Greg Carter

203(K) Consultant Process

1.General contractor certification

Process acknowledgement form

2.First borrower / consultant property visit

Homeowner / Contractor agreement

3.Property Inspection 3-4 Hours

4.Preliminary Work Write-up (specification of repairs)

Emailed to the borrower with a copy of contractor's bid (blank forms - sample page,instruction page)

Include specialized reports if needed

I. Mold inspection

II. Stucco inspection

III. Engineering reports

5.Specification of repairs

Overview page

Recap page

I. Total amount

II. Contingency amount

III. Total draw inspections

IV. Balance of consulting fees

6.Number of draws

(based on the rehab amount and request from the contractor - average one every $10,000 / Max 5)

7.Contingency Reserve

10% if all utilities are turned on

15% if any utilities are off

20% complicated projects / older homes

8.Change orders

If a change to repairs is requested they will be documented and approved by lender. Change request must be signed by borrower, contractor, consultant, and submitted to lender with draw request.

9.Contractor bid reviewed by client

10.Work Write-up

Borrower or general contractor to send copy of the completed contractors bid to consultant. If bid numbers are good and complete, any adjustments are then made to the work write-up.

11.Signature Process

Borrower and general contractor must sign the following and sent to the consultant to put into the final package.

I. Specification of repairs

II. Homeowner / general contractor agreement

III. Permit certification

12.Final package - sent to lender and borrower

Final work write-up

Homeowner / general contractor agreement

Permit certification

Consultant / homeowner agreement

Consultants identity of interest

1^st draw

Invoice from consultants balance due

Time Line

Steps 1,2,3,4 (initial site visit) 1 day

Step 5 (pre ww-up and contractor bid) 2 days

Step 6 (borrower reviews preliminary doc's) 1 day

Step 7 (contractor works on bid) 3 days

Step 9 (bid reviewed by borrower) 1 day

Step 10 (bid sent to consultant and ww-up modified) 1 day

Step 11 (signature process) 1 day

Step 12 (Final package sent) 1 day

203(k) - How It Is Different

Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.