The FHA 203K loan is a simple way to not only purchase a home, but also pay for any work that needs to be done. If you are purchasing a home that does not meet FHA code, does not have the look you desire, or needs any type of updating, you can include the costs in the 203K loan. This one loan provides you with the funds to purchase the home as well as fix it up whether the changes are major or minor in nature. One difference with this loan type is the need for a loan consultant whether you use a streamline or full 203K loan. The loan consultant comes at a cost, at which you must pay up front in order to secure his services.
The Fees of the 203K Consultant
The FHA does not provide you with a particular FHA consultant, so the fees may vary from person to person. In general, however, the following fees apply:
- $400 for changes between $5,000 and $7,500
- $500 for changes between $7,501 and $15,000
- $600 for changes between $15,001 and $30,000
- $700 for changes between $30,001 and $50,000
- $800 for changes between $50,001 and $75,000
- $900 for changes between $75,001 and $100,000
- $1,000 for changes above $100,000
Some consultants do not charge the HUD suggested fees and instead charge a flat fee for their services. In order to find the most affordable and reputable consultant, it pays to do your research as well as interview various consultants to find the best fit for you.
The Role of the FHA 203K Consultant
There are two different roles for the loan consultant which depends on the type of 203K loan you use:
- Full 203K loan – In this loan, the consultant plays a major role. The professional is your project manager, overseeing the entire process to make sure all of the pieces fall into place. The consultant can help you determine if a particular property is feasible within the 203K framework; helps with the write-up of the work to be performed; can advise on the selection of a contractor even though the final decision is up to the borrower; oversees the loan process; handles the disbursement of the funds as the work is completed; and performs necessary inspections of the work along the way.
- Streamline 203K – The loan consultant plays a lesser role in the streamline 203K process. Typically, the consultant helps with the work write-up and any processes you request help with from there, but the write-up is the only requirement on the part of the FHA.
While it might seem like a nuisance to have another fee to pay someone during the 203K loan process, the loan consultant is very helpful during the entire process. You can think of this person as your personal manager as he helps you organize every aspect of the 203K process, which can be rather daunting if you do not know what you are doing. The consultant can handle as much as you allow him to handle, going as far as dealing with the lender and letting you know what is necessary in order to get your loan closed. The largest benefit is having the expertise of the consultant to deal with the contractors. The consultant should have plenty of experience in dealing with contractors so that he knows what works and what does not. He can help prevent you from getting taken advantage of as well as ensure that your project stays on target so that you are not penalized for work taking longer than specified in the contract.