If you are in the market to buy a rehab home with the FHA 203K loan, you’ll need to hire a 203K consultant. Yes, it’s another service that you must pay for, but the 203K consultant is there to make the process easier for you. The FHA 203K loan is a long process that requires a lot of paperwork and has many checks and balances. Having that neutral third party there to help you through the process can be a great thing.
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Keep reading to learn what the loan consultant can do for you.
What is a 203K Consultant?
First, let’s look at what an FHA 203K consultant is so you can get a better understanding. Typically, 203K consultants have a background in the home industry in some aspect. Some were previously home contractors others were home inspectors. You may even find some that worked in the mortgage industry in some aspect. No matter which way you slice it, they have experience in the housing industry that they bring to you.
HUD doesn’t allow a person to become a 203K consultant unless they can prove that they have the expertise to be successful. In other words, HUD wants to make sure that they are of value to you and will help you get through the process seamlessly.
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The Job of the 203K Consultant
Now, let’s look at what the 203K consultant can do for you:
- Inspect the property – Once you choose a property, the consultant can walk through it with you and let you know the things that HUD will require you to fix. In other words, they let you know what will need to be done in order to bring the home up to code. The consultant will also cover the repairs/renovations that you desire, helping you see how they might fit into your loan and/or budget.
- Completes the paperwork – Your lender will require a vast amount of paperwork from you to help determine the right loan amount given the situation. The 203K consultant does this paperwork for you. It may include blueprints, a feasibility report, or a write up of the intended work that you will have done on the home.
- Give advice – The consultant will also give you advice regarding what he/she thinks the repairs will cost, the cost of the materials, a timeline for the work to be completed, and any amount they think would be necessary to set aside for emergencies.
- Help choose a contractor – You have to choose a specific contractor before you can close on the 203K loan. Your 203K consultant can use his/her expertise to help you choose the right contractor. It’s usually best to get quotes from 3 contractors so that you have enough variety to choose from while using the consultant’s advice.
- Loan advice – The 203K consultant works as the go-between with you and the lender too. The lender will likely throw a lot of scenarios and numbers at you. Your consultant can help you make heads or tails out of everything, helping you to choose the right terms so that you don’t get in over your head.
- Inspects the property – After you close on the loan and the work begins, the lender will require periodic inspections. This helps them stay abreast of what is going on and to make sure the work is completed on time. The 203K consultant can do the inspections for you, reporting back to the lender accordingly.
- Disburse the funds – Before you close on the loan, the lender and contractors agree on a disbursement schedule. After the inspection is done by the consultant, the lender will agree to disburse specific funds. The lender will only agree to do so after the consultant gives the green light though.
In short, the 203K loan consultant serves as your advisor throughout the entire 203K project. He helps you understand what you are getting into and guides you in the decision making process. If you don’t have any experience in the housing industry or in rehabbing a home, the consultant can be a valuable tool to help you make sure that you make a sound decision.