When home buyers want to buy a foreclosed or HUD home that needs repairs, the 203k loan program from the FHA is an excellent choice. There are two different loan programs available, the Standard and Streamlined. The Streamlined program is a bit faster and easier to get, but they both require a significant amount of work from the borrower. To make the loan process easier, you can work with a 203k loan consultant.
The 203k loan consultant works independently from you and the FHA to make sure that you are getting all of the proper contracts and required agreements. Because most borrowers do not do this very often, the consultant helps ensure that all of the proper paperwork is completed. The consultant will meet with you, the FHA and HUD inspectors to make sure that everything that needs repairs is properly inspected.
Complete Bid Forms and Jobs List
The 203k loan consultant will help you build a job specifications list and a bid request form. This way you will be able to keep track of the required repairs that the FHA and HUD inspectors find that must be repaired. These lists will also include everything that you want to have done, like replace the flooring or install energy efficient appliances. The consultant will also help with choosing a contractor and being certain that the contractor will stay within the FHA guidelines.
Coordinate the Bids and the Paperwork
The 203k loan coordinator will also be sure that the lists and the bids get to the lender so that your loan paper word is completely in order. After the loan has been approved and the work begins, the loan consultant will help with the post work inspections and releasing the funds to the contractors. There are required pieces of paperwork that will need to get to the FHA. The loan consultant is trained to prepare the paperwork and make sure that everything is done to the standards of the FHA 203k loan program.
Speed the Loan Along
The loan consultant is very important to the speedy processing of the loan. The consultant has been trained to complete the paperwork, work with the contractors, FHA, and lender. Most consultants are from the construction industry, so they know about bids and remodeling work. They are also trained in inspection work so they know exactly what to look for with the FHA and HUD inspectors that visit the home. The consultant can also create bids without meeting with the contractor, because the consultant should be up-to-date on remodeling costs and appraisals. These costs will become bidding points for the contractors who will eventually to the work.
Inspect the Safety and Health of the Home
Another role of the consultant is to be sure that the home is safe for the new owners. The consultant must be sure that the house is free of termites, rodents, and other possible infestations that could harm the safety of the new occupants. The 203k consultant will also inspect for dry rot. The 203k loan cannot be completed without this inspection. The consultant will also look for mold and other potential health hazards and safety hazards. Before the repairs begin, the consultant will inspect the structure as is, including the structure’s walls, foundation, and roof as well as the HVAC system, plumbing and electrical, especially since the owner of the home may need to live there while the repairs are being done.
Low Stress for the Borrower and Lender
Without the 203 k loan consultant, the process of getting the bids, the paperwork, and other requirements could take months instead of weeks. The consult will guide the home owner through the process with the hopes that the process with be very simple and be a low stress project for the home owner and the lender. Without the consultant, there are just too many things to remember and the borrower could be grossly overwhelmed. The consultant is also there to protect the borrower from unscrupulous contractors who could see a potential cash cow with the guaranteed money from the FHA, which is really the Federal government.
Direct Questions to the FHA
Even though the FHA is in charge of the 203k loan program, some states have certain requirements for the loan and for the qualifications of the consultants. If you have any particular questions, it is best to consult with the FHA and with a qualified lender who has worked with 203k loan program in the past.