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A 203k Consultant is an FHA-approved inspector who oversees the rehabilitation project from start to finish. The Consultant and the buyer will meet and inspect the property at which time the Consultant will determine what repairs are required to bring the property up to FHA minimum standards. The borrower should discuss with the Consultant the optional improvements they would like to incorporate into the 203(k) loan amount. The Consultant will prepare all applicable exhibits, feasibility study and HUD’s specification of repairs.
A feasibility study is an overall inspection of the property to determine the necessary repairs to comply with FHA/HUD's specification requirements.
Specification of Repairs
The specification of repairs will include all areas of concern with a cost breakdown. The contingency reserve amount along with the number of inspections will also be included. The cost breakdown must keep materials and labor separate. Labor cost cannot be eliminated if the borrower is doing some of the work.
In addition to the feasibility study and the specification of repairs, a termite report may be required by your lender. Other certifications may be required: (well and/or septic cert, unless replacement is part of rehabilitation). The loan officer will coordinate with the Consultant to determine which certifications are needed and who will order them.
The Consultant will conduct inspections in order to approve each draw percentage. Any change orders must be approved by the Consultant. Once the repairs are certified complete, the funds may be released. The borrower must sign a lien waiver per each completed draw. A final inspection is required before the final disbursement is released. The final disbursement will include any repair contingency collected. All leftover funds are applied to the principal balance of the loan. Up to 5 draws are paid by the bank. Draws that exceed 5 will be paid by the borrower or contractor.
The Consultant rehabilitation fees are listed below for the preparation of the Work Write-Up and review of architectural exhibits: (fees are set by HUD).
• $400 for repairs less than $7,500 • $500 for repairs between $7,501 and $15,000 • $600 for repairs between $15,001 and $30,000 • $700 for repairs between $30,001 and $50,000 • $800 for repairs between $50,001 and $75,000 • $900 for repairs between $75,001 and $100,000 • $1,000 for repairs over $100,000 *Multi-units add $25 per unit
The streamline 203(k) rehab fee cannot be financed into the loan (effective September 2015)
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