Process and Professionals.

Professionals

In this video we’ll review the 203k process and discuss the roles of the professionals you need to complete your 203k project. There are five categories of professionals. The five types of professionals and the process we’ll explain includes:

  • Realtors who help buyers find properties
  • Loan officers who help people secure financing and who control repair monies
  • HUD Consultants who inspect properties in accordance with established guidelines
  • Inspectors and engineers who provide specific evaluations when required, and
  • General contractors who complete documented repairs.

Use the LearnTheK website to find renovation professionals in your area.

Realtors

The 203k process is a little different when you are looking to buy and renovate rather than when you already own your home. When you are looking to purchase a home, the first step often includes contacting a local realtor to begin your search. The realtor can help you refine your search and can provide professional advice concerning the various available neighborhoods that meet your needs. If the realtor knows that you are willing to purchase a home that needs repairs, it normally increases the number of properties you might consider. Of course a realtor is not necessary if you already own your home.

Loan Officer

But whether you need to find a home or already live in your home, the next need is to determine how much you can afford. A loan officer is the professional who can help. Since not all loan officers process 203k loans, we include on the LearnTheK website some who do. Your loan officer can prequalify you for a certain loan amount; this will be the maximum amount you can afford to purchase and repair a new house or refinance and repair your current home.

HUD Consultant

You can also find a HUD Consultant on the LearnTheK website. The HUD Consultant coordinates a date and time when to inspect the home for specific health and safety issues in accordance with FHA & HUD guidelines. In some cases the HUD consultant may determine that an additional inspection is required. For instance, if mold or foundation issues are found then a certified mold inspector or certified structural engineer are required to provide their professional evaluations.

After the inspection, the HUD Consultant will provide an inspection report to the buyer. The buyer can then coordinate with contractors to provide a cost estimate or bid the work of the project. At LearnTheK you’ll find contractors who are already familiar with the 203K process.

General Contractor

Not all general contractors are the same. By HUD guidelines, it is up to the buyer to select their own general contractor, but the lender may also approve or disapprove a contractor based on the lender’s validation. This is important, because contractors are not paid any money to begin work and at no time should the customer pay out of their own pocket for any labor or materials. This means that your selected general contractor must have the ability to fund your project until a portion of work is complete. Once a portion of work has been completed, you, your contractor and the HUD Consultant will meet at the property to review work and sign off approving the total to be paid.

Process

Just so you know, the lender will hold ten percent until the project is complete. In some cases, for the buyers’ protection, to be sure no liens are filed against the property, a final appraisal and title search is required. Once your home’s title is confirmed as clear of any liens, the ten percent is released.

One thing to consider, if your home will be uninhabitable, that is, if you can’t live in your home during a portion of the renovation, then HUD allows the buyer to roll their mortgage costs into their overall loan, but only for that time when the home is uninhabitable.

After all these estimated costs are known, you can determine if the project is practical.

Once you’ve determined to move forward, contact your Loan Officer and Realtor who will work with the title company to coordinate obtaining signatures from buyer and seller. Once all the paperwork is signed, the lender will pay the seller and hold the remaining funds in escrow until repairs are complete and verified.

Please remember that the repairs you identify in your loan documents are the repairs that are expected to be completed; so be sure you are getting estimates for exactly what you want. Homeowners and General Contractors are often tempted to make changes after closing, but changes are not always allowed.

Summary

In this video we have reviewed the 203k process and discussed the roles of the professionals you need to complete your 203k project. There are five categories of professionals. The five types of professionals and the process we explained included:

  • Realtors who help buyers find properties
  • Loan officers who help people secure financing and who control repair monies
  • HUD Consultants who inspect properties in accordance with established guidelines
  • Inspectors and engineers who provide specific evaluations when required, and
  • General contractors who complete documented repairs.

Use the LearnTheK website to find the renovation professionals in your area.

We wish you the best on your project!