This is, without a doubt, the first thing that I am asked each time I meet a new client. Often, the time and cost that it takes to meet and hire a Consultant is unexpected, and it helps to have a clear understanding of what my role is in the loan process.
The 203(k) Consultant is a professional who has been vetted by FHA, to act as a Consultant to Borrowers, and help them through the different stages of remodeling. It is essential that the Consultant have a clear understanding of remodeling, contracting, subcontracting, materials and contracts – because they each have unique roles here.
With that said… here’s how it works after the Borrower has chosen a house:
1. The Borrower meets the Consultant on site, bringing copies of all bids and prior inspection reports.
2. An agreement between the Borrower and Consultant is signed.
3. A $400 base fee is paid to the Consultant, based on HUD’s fee guidelines.
4. An inspection is performed to the residence, noting all deficiencies and existing systems.
5. The full FHA Package is submitted, typically next day, to the Underwriter, Lender and Borrower.
(What’s in the Consultant's FHA Package?)
Specification of Repairs
Notice To The Contractor
Borrower/Contractor Contract
Certification Letter
Identity of Interest forms
W-9’s for the Contractor & Consultant
First Draw Request form
Self-Help Agreement (if Borrower is to be the Contractor)
All specific form required by the Underwriter to close the loan.
6. If a major addition or remodel is planned, architectural drawings will be required.
7. All drawings are provided to the Contractor for bidding and permitting purposes.
8. The Consultant takes the Contractor’s final bid and adjusts the Specification of Repairs form, as all numbers have to match up before the Underwriter sends the loan to closing.
9. An Appraiser is sent to the site, along with a copy of the architectural drawings and the final Contractor’s bid, and determines the After Repair Value.
10. Assuming all goes well with appraisal, all papers are forwarded to the closing attorney.
11. The Contractor pulls all required permits and the sawdust starts to fly!
12. As repairs move forward, the Consultant is called for a Draw Request (up to 5 times over the course of remodel) to review all work put in place, and funds are released to the Contractor for the determined value.
13. For each Draw Request, a Lien Waiver is submitted to insure clear title.
14. After all repairs are complete, the Consultant performs a final inspection, and the 10% Hold Back from the Contractor is released… and the Borrower can move in!