Posted on February 16th 2024

Standard 203(k) transactions, Mortgagees may disburse the following at closing:

• permit fees (the permit must be obtained before work commences);
• prepaid architectural or engineering fees;
• prepaid Consultant fees; [reimbursed to the borrower]
• materials costs for items, prepaid by the Borrower in cash or by the contractor, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date; and
• up to 50 percent of materials costs for items, not yet paid for by the borrower or contractor, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date.There typically is a cap of $50,000 by the lender.
• For any Disbursements paid to the contractor, the Mortgagee must hold back 10 percent of the draw request in the Contingency Reserve.

This is actually a pretty big thing. This will allow us to get reimbursed for materials... materials at 50% of their cost at the close of escrow. By paying that directly to the supplier with proper 1099 form and invoice copy for materials they can get the money at close of escrow. This should speed things up considerably for getting the big ticket items deposits paid for up front at the closing.

While the permits and some of the other fees has been the case for yers the 50% of some of the materials costs paid at close is going to help allow more contractors the flexibility to do more 203k projects.