FHA 203k and Homestyle® Rehab Loan Consultant Services

Jesse Morado, President of Renovation Coach, Inc. has been approved as Federal Housing Administration 203k loan consultant for more than 15 years (HUD Inspector # A0742). Jesse can assist you in your partnerships with your lender and contractor.

What is the purpose of a Rehab Loan Consultant?

The FHA 203k and the Fannie Mae Homestyle® loan are two of the most popular renovation loans available today. Both HUD (Dept. of Housing and Urban Development - parent of FHA) and Fannie Mae recognize that homeowners are not experts in handling renovation projects. Lenders want to know that their collateral for a renovation loan will be saleable (should they have to foreclose) and that the renovation work will be done in a timely manner and handled according to local codes. To facilitate this, a "Rehab Loan Consultant" is needed to assist the borrower in putting together the needed paperwork and to oversee the release of renovation funds to the contractor as work progresses. There are typically 4 functions to my job as your Rehab Loan Consultant:

1. Feasibility Inspection: I will inspect the subject property to determine if the needed and desired repairs/improvements can be done within the loan budget that your lender has determines you can qualify for.

2. To prepare a "Scope of work/Work Write-Up" so that contractors can bid your job in the same format, and assuring that they include all the needed repairs in their bids. I will give you one master copy with an estimate of what I think each category of repairs will cost, and will give you an additional copy that has no $$ figures in it. This is the one you will distribute to your contractors and with which you will gather your bids. Because all contractors bid on the same form and in the same format, it will be easy for you to compare "apples to apples." Be sure to read my "Tip Sheet" regarding checking for a contractor's license and references.

3. Plan Review: After you have received your bids and chosen a contractor, I will meet both you and your contractor at the property to go over their bid. The purpose of this meeting is to make sure we all understand what type of materials will be used, to make sure all the needed repairs are included in the bid, and to educate all parties as to how and when the lender will release renovation money from the escrow account.

4. Draw Inspections: Each time your contractor wants money, the lender will send me out to perform a "Draw Inspection." I will determine the % of work that is complete and the money will be released based on this amount. Almost all projects require a building permit, and a copy should be faxed to me prior to the first draw inspection. During a Draw Inspection, I can also approve "Change Orders." See my Tip Sheet for more info.

How much do your services cost, and how and when are you paid?

HUD regulates the amount that I charge for services on FHA 203k rehab loans. I charge the same amount for most other types of loans, including the Homestyle®. Fees are as follows:

Renovation Amount	Fee Charged
$5,000-$ 7,500	$400
$7,501-15,000	$500
$15,001-$30,000	$600
$30,001-$50,000	$700
$50,001-$75,000	$800
$75,001-$99,999	$900
$100,000+	$1,000

Before I visit your property, I will ask that your lender send me a "Consultation Request" that will outline how much renovation $$ can be included in your loan. When I visit your property and see that your project is not feasible for the amount you can qualify for, I will charge only $250 for this Feasibility Inspection. You may pay me via credit card (please let me know at the time of the appointment, and I will send you a PayPal bill) or you must pay via cash or check when we meet. Additional per mile charges apply when your property is more than 30 miles (round trip) from my office address. An additional fee of $25 per each additional unit (duplex, triplex, quad) is charged per HUD.

What are the most common "issues" you see with 203k and Homestyle® loans?

• Homebuyers focus more on what they want to do, and not what they need to do. The NEED items must come before the WANT items and this may make the cost higher than they expect. Basically I see unrealistic expectations regarding what things cost.
• Borrowers think they can do work themselves and not put any $$ in the budget. This is not correct. Let's say a borrower intends to paint the home themselves. The lender requires that there be enough $$ in the budget to pay a painter to do the work in the event that the borrower is unable to do the work.
• Borrowers bring in a contractor BEFORE I perform my consultation. It is best to get a complete Scope of Work/Work Write-Up BEFORE calling in contractors. This way you putting a contractor on notice that this is a business relationship and that you will require him/her to bid the job based on the lenders requirements before awarding it.
• Borrowers are in a rush to close and they neglect to cover all the paper work. This leads to misunderstandings and often costs them money later.
  
• The lender closes the loan without a "Plan Review" of the contractor's bid. When I am called out for a draw request I find that the bid is not realistic or complete. The loan should be closed based on my review of the awarded bid and my meeting with the borrower and contractor PRIOR to closing. I do not charge extra for this additional trip.

Click here for Renovation Coach's TIP Sheet

Click here for a "Request for Consultation" form

Contact the Renovation Coach: info@renovationcoach.com