Licensed FHA 203(k) Consultants/Inspections
The 203(K) Consultant
The 203k Consultant’s role is to create and submit all required HUD lender documentation in support of the 203k loan process, verify the accuracy of your contractor’s estimates and ensure that all required repairs are completed in a professional manner. If you are not happy with the quality of the work, the Consultant will require the contractor correct any issues prior to payment. When the borrower knows what upgrades and improvements they want, the Consultant is typically engaged after the contractor has submitted itemized bid(s).
The Consultant’s first task during the loan process is to perform an initial property Compliance Inspection. If the homeowner is unfamiliar with repairs required by FHA guidelines they should involve the Consultant as soon as possible. The Consultant is responsible for completing all FHA/HUD documentation to support the 203k loan requirements and subsequently performing all Draw Inspections and obtaining signed Lien Waivers to be insure all sub-contractors have been compensated to protect the homeowner from potential mechanic’s liens.
For the 203(k) program to be successful, it is necessary that a licensed independent third party inspect the property and provide all FHA required documentation to ensure the loan process proceeds in a timely manner. From the time of the loan origination the consultant is invaluable to ensure adequate plans for improvement and during construction to ensure compliance. To address these concerns FHA has included in its underwriting guidelines the following requirements:
1. An IL. licensed Home Inspector must perform all 203(k) consultant engagements.
2. A Compliance Inspection that categorically examines the subject property on (35) areas of concern.
3. A Work Write-up that includes all necessary HUD documentation for the lender to process the loan request.
What Is The Consultant's Role?
The loan consultant is the KEY to the 203(k) program. As IL. licensed home Inspectors and registered FHA/HUD 203k loan consultants we have an extensive construction background with advanced home inspection and remodeling experience. It’s our responsibility, as consultants, to complete the home inspection and construction exhibits as soon as possible after you, the borrower, execute the sales contract in order for the lender to process you loan. FHA requires the consultant that prepares the work Write-Up to perform a Compliance Inspection of the subject property to assure:
- There are no rodents, dry-rot, termites and other infestations on the property;
- There are no defects that will affect the health and safety of the occupants;
- The adequacy of the existing structural, heating, plumbing, electrical and roofing systems; and
- The upgrading of the dwellings thermal protection (where necessary).
Borrower Steps to a Completed 203k loan
1. Work with a lender that is familiar with the 203K loan process and get pre-approved.
2. Work with a licensed Realtor to locate a list of potential properties that meet your selection criteria.
3. Identify licensed general contractors and request itemized bids to address the scope of work you want to include on your project. Contractor bids must be itemized by task and break-out the labor AND material cost for each itemized task.
4. We work with you (the borrower), your selected lender and contractor to prepare all the FHA/HUD documentation your lender will require to process your 203k loan. This includes: a Compliance Inspection Report, Work Write-Up, Itemized Scope-of-Work, Consultant's Identity of Interest, Recap of Sub-Totals Summary and Draw Request documentation.
5. When the loan is approved your lender will place the funds in an escrow account. You typically have 6-months to complete the project. Your lender will NOT release any funds prior to the work being completed and inspected by the 203k consultant.
6. As your contractor completes the various stages of construction you engage us to perform a Draw Inspection, compile the underwriters required documentation (proof of permits, lien waivers and draw request forms) and process the request for release of funds. Progress payments are released to your contractor within 5-business days of inspection. The project proceeds in this manner until work is complete. Most projects require 3-5 construction draws.