FHA 203(k) Consultant

J Brent Heberlein, owner of Inspection Tech LLC, is a U.S. Department of Housing and Urban Development FHA approved 203(k) consultant, ID number S0681.  FHA 203(k) consultants are an integral part in the 203(k) loan process.

What is the FHA 203(k) loan program?

The FHA 203(k) loan program provides a permanent loan for the purchase or re-finance of a one to four family dwelling unit, which includes the cost of qualified home repairs and improvements, and can include up to six months of mortgage payments and other closing costs.  The 203(k) loan  can be used to purchase a home in any neighborhood or condition.  It can be a home listed on the multiple listing in your area, a for sale by owner, a foreclosure, Short Sale, or a Bank Owned Properties (REO's).  Depending on the type and scope of rehabilitation work to be performed, one of two program choices are available.  The Full 203(k) program is used for renovations and/or additions in excess of $35,000.  The Streamlined 203(k) program is for work in excess of $5,000 and up to $35,000 in repairs. Those repairs have to be for simple things like carpet, roofing, paint, cabinets, minor repairs, new windows, etc.  There can be no structural issues or changes to the project that require blueprints.  Although the Streamline program does not require a Consultant by FHA Standards, if the work to be done is valued over $15,000 and under $35,000, it would be recommended that you use the consultant to prepare the "Job Specification & Bid Request" and to act as a "Plan Reviewer" to verify compliance with specifications and to perform a "Final Draw inspection.

Other Advantages:

• Low down payment
• Can include up to six months mortgage payments in the loan.
• You can turn a home into something you want by making improvements you want.
• Great program for "fixer-up" homes.
• FHA 203k loan allows you to combine loans for purchase (or refinance) and home improvement, thus reducing closing costs and paperwork.

Steps to a completed 203k(k) loan

1. Contact a 203(k) Lender and get pre-qualified.
2. Hire a real estate professional to assist in finding a suitable property. Always choose one that understands 203k.  (If you’re refinancing an existing loan with a 203k, a real estate professional is not needed.)
3. Set an appointment with us as your 203k Consultants. As your consultant, I will meet you at your site and review copies of the contracts and agreements required for the 203k loan given to you by your lender that you will need to sign prior to the close of the loan. After our meeting and the HUD/FHA Home Inspection that I will provide, I will create a “Job Specification & Bid Request”, which is a list of the FHA required repair items to be completed.  I will also list inclusions you may want to add like new cabinets and flooring, window, etc.  I will also forward copies of the various reports to your lender to assist you in the loan process.
4. Get contractor bids, by using the “Job Specification & Bid Request” prepared by me as your FHA 203k loan consultant.
5. Choose a contractor. As your consultant, I can assist you in this process and verify contractor compliance to the specifications. The lender will hire an appraiser and once the appraisal report is done, in most cases, your lender can close the 203k loan.
6. Schedule the contractor to begin the work. Once the work begins, the contractor will require continuing inspections called “Draw Requests” to get progress payments for the work as it’s completed. As your 203k loan consultant I will inspect the project and prepare these documents and repeat the procedure until the project is complete.

What is the Consultant's Role?

The 203(K) Consultant was created to address the need for Direct Endorsement Lenders to better control timeframes through the use of an individual who can formulate the work Write-Up by consolidating the functions of a Home Inspection, site visit and the creation of the bid package.  It’s our responsibility, as consultants, to complete the home inspection and construction exhibits as soon as possible after you, the borrower, sign the sales contract in order for the lender to request the appraisal of the property. In order to attain this goal, the consultant must be able to prepare the work Write Up and cost estimate without using outsiders to obtain bids from. We, as your consultant, are expert in this function and use cost estimates that are reasonable for the area in which the property is located. After the work Write Up and cost estimate is completed, you will begin the bidding process with the contractors or subcontractors you select for your project. FHA requires that the consultant who prepares the work Write Up and cost estimate needs to inspect the property to assure:

• There are no rodents, dry-rot, termites and other infestation 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).

The HUD/FHA Home Inspection Report should address any deficiencies that exist and certify the condition of all major systems: electrical; plumbing; heating; roofing and structural.  A WDO (wood destroying organisms) report should be included for all loans if required by the lender. The Home Inspection is the starting point of a successful FHA 203(k) Mortgage.  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.  HUD is not looking for the consultant to make the house perfect, but only determine if the house needs to be repaired.

In accordance with HUD, “The consultant should not have an identity-of-interest in the property. The Home Inspection should not be performed by anyone with an identifiable interest in the transaction (seller, buyer or contractor). If the consultant has an identifiable interest in the transaction, then the work Write Up and cost estimate that they prepare must be reviewed by a HUD assigned plan reviewer, who will also do the inspections on the property. If there is no identity-of-interest present, then the consultant can perform the Home Inspection function, prepare the architectural exhibits and do the inspections on the property where approved by the local HUD Office".

203(k) Consultant Fees

The below fees are paid by the buyer at the time of the initial inspection.  The Consultant Fee Schedule is established by HUD.

REPAIR AMOUNT	CONSULTANT FEE
$5,000 TO $7,500	$400
$7,501 TO $15,000	$500
$15,001 TO $30,000	$600
$30,001 TO $50,000	$700
$50,001 TO $75,000	$800
$75,001 TO $100,000	$900
$100,001 AND UP	$1,000
FEASABILITY STUDY
LESS THAN $15000	$100
$15,001 TO $30,000	$150
GREATER THAN $30,001	$200
DRAW INSPECTIONS	$175
FINAL INSPECTIONS	$175
MILEAGE OVER 30 MI	$.50/MI

CALL 360-771-5414 OR EMAIL jbrent@inspectiontechllc.com