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FHA Inspection

How a FHA 203k Works

The FHA 203k renovation mortgage is a great way to purchase a house and fix it up to your liking all wrapped up into one mortgage.


Here are a few steps that are necessary to do a FHA 203k.


You first need to be qualified by your lender and the lender should be qualified to process FHA 203k loans.


Once you have located the house you wish to purchase, you need to have it inspected by a Certified FHA inspector. General home inspectors are not usually trained in the FHA minimum property standards. (MPS). FHA wants to know the house is safe, secure and structurally sound. They have set forth their own set of standards that need to be satisfied in order to qualify for the mortgage. Any standards that don’t meet their requirement will need to be repaired as a condition of the mortgage.


The Consultant will compile a Preliminary Work Write Up based on the MPS inspection. This report will inform you of the estimated cost of repairs that are required. This information is useful to let the borrower know what other repairs, if any, they can afford.


The borrower will need to find a qualified contractor to bid on all the repairs the consultant has specified. This bid is given to the borrower and the consultant. The consultant can then do the Work Write Up for the lender. The repair amount is then calculated into the mortgage. The lender will request an appraisal. The loan goes to the underwriters for review. Once this is done we wait for closing.


Now that the loan has closed and the borrower has possession of the house, the work begins. The consultant will inform the contractor to start their work. The contractor has 7 days to begin their work.


The consultant conducts Draw Inspections every 30 days to checkup on the work progress and to verify the work is satisfactory. The Consultant issues a Draw Request to the lender so the Contractor can receive some money for the work that has been done. The Contractor will then receive a check from the lender.

This process repeats until the project is completed. The project must be completed within 6 months.