FHA 203K
Let Professional Property Inspection help you with your 203K loan in the Columbus, Ohio area. David Tamny, AIA is a HUD approved FHA 203K consultant. His extensive experience working with both borrowers and lenders can assure that the process will move smoothly from start to finish.
What is an FHA 203K Loan
The FHA 203K loan is a great way to get money for a new purchase fix up or to improve an existing home. With so many bank owned properties in Columbus, Ohio on the market needing work, it is a means to get money to make necessary improvements. If you are considering the purchase of a foreclosed home but don't have the money to make repairs, the FHA 203K loan may be an option for you to consider. There are two basic types of 203K loans, the FHA 203K Standard or full K and the FHA 203K Streamiline. The Standard loan is for major rehabilitation where costs exceed $35,000 and an "FHA 203K Consultant" is required. The Streamiline is for lesser repairs under $35,000. If there have been issues with the plumbing or structural repairs are required, the Standard loan is required. With the Standard loan a single general contractor is preferred.
What are eligible improvements?
Painting, room additions, decks, carpet, appliances, doors, windows, HVAC, roofing, energy improvements and decks are common improvements. Luxury items such as swimming pools are not eligible improvements. The consultant must insure that all health and safety items and required energy conservation items are addressed in the scope of work.
What is the role of the FHA 203K Consultant?
The FHA 203K Consultant prepares the required architectural exhibits. Typically this includes a work write up which describes the intended improvements and costs for the property. The consultant typically meets at the house with the borrower and the contractor to make sure that the intended improvements are in order and that the house will meet HUD minimum property standards. The consultant must be approved by HUD and listed on the FHA 203K Consultant Roster.
What is the FHA 203K Consultant's fee ?
The Consultant must enter into a written agreement with the borrower that completely explains the services which will be performed and the fee charged. The Consultant's fee can be included in the mortgage. HUD lists the following fee schedule.
| Amount of Repairs | Consultant Fee |
|---|---|
| Less than $7500 | $400 |
| $7501-$15,000 | $500 |
| $15,001-$30,000 | $600 |
| $30,001-$50,000 | $700 |
| $50,001-$75,000 | $800 |
| $75,001-$100,000 | $900 |
| Over $100,000 | $1,000 |
What happens after I close ?
After closing work begins and an escrow account is established with the money intended for repairs. The general contractor is typically paid in a series of draws. Up to five draws are allowed. When the general contractor is ready for a draw inspection the Consultant is contacted and inspects the work completed. A draw request form along with photos are submitted to the processor for payment. A final draw inspection is scheduled when the work has been completed. The homeowner has up to six months to complete the work. Any unused funds will be used to pay down the mortgage principal.
Sample draw request formCan the homeowner do their own work ?
If the homeowner would like to do their own work they are not prohibited from doing so by HUD. The homeowner must be qualified to do the work and complete it in a workmanlike manner. A homeowner doing their own work can only be paid for the cost of materials. Practically many individual mortgage underwriters prohibit the borrower from performing their own work.
Can I increase the amount of the loan if I want to do more work?
Once the loan has been closed the amount of the loan cannot be increased. The scope of work can be expanded with a change order utilizing the contingency. The contingency may be between ten and twenty percent and is used to take care of unforeseen problems that may arise. If the contingency funds are not needed they can be applied for a change order. Any unused contingency is used to pay down the loan.
What can Professional Property Inspection do for me?
We are HUD-approved FHA 203K consultants. As an architect David Tamny, AIA can help you make sure that you have included what you need in your project and advise you as to whether your contractor's scope of work and costs make sense.