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203K Consulting
203K Inspector also known as FHA Compliance Inspector
What is a 203K Inspector
The role of FHA 203k Consultant is to help borrowers who have a Standard 203K Loan. Also to assist with major improvements that will be made on their home renovations.
- The key role of FHA 203k Consultant is do a full inspection of the subject home
- Their job is to check especially for any safety and health related problems and/or issues that is part of the rehab project
- The Consultant is also called the HUD consultant
- HUD Consultants are experts
- They are professionals with experience and knowledge on all aspects of home improvements
- They are familiar with 203k mortgage loan program
- They are on the HUD Approved list of general contractors
The role of a 203K Consultant/Inspector
- The role of FHA 203k Consultant is to perform a Feasibility Study on scope of work
- The HUD Consultant will also be required to perform a Property Inspection Report on the subject property
- Borrowers will be consulting with the HUD Consultant on the scope of work to be performed
- The HUD Consultant will do a Work Write-up
- They will be responsible of either doing the architectural sketch or subcontracting such work
- HUD Consultants will be responsible for inspecting the job prior to contractor’s draws, deny a draw request until further work is done
- They are also responsible for doing a final inspection before a final contractor’s draw
- The HUD Consultant will also be responsible for making sure that the contractor and sub contractors submit lien waivers
- All materials and labor are paid so there are no mechanics liens on the property
- The HUD Consultant is the quarterback between the homeowner, the general contractors, and lenders
- The HUD Consultant is responsible for the work to be done correctly, timely, and professionally
- The role of FHA 203k Consultant is to make sure that the construction funds are properly spent on the project
- Their role is to protect borrowers and lenders interests
Streamlined 203K Loans
Streamlined FHA 203k Loans are acquisition and construction FHA Loans that require minor repairs.
- The maximum construction budget for Streamlined FHA 203k Loans is $35,000
- Home buyers buying foreclosed homes are perfect candidates for 203k Loans
- This is because many foreclosures need minor cosmetic repairs
- Cannot do structural repairs or room additions with Streamlined 203k Loans
- In the event if homeowners need to do structural work and/or room addition and the work is under $35,000, they cannot go with a Streamlined 203k Loan
- This is because of the structural and/or room addition work and need to go with the Standard 203k Loan program
Standard 203K Loans
Home buyers with a Standard FHA 203k Loan can do a full blown rehab which includes the following:
- Any work that can be done with a Streamlined 203k Loan can be done with the full Standard FHA 203k Loan
- There is no construction budget
- Can go as high as homeowner wants
- This only holds true as long as it appraises on the after repaired value
- Cannot go beyond the maximum FHA Loan Limits
- Can do structural changes and do second story additions and side room additions
- Can do a complete gut and rehab
- Can have the home of your dreams and customize it
- Basically, can have a custom home built to homeowners needs and choice of layout, decor, mill-work, siding, flooring, windows, roofing, and appliances.
Payment for Consultant and Contractors
Here are the costs and duties of a HUD Consultant:
- The HUD Consultant needs to be approved by HUD
- HUD Consultant fees are normally $400 to $1,000
- Costs depends on the costs of the repairs to the property
- The HUD Consultant will also charge an inspection fees
- There are a maximum of 5 draws allowed on Standard 203k Loans
- The HUD Consultant needs to sign off on all contractor draw requests before the contractor and go and collect their draw request from the title company
- The HUD Consultant can also charge a mileage fee
203k Contractors who perform Standard 203k Loans are paid as follows:
- Contractors who perform Standard 203k Loans are not paid upfront money like Streamlined FHA 203k Loan Contractors
- Contractors are paid their first check by requesting their first draw after the initial scope of work has been completed within the timeline scheduled and project completed
- Contractors are allowed up to a maximum of 5 draws
- The role of FHA 203k Consultant is to section the draw of the general contractor in five stages
- Each draw will be signed off by the HUD Consultant after the particular scope of work has been completed with the fifth and final draw being signed off when the whole project is completed
- For each draw a general contractor gets paid, a 10% Contingency Reserve will be deducted
- This Contingency Reserve hold back is to make sure that nothing goes wrong or that there is no cost overruns with no last minute surprises and that the project is completed with the construction budget