What Is A 203(K) Consultant?

Those looking to fix up a home, remodel or repair a run-down property may apply for the Federal Housing Administration’s (FHA) 203(k) loan. The loans are offered to those who want to repair or fix up a home that has run into disrepair and live in it as their primary residence. These loans help reduce the risk that would otherwise have to be undertaken by a primary lending agency. Mortgage payments during the time of the remodel may be covered up to six months by the government. Down payments are reduced to encourage revitalization of neighborhoods. Only 3.5% of the purchase price plus repair costs need to be accounted for as well as good credit and steady income to apply. In order for the loan to be secured you will need to work with a 203(k) consultant.

Do you need a 203(k) consultant? What can they do for you? A 203(k) consultant is approved by HUD, or the government agency that oversees home mortgage lending practices. HUD stands for Housing and Urban Development. Consultants must be approved by a HUD field office and trained using their specific Work Write-Up Forms.

To begin with, a 203(k) consultant will view the site with the potential borrower. Together they will walk-through the site as the consultant assesses the amount of work that needs to be done and whether or not it’s possible to do the project. If the consultant gives the go-ahead, an agreement is signed and the client pays a retainer for services.

The second part of the service is where the contractor’s HUD training comes in. They prepare a detailed Work Write-UP. This lays out line-by-line costs associated with project. Included in the Work Write-Up are project specifications, construction costs analysis and HUD-required draw request forms. They also prepare bid packages and lender packages.

The next step is to deliver the Work Write-Up packages to the borrower, lender and contractor. After that the borrower finds a contractor to work with. It’s important to note that lenders have requirements that contractors have to meet. Contractors must know about the 203(k) process and how it will apply to the work they do.

Finally the loan closes. Repair funds are put in escrow and the actual work begins. After that, the consultant performs draw request inspections. During this phase the proper permits must be issued. As the building progresses a punch list is drawn up. Finally the project is completed and warranties and lien releases are gathered.

This type of investment isn’t for everyone, but for those interested in restoration of homes can find themselves a great deal if granted a 203(k) loan.

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