On FHA 203K Rehab Loan HUD Consultant is "Big Brother"
FHA 203K Loans, as either a purchase or a refinance, must all be monitored by a FHA approved HUD Consultant when dealing with anything over 35K in renovations, either structural or not. This HUD Consultant must sign off on the initial general contractor bid, before the loan goes into underwriting. Certain Requirements must be met for the FHA to insure your loan and it's the the HUD Consultants job to make sure the project is in line with those HUD minimum requirements.
Currently, I am doing an FHA 203K purchase in Wash Park, and the buyer has currently received 3 or 4 bids for his renovation of $120,000. Needless to say, the bids were all over the map with regards to price. It is the job of the HUD Consultant to not only make sure the bids are in line with the scope of the work, according to minimum FHA requirements, but to also make sure the borrower is not getting ripped off, which in this case, he potentially was.
The bid for the electrical renovation was $13,000. The bid for the windows was $4000, both of which were extremely excessive, and the latter, the General Contractor chose expensive Pella brand windows, versus standard windows.
As luck would have it, the FHA Consultant on this job who as I say has to be lender approved was the General Contractor for 15 years building homes for Habitat for Humanity. He charges around $200 for an initial bid review, and around $100 every time he comes to follow up with any project before each draw request gets funded by the lender. The lender approved FHA Consultant acts as a Big Brother in place to monitor these renovations.
Think about this for a second. With all the craze in "fixing and flipping" properties, many people try to brave this on their own, and lose big in the process, due to projects going way over bid.
FHA 203K is by far the safest renovation loan out there, because of the following.
1. Instead of the usual 6-9 term note for private money renovation lending, you get a low interest rates for a 30 year term with a FHA 203K Loan.
2. You can refinance in 60 days with the initial lender into conventional financing, and if the equity is there, refinance out of the FHA loan, which carries mortage insurance.
3. You'll be saved time and money on the project because you'll have "big brother" HUD consultant watching over the project and whole process.
So hopefully after reading this you will have a good or better understanding of why the FHA Loan is the safest renovation loan out there and the role of the HUD Consultant.
Brian Quigley
Currently, I am doing an FHA 203K purchase in Wash Park, and the buyer has currently received 3 or 4 bids for his renovation of $120,000. Needless to say, the bids were all over the map with regards to price. It is the job of the HUD Consultant to not only make sure the bids are in line with the scope of the work, according to minimum FHA requirements, but to also make sure the borrower is not getting ripped off, which in this case, he potentially was.
The bid for the electrical renovation was $13,000. The bid for the windows was $4000, both of which were extremely excessive, and the latter, the General Contractor chose expensive Pella brand windows, versus standard windows.
As luck would have it, the FHA Consultant on this job who as I say has to be lender approved was the General Contractor for 15 years building homes for Habitat for Humanity. He charges around $200 for an initial bid review, and around $100 every time he comes to follow up with any project before each draw request gets funded by the lender. The lender approved FHA Consultant acts as a Big Brother in place to monitor these renovations.
Think about this for a second. With all the craze in "fixing and flipping" properties, many people try to brave this on their own, and lose big in the process, due to projects going way over bid.
FHA 203K is by far the safest renovation loan out there, because of the following.
1. Instead of the usual 6-9 term note for private money renovation lending, you get a low interest rates for a 30 year term with a FHA 203K Loan.
2. You can refinance in 60 days with the initial lender into conventional financing, and if the equity is there, refinance out of the FHA loan, which carries mortage insurance.
3. You'll be saved time and money on the project because you'll have "big brother" HUD consultant watching over the project and whole process.
So hopefully after reading this you will have a good or better understanding of why the FHA Loan is the safest renovation loan out there and the role of the HUD Consultant.
Brian Quigley
About the Author:
Contact our Colorado Mortgage Broker TODAY to ensure your FHA Loans gets done right.