Wednesday, March 11, 2015

What is the Maximum Number of Draws on a 203k Project?

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I have had a major lender turn down a loan when our contractor requested 10 draws @$30,000 for a $300,000 construction amount.

I set in on a Denver HOC webcast as I thought we would get some new input or insite. Sadly they were merely reading from the 1994 manual, and mis-reading this portion as so many do.

4240.4 Rev-2 states "Intermediate draws (four maximum) [and one final draw] are inspected by the HUD assigned fee (or DE staff, where applicable) inspector (see paragraph 4-9)."

It goes on to state "If the cost of rehabilitation exceeds $10,000, then additional draw inspections are authorized provided the lender and borrower agree in writing, and the number of draw inspections are shown on Form HUD 92700, 203(k) Maximum Mortgage worksheet."

That is pretty clear to me that more than 5 draws are allowed as long as everyone agrees.