FHA Renovation Forms That FHA Requires the Borrower to Sign

FHA Renovation Forms That FHA Requires the Borrower to Sign

There are quite a number of forms that FHA requires the borrower to sign, some of the forms others must also sign such as the Contractor, Home Inspector, Loan Officer and others.

Lenders will have additional forms that meet their in-house guidelines these are called overlays and are allowed by FHA. Here I will discuss only the FHA required forms.

It is very important that everyone involved with the loan read and understand what the form means. Ask you Loan Officer for a copy of the forms so that you can read and understand in advance.

The Maximum Mortgage Worksheet is a form that breaks out the renovation soft costs to determine the loan amount and calculate the down payment.

The Borrower’s Identity of Interest form is stating that the buyer does not know the seller of the property and there is no conflict of interest with any of the parties involved in the transaction.

The 203K Acknowledgment form has several important sections. The first section of this form states to the buyer that HUD has not approved the property and does not warrant the condition or value of the property.

In the section titled Loan Requirements, there are 3 boxes that requires one of them to be checked. This boxes states where the interest check will go when the repairs are complete.

The Renovation Funds are held in an interest bearing escrow account. The interest paid is not a lot but it belongs to the buyer. One of the options is to have the interest check mailed to the buyer. I suggest the borrower take the money, it is not a lot and it does not make sense to apply to the principal balance, the monthly payment will not change. The borrower will never realize the money if it is applied to the principal.

See also  Why Location Matters When You're Purchasing a Home

The form also explains:

The consequences if the if the work is not completed on time.

When the permits must be pulled and presented to the Lender.

Understanding how and when the Contractor is paid.

Understanding using binding arbitration if disputes arise with the contractor.

Understanding what happens if the borrower changes Contractors during the renovation phase.

Understanding HUD does not provide a warranty on the property.

Making the mortgage payments during the renovation phase.

Understanding that no changes can be made to from the work write-up and any exhibits that were presented to the underwriter for loan approval.

Understanding the contingency funds and how they are used.

The borrower should receive a copy of this and all other forms.

Educating yourself when getting the FHA renovation loan is crucial, this is a complex loan and can be difficult and time-consuming to close. I personally think it is the most exciting loan program on the market.