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Using an FHA 203k Mortgage Consultant

By Edward Fallon Updated on 6/19/2017

fha 203k adviceFHA 203k consultants are experts in processing construction and remodeling projects with a 203k loan, but most importantly, many lenders require that you speak with this specialized consultant before you're approved for an FHA 203k loan. 

Here's why:


Feasibility Review

The consultant will inspect the home with you and determine the required repairs as well as the estimated cost. They'll also combine some of the repairs that may not be needed, but would like completed on the property. 

Armed with this information, you can decide whether it makes sense to continue with the purchase of the home. If the cost of the home plus the cost of the repairs is greater than the future value of the home, then it not be a good idea to proceed unless the repairs are scaled back.

Paperwork and Work Write-Up

The consultant also prepares a detailed report of the work intended. This report is known as the Specification of Repairs, and it is sent along with other required paperwork to the lender. The repairs are broken into 35 separate categories with an itemization of the estimated cost of the labor and material for each category, as well as a very specific write-up of the work to be done. 

The consultant prepares this package for the lender and for the contractor to use to bid on the project.

Choosing a Contractor

After this is completed, you can obtain bids from contractors using the work write-up. This is particularly advantageous as each contractor is now bidding on the same work which allows you to compare apples to apples. 

Additionally, the lender will require a background check of the contractor. The lender will provide the necessary paperwork to you to give to your chosen contractor.

Appraisal is Ordered

The appraiser may ask for additional repairs to satisfy HUD's minimum property standards, and the consultant will make the required changes. Once the loan is approved and closes, the money for the repairs goes into an escrow account with the lender. 

Once the loan closes, you can start the repairs.

Inspecting the Work

After work begins, and the contractor needs to be paid. The initial payment is processed after the consultant inspects the work, and has determined that the required permits have been issued. 

Ten percent of the original amount requested is held back until all the work is completed and any changes must be approved by the lender and the consultant.

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About The Author:
Edward Fallon
As an experienced mortgage professional with Allied Mortgage Group, I look forward to helping you with your home financing needs... more

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