HUD (Department of Housing and Urban Development) is the U.S. government agency that is charge of overseeing home mortgages practices. Among the mortgages loans HUD oversees are the regular 203K loan and the streamline 203K loan. Both of these types of loans are bundled loans which include a loan for the dwelling combined with a loan for home repairs. People that are interested in purchasing existing dwellings in existing neighborhoods often find the dwellings in need of repair. Many potential buyers walk away because they believe they would need to apply and be qualified for two loans (the typical home loan and the home improvement loan). It is true they would have to apply and be approved for both types of loans if they went with a conventional lender; however, by applying and being approved for a 203K loan they would only need one type of loan since it covers both the purchase of the dwelling as well as renovations and repairs.
The 203K loans were developed with the intent to assist people in buying existing dwellings in existing neighborhoods that were in need of renovation and/or repair. This type of loan not only improves the existing dwelling but also the existing neighborhood.
There are specific qualifications that dwelling must meet to even be considered for a 203K loan. The dwelling must be over 1 year old, cannot be an abandoned construction site, and must be a single family home or a building consisting of 1 to 4 units. Townhouses and condos only qualify for 203K loans to cover repairs and/or renovations inside the dwelling. The dwelling must be the primary residence of the buyer(s). There are exceptions permitted for government agencies and non-profit organizations.
For individuals that have applied and are hoping to be approved for either a regular 203K loan or a streamline 203K loan, a home inspection is not actually required but is very, very highly recommended in order to approved for the loan. This inspection must be completed by an individual who is considered qualified by HUD.
Currently the Department of Housing and Urban Development does not have individuals in their employ that actually do home inspections - though they did employ their own inspectors up until around the mid-1980s. These days, home inspections are completed by qualified inspectors for a fee. These qualified inspectors not only do home inspections for HUD 203K homes but also do standard inspections of existing and newly built homes.
So how does a person become qualified to do home inspections for dwellings that are being inspected for a HUD 203K loan? Qualified inspectors have a minimum of 3 years of experience as a general contractor, remodeling contractor, or home inspector. In addition to meeting these minimum requirements, they must then have completed and passed the HUD/FHA Inspector Examination in order to be qualified to perform home inspections for HUD. To find a HUD qualified inspector in your area, go to the HUD website (www.hud.gov).
There are several important questions you should ask your home inspector – for example, ask about their experience and/or length of time doing this type of work; find out if they have experience in residential inspections (versus experience in commercial building inspections); how long will the inspection take; is the individual(s) apply for the 203K loan permitted to be present during the inspection; what is the cost of the inspection; and be sure to ask what type of inspection report they provide and the length of time it will take them to complete the home inspection report.
So, really, how does the HUD 203K home inspection differs from the standard home inspection? With a HUD 203K home inspection, the individual doing the inspection is looking for property standards that will permit it to qualify for a 203K loan. These property standards are those that are set by HUD. HUD wants the inspector working for the government to make sure these property standards are met before the government takes the risk and approves the loan. In contrast an inspector performing a standard home inspection works for the homeowner or potential home buyer directly looking out for their best interests. There is a definite overlap in between the HUD 203k home inspection and the standard home inspection when the individual is looking for issues.