Home Inspection Pros Inc: We Are Your 203(k) Consultant
What is an FHA 203(k) Loan?
The objective of the 203(k) program is to promote and facilitate the restoration and preservation of the nation’s existing housing stock.
A common but incorrect myth about the 203(k) is that it’s for an ugly property in a bad neighborhood. Not true! The maximum loan amount is currently over $400,000 for a single family and over $700,000 for a four flat in some Illinois counties.
If you are considering any of the following, it’s worth seeing if a 203(k) can work for you:
- A property that is too small, but in an ideal location
- Adding on or building up an existing property
- Updating or replacement of siding, windows or roof
- Updating plumbing, electrical or HVAC
- The purchasee of two, three, or four flats
- Mixed-use properties
Home Inspection Pros is your 203(k) consulting expert. Please read on and contact Dean for further information since every situation is unique.
Using a HUD Consultant
It has never been a requirement of today’s typical mortgage originator or underwriter to be an expert in the fields of home inspection or construction. For the 203(k) program to be successful, it becomes necessary that someone be an expert in these areas. That someone is the HUD consultant.
To insure all required and requested renovation work is accounted for, the HUD consultant monitors compliance with FHA property standards.
The HUD consultant prepares the following:
- A feasibility study that categorically examines the structure while reviewing 35 areas of concern
- A plan review to examine the customer’s bids in light of a site visit and review of the home inspection report
- A specification of repair also known as the work write up
Because of the detail and necessity of specific forms, a home buyer (or their contractor) might take 3 -6 months to do a proper work write-up and cost estimate package. This package must be fully completed to start the appraisal stage. Real estate purchase contract time frames typically allow 60 days for closing, which means time is of the essence.
By incorporating a HUD consultant into the process, everything can be readied in just 2 weeks.
The 203(k) consultant addresses the need for direct-endorsement lenders to better control time frames through the use of an individual who can: Perform site visitsFormulate the work write-up while consolidating the functions of a home inspectionCreate a bid package The ideal consultant has a construction background with advanced home inspection skills and remodeling experience. Their primary responsibility is to complete the home inspection and construction exhibits as soon as possible after the borrower signs a sales contract so the lender can request the property appraisal. The consultant must be able to prepare a work write-up and cost estimate without using contractors to obtain bids. It is important for the consultant to use cost estimates that are reasonable for the area in which the property is located.
FHA requires that the consultant who prepares the work write-up and cost estimate needs to inspect the property to ensure:
- There are no rodents, dry-rot, termites and other infestation present on the property
- There are no defects that will affect the health and safety of the occupants
- Adequacy of the existing structural, heating, plumbing, electrical and roofing systems
- Upgrading of the dwellings thermal protection (where necessary)
- The HUD/FHA home inspection report will address any deficiencies that exist and certify the condition of all major systems. A wood-boring insect report is included if required by the lender. For properties with private sewer and water, a septic certification and a private well analysis is required. Your consultant will determine if additional professional expertise is needed to provide all the inspection services required to complete the report, and will make such recommendations at the time of inspection.
As a part of the application process for an FHA 203(k) rehabilitation mortgage, a home inspection report on the current condition of the property is required. In most cases, the Home Inspection Report will be the Direct Endorsement (DE) underwriter’s only “view” of the property in its as-is condition. HUD is not looking for the consultant to make the house perfect, but to determine if the house needs to be repaired based on the above mentioned items.
It is essential that this inspection be carried out in the utmost professional and competent manner.