What Is a 203K Consultant and How Can This Person Help You Buy a Home?

People who are interested in buying a damaged or older home and repairing and renovating it can finance through an FHA 203K loan for the cost of the house and necessary renovations. If, for example, you were to buy a home that desperately needed a new kitchen, you could borrow through an FHA 203K lender and qualify for money to buy the house and renovate the kitchen, plus “contingency reserve” funds for completion if costs exceed estimates.

What a 203K Consultant Does

The 203K consultant helps home buyers coordinate the many steps involved in this type of financing. A licensed 203K consultant starts by scheduling a site visit to the property the buyer is interested in. The site visit allows the consultant to thoroughly examine the property and make an assessment about the renovation project’s feasibility under 203K requirements. If the project looks like it will be within the scope of a 203K loan, the buyer pays the consultant a retainer fee for his or her services throughout the buying and renovating phases.

Scoping Out Repairs and Renovations

After visiting the site and speaking with the home buyer about renovation plans, a 203K consultant prepares a document about the project’s specifications and scope. This report contains various architectural exhibits and a detailed breakdown of costs for each repair task necessary to complete renovations. The consultant also prepare lender and contractor bid packages that include “draw” request forms that allow money to be withdrawn according to the work plan for the renovations. A copy of the complete write-up is given to the lender, contractors, and the borrower.

Selecting a Contractor

The borrower must invite bids from contractors for completion of the work. Many 203K lenders have pre-screened lists of contractors eligible for the work, and they may insist that you choose one of them. If the lender does not have such a list, they may provide a list of requirements contractors must meet for the work. It is very important that the buyer choose a contractor who is familiar with 203K guidelines and who is experienced in 203K projects.

Closing, Inspections, and Completion of Work

When a contractor is chosen and conditions of the loan are satisfied, the 203K lender schedules a closing to complete the sales transaction. Once loan documentation is signed by all parties to the sale, the funds for renovation are put in escrow and renovation can begin. The first draw on renovation funds takes place after the 203K consultant determines that the necessary permits have been obtained for the work. Generally, the 203K consultant makes subsequent inspection visits before the second and third draw amounts are issued. Once the fourth draw request is complete, the consultant makes a list of unfinished tasks for the contractor. The fifth and final draw is issued after the final inspection, at which time the project is completed successfully. A 203K lien release document absolving borrower and lender is signed by the buyer and contractor. MD Mold Inspection has licensed 203K consultants that serve the Maryland, DC, Delaware, and northern Virginia region and also provides comprehensive home inspections and environmental testing services.

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