HUD 203k consultants
What is a HUD 203k Consultant?
A 203(k) Consultant is a U.S. Department of Housing and Urban Development (HUD) and FHA-approved consultant that’ll help you through the 203(k) loan process.
The HUD requires that you hire a 203(k) Consultant if you’re applying for a Standard 203(k) loan. You’re not required to get a 203(k) Consultant if you’re applying for a Streamline 203(k) loan (aka Limited 203(k) loan), but you may use one.
What’s does a 203k Consultant do?
The 203(k) Consultant is a key partner that’ll work with you throughout the entire 203(k) loan process from starting the application to the end of the renovation period. The consultant has multiple duties during the process.
A Feasibility Study is a light inspection of a home to identify major safety and health issues that the FHA would require you to correct, to provide you with recommended improvements, and to consider upgrades and improvements you want to make. All of these factors help determine if the renovations are going to be financially feasible. A Feasibility Study is not a full inspection. It is also not required for a 203(k) loan, but you or the lender may request to have one done by a 203(k) Consultant.
203(k) Consultants must inspect the home you would like to buy. As part of the inspection, they have to check for the following:
- There are no rodents, dry rot, termites, and other infestation on the property
- There are no defects that will affect the health and safety of the occupants
- The property has adequate structural, heating, plumbing, electrical, and roofing systems
- The property has adequate, up-to-date thermal protection
After the inspection, the consultant must prepare a report on the condition of the home based on a FHA 35-point checklist. The report must include any issues that exist and confirm the condition of all major systems, including electrical, plumbing, heating, roofing, and structural system. The Consultant must also determine the repairs/improvements that are required to meet the HUD’s Minimum Property Requirements (MPR), Minimum Property Standards (MPS), and local requirements.
The 203(k) Consultant is responsible for identifying, preparing or obtaining, and reviewing all required architectural exhibits. Some examples of architectural exhibits include well certification, septic certification, termite report, proposed plot plans for new additions, foundation certification by a licensed structural engineer, cabinetry plans and elevations, new construction exhibits to obtain a building permit for an addition, grading and drainage plans, and engineering and soil/geotechnical reports.
Work Write-Up and Cost Estimate
The 203(k) Consultant must prepare an unbiased Work Write-Up (i.e. renovation scope) and Cost Estimate without the use of the contractor’s estimate. The Work Write-Up and Cost Estimate must detail out the work that will need to be done and financed. It includes all of the necessary architectural exhibits and reports.
Draw Request Inspection
After the loan is approved and work has started, the 203(k) Consultant must inspect the work to determine if they’re complete and meets requirements before funds are drawn from the escrow account that was created to set money aside to finance the renovations.
If you or the lender request for a change in the Work Write-Up, then the 203(k) Consultant must review the proposed changes to the Work Write-Up and prepare a change order.
Work Stoppages or Deviations from the Approved Write-Up
The Consultant must inform the lender of the progress of the renovation and any problems that arise. Problems include if work has stopped for more than 30 consecutive days, work is not progressing reasonably, there are significant deviations from the Work Write-Up without the consultant’s approval, there are issues that would mean the property will not meet the loan’s requirements or eligibility, and there are issues that could affect the health and safety of the occupants or the security of the structure.
How much does a 203k Consultant cost?
The FHA sets maximum amounts that 203(k) Consultants can charge for its services. The fees vary depending on the service. You may use a Standard 203(k) loan to finance some of these fees, including the fee for preparing the Work Write-Up, the inspection fees, and the Feasibility Study fee, if required. A Streamline 203(k) loan may cover inspection fees, but not the 203(k) Consultant and Feasibility Study fees.
Breakdown of 203(k) Consultant fees
|Preparing the work writeup and reviewing architectural exhibits|
|Less than $7,500||$400|
|From 7,501 to $15,000||$500|
|From $15,001 to $30,000||$600|
|From $30,001 to $50,000||$700|
|From $50,001 to $75,000||$800|
|From $75,001 to $100,000||$900|
|Per additional unit||$25|
|Per draw inspection||Whatever’s standard and reasonable for the area with a max of $350|
|Re-inspection of a work item||$50|
|Change order request||$100|
|Mileage fee when the consultant’s place of business is more than 15 miles from the property||Current IRS mileage rate|
How can you find a 203k Consultant?
The FHA keeps a database of all approved 203(k) Consultants. In this database, you can search for 203(k) Consultants by city and/or state or you can check if a 203(k) Consultant is approved by the FHA by looking up his/her name and/or Consultant ID. You must use a consultant that’s on this list to get a Standard 203(k) loan.