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FHA 203b Loan with Repair Escrow

by Don F.
(Wilmington, Delaware)

Are the repairs done before or after settlement?

Who does the inspection of the final work and the quality of the repair? Also, who does the repair work?


Hello Don,

I thank you for coming by my website and asking such a good question. I can tell you have been doing your homework and are well along in the mortgage process.

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So allow me to answer your questions and see if this helps you out.

Your first question is about when the repairs are done. Well that depends really on a number of things.

For example, here in Michigan where I live, if a first time home buyer was to make an agreement to purchase on a house in the winter time, this could cause a delay in the repairs if it was determined by the FHA Inspector that some outside work needed to be done.

I can recall a few occasions where this happened. The one that comes to my mind first is a deal I was doing where the garage needed to be painted because it had paint peeling off. Since it was winter, it had to wait until the weather was better before it could be done.

However, to keep the process moving forward, the FHA Inspector made a condition that some money be set aside in escrow until spring. Once the weather got better, the painting could be done.

So if the weather permits, repairs are done before settlement. If the case is like I described above, you may still close but the work will still need to be done in the spring and the funds are then released to the contractor for the job done.

The final inspection is done by the original FHA Inspector even if it is after the settlement. So whoever does the original inspection/appraisal will be accountable to do the final.

At times, work like that can be done by the home buyer and he can get paid for doing the work. If he is not qualified, then a contractor gets the job.

The best part of all of this, you the first time home buyer can be assured that since you are buying the house using the FHA 203b loan product, you will get a good house. The Inspectors reputation is on the line so they will be sure the house is in compliance before it closes.

Personally I feel the FHA Home Loan is the best product to use.

So I hope I answered all of your questions. If you have any other questions feel free to reply to this post.

Also, if you could help me out I would really appreciate it. If you know any body else that could benefit from this website, could you pay it forward and share this with them??

Best Regards,

Jeff Ragan

Comments for FHA 203b Loan with Repair Escrow

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Deadline for repairs
by: Tonya R

We are in the process of buying a HUD home thru a FHA 203B loan. My lender says I only have 5 days after closing to complete the repairs and have it re-inspected. This is practically impossible because, we are having to repaint the entire inside of the house and replace all carpet. I have looked online and only see a 90 day after closing deadline. Why the discrepency?



I'm not sure what guidelines your lender is operating under, but here is what HUD says about it.

You are right, if the repairs are under $5,000 you generally have 90 days to complete them.

I hope this helps.



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