Quick tip on 203k loans: As a potential home buyer, make sure that the HUD Consultant and the General Contractor who is doing the repairs and upgrades to the property, are not the same person. The HUD Consultant is supposed to be an independant third party who keeps the General Contractor in check.
I’ve ran into a few people and have seen some blogs out there recently that state that the HUD Consultant steered the home buyer, or so they say, toward a certain General Contractor to do the work on the home. As a home buyer please understand that this is not necessarily a bad thing but you do need to do your own due diligence in checking into the relationship between the HUD Consultant and the General Contractor. Make sure and Google the HUD Consultant and the General Contractor. Ask for references from past jobs from both the HUD Consultant and the GC and call the past clients. This is no different from any other business you contract with.
The HUD Consultant is used on the 203k loan, the 203k Standard loan in particular, and part of their job is that they are supposed to serve as a buffer of sorts between the homeowner and the General Contractor and make sure that the materials and labor charged by the GC are fair and at market rate which protects both the lender and homeowner. Their relationship at times can be testy because the HUD Consultant may be making some adjustments to the General Contractor project(s) or maybe the HUD Consultant is wanting the GC to do more work before they ask the lender to advance the GC more money to finish or start another project which is being financed by the 203k loan. The process works, but you want to make sure that the HUD Consultant and GC relationship isn’t compromised in any way and the best way to make sure of that is to do your own due diligence before you agree to do work with either of them, and that goes for Loan Originators too!
As I previously mentioned in a past article, make sure and get your General Contractor selected early, before you make an offer on a home, and make sure they have worked with the 203k loan in the past. There are several 203k loan directories for contractors out there on the web. Check out a few of them for contractors in your area. These contractors have gone out of their way to learn about the 203k loan and its nuances.
Unfortunately there are unscrupulous people in every profession. Just like anything else you have to look out for yourself. I as a Loan Originator am looking after your best interests as well, but ultimately it’s the home owner’s name that goes on the offer contract, the loan documents, the HUD Consultant contract and the General Contractor’s contract. Take the time to look out for yourself and check everyone out you are working with and you’ll be on your way to a successful transaction.
Best,
KW
