Closing Your 203k Loan: A Checklist

Closing on a 203k renovation loan involves several key steps beyond a traditional mortgage. Because you're financing both the purchase (or refinance) and the renovation costs, the process requires careful coordination between you, your lender, and your contractor. Staying organized and proactive is essential for a smooth closing. This checklist outlines the essential elements needed to finalize your 203k loan and get your renovation project underway. By understanding these requirements and working closely with your lender and real estate agent, you can ensure a timely and successful closing.

• Finalize Loan Application and Underwriting: Ensure all requested documents have been submitted to your lender and that underwriting is complete. Address any outstanding conditions promptly.
• Appraisal Completion: The "as-is" and "as-improved" appraisals must be finalized and approved by the lender. Discuss any discrepancies with your lender and real estate agent.
• Contractor Selection and Agreement: A qualified contractor must be selected, and a detailed renovation contract must be signed and submitted to the lender. This contract forms the basis for the renovation budget and draw schedule.
• Homeowners Insurance: Secure a standard homeowner's insurance policy and a builder's risk insurance policy (also known as course of construction insurance) to cover the property during renovations.
• 203k Consultant (If Required): If your lender requires a 203k consultant, ensure they are hired and have reviewed the renovation plans and contractor bids.
• Escrow Account Setup: The lender will set up an escrow account to hold the renovation funds. Understand how the draw process works and how funds will be disbursed to the contractor.
• Final Walk-Through (If Applicable): If you are purchasing a property, conduct a final walk-through with your real estate agent to ensure the property is in the agreed-upon condition.
• Closing Disclosure Review: Carefully review the Closing Disclosure, which outlines all loan terms, fees, and closing costs. Ask your lender about any questions you have.
• Closing Date Confirmation: Confirm the closing date and time with all parties involved, including your lender, real estate agent, and attorney (if applicable).
• Funds for Closing: Ensure you have the necessary funds for closing, including any down payment, closing costs, and escrow deposits. These funds must be readily available.
• Attend Closing: Attend the closing and sign all required documents. This officially finalizes the loan and transfers ownership of the property to you (if applicable).
• Post-Closing Meeting (Recommended): Schedule a post-closing meeting with your lender and contractor to review the draw process, communication protocols, and any remaining questions.

By following this checklist and maintaining open communication with your lender, real estate agent, and contractor, you can streamline the 203k loan closing process and pave the way for a successful renovation project.