-approved consultant to oversee the renovation and to monitor payments from a special renovation account to the contractor hired by the client. clients need contingency money in their renovation accounts to cover unforeseen expenses. While the loan is commonly being used on uninhabitable fixer-uppers, a house may simply have some undesirable elements—an outdated kitchen, for example—to qualify. Banks are eager to point out that its rising popularity is not entirely driven by consumers searching for discounts in the housing market. “The increase in the 203(k) loan is not specifically related to the growth of foreclosed properties,” said Jim Ragan, Bank of America’s national renovation lending
manager and 203(k) product manager. Still, he added that the 203(k) loan provides consumers with a useful tool to deal with the “volume of properties on the market today.” And with many of these properties, inspiration and vision are as important as cash for borrowers to bring to the table. “Sometimes when you take a person to a house with all its bumps and warts, they can’t picture how it can be turned into something,” saidWeinroth, the consultant. “These 203(k) houses, they’re houses. It’s up to you to be creative and imagine a home. It takes imagination.”
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Navigating the Real Estate Market | APRIL 2012 SPECIAL SUPPLEMENT TO THE GAZETTE 11