Most 203k projects require a Certified FHA 203k Consultant. The Consultant is well worth the added cost. The fees are factored into the mortgage so there is little-out-of pocket expenses. Some of the responsibilities of a Consultant are; inspecting the property for safety, security and structural soundness. From this inspection he will present a preliminary work write up for the borrower and discuss your options. He will work directly with your contractor to get the bids, present the work write up for the lender so the lender can finalize the loan. After closing the Consultant oversees the contractors work schedule and verify the quality is up to standards by conducting Draw Inspections. The consultant completes all the form necessary to complete the project.
The consultant fees are based on the total cost of the job. There is a fee for the Minimum Property Standards which is usually around $400.00. This fee allow the Consultant to inspect the property for the minimum standards and present a preliminary work write up. The preliminary work write up is a ball park estimate of what the total cost of the repairs will be to determine if the project is feasible.
If the project is feasible there will be a fee to generate the official work write up for the lender. This work write up is based on an actual contractors bid that will be used to generate the loan. If the repairs were $40,000 the total Consultant fee would be $750.00. You already paid $400.00 of that total for the inspection. This is subtracted from the $750.00. The difference ($350) is what is due for the official work write up. This fee is paid to the inspector and then can be added to the mortgage and reimbursed to the borrower at closing.
The Consultant will need to do Draw inspections every 30 days as the work progresses. The Draw fee varies between $175 to $275 for each Draw inspection. These fees are factored into the mortgage and are paid to the Consultant by the lender. Depending on the size of the project there may be 2 to 6 Draw inspections.