Saturday, December 31, 2011

How to Buy a Fixer-Upper

Are fixer-uppers a good deal? If you buy them right, fixer-uppers can be a great deal. Foreclosures have escalated to historical highs, and selling these homes presents new challenges. In years past a seller would market their home based on the condition of the home and comparatives in the neighborhood. If the home was newly remodeled with the latest fashions, then the seller could expect top dollar for the home.
In today's market place, many listings are REO's or bank owned homes that were foreclosed on because the homeowner couldn't afford to make the payments. More often than not, these homes need some repair and modernization to bring the home up to market standards. Many have structural issues that need correcting before a bank will lend to purchase. This presents a dilemma as many banks are losing large amounts of money on the sale and do not want to sink more money in a losing situation.
Options include paying cash for the home, which limits the market as most homebuyers in today's marketplace do not possess the funds to purchase a home for cash. Option two, the FHA 203k, the 203k is a rehabilitation loan offered by HUD to modernize and bring homes up to FHA standards. This loan allows the buyer to finance the rehabilitation into the purchase with a minimal down payment. The formula is as follows: purchase price, plus rehabilitation cost, equals adjusted gross sales price. The loan amount is ninety-six and a half percent of the adjusted gross sales price. That's right, you can purchase and rehabilitate a home with three and a half percent down.
The FHA 203k is an excellent option for financing when buying a fixer-upper, which is a fantastic way to build instant equity. Building instant equity in today's market makes buying fixer-uppers a great investment.
Article Source:

Wednesday, December 28, 2011

Red Flags Of The FHA 203k Renovation Loan

Fixer-upper homes, foreclosures, short-sales and REO properties have flooded many housing markets across the country. This can be a great thing for home buyers looking for good deals. Unfortunately it also means a lot of housing stock is in need of some TLC. From simple upgrades and improvements to renovations and repairs, many homes need work. Fortunately there's a mortgage loan program that takes aim squarely at these less-than-desirable houses, and turns them into dream homes!

You may have never heard of the loan program backed by the Department of Housing and Urban Development (HUD) called the FHA 203k loan. The 203k hasn't seen much press since its inception in the late 1970's. Since then, lenders have been able to partner with state and local housing agencies, as well as nonprofit organizations to rehabilitate properties. Despite this great move, the 203k remains largely in the shadows. Some of the reason would be a stigma attached to the FHA 203k that it's a difficult loan to deal with. But that doesn't have to be the case. The Standard 203k from the 70's can have issues with difficulty or timing, but an experienced mortgage advisor should be well-equipped to handle this loan program.

Also, the 203k Streamline was added to the program a few years ago. Now home buyers have another option to finance home improvements, repairs, renovations, or rehabilitation.The basic difference between the Full and Streamline loans is the money you can roll into the mortgage (the Streamline covers up to $35,000) and the kind of work that's covered (the Full will cover structural repairs). So whether it's new paint, carpet, siding, appliances or windows that you want to replace, or it's something that you need to replace because it's a structural issue, the FHA 203k can help by rolling the cost into the mortgage.

FHA 203k Red Flags

The unfortunate thing about the 203k is that many people either haven't heard about it, or they've heard the loan program is bad. Let's take time to dispel the rumors and negativity about this mortgage loan.

Closing times are too long. Quite often the problem with the FHA 203k loan program is that those involved may not have a grasp on all of the inner workings of it. This starts at the top: your mortgage consultant should be a 203k Specialist. This person should work with other professionals who are well-versed in the loan and the work it takes. While getting the loan set up and closed could take a little longer than another program, it generally should not take more than a week or two longer. Getting the bids in on the work is often what adds to the process, which is why contractors need to know about the 203k. It's also why we work hard to offer continuing education to real estate professionals in our service areas. The more people educated about the program, the more powerful would-be borrowers we will have.
  • Bids, contractors, draws - it's just too complicated.. The 203k definitely has a of working parts. Working with your lender, a real estate agent and the contractors can be a huge undertaking. One way to take care of the stress is to work with a lender who's a 203k Specialist. A mortgage consultant should have a trusted network they work with to help get the job done efficiently.
  • Instant equity is a myth. Actually, the 203k can take the place of the old home equity loan. Whether it's a purchase or a refinance, the future value of the home after the improvements or repairs gets factored in, creating instant equity. Let's look at the number: a home for sale for $80,000 in an area with homes valued at $140,000 might need $40,000 in upgrades or repairs. That means a mortgage loan of $120,000 for the house and the work. You now have $20,000 in instant equity.
  • It costs less money and less work to just rent. There are costs involved whether you rent or own your home. Whether it's lawn care or utilities, you will need to do the work yourself or pay for it if you own your home. A landlord might cover all of that if you're renting. However, the equity you will build and the freedom from a renter's nightmare outweigh those perks. Also, it's a buyers market right now with home values low and interest rates still hovering at near-record low levels.
The FHA 203k is designed to help turn neighborhoods around, and build up housing stock from run-down homes to livable, desirable dwellings. While cutting through the government red tape can be a hassle, arming yourself with knowledge can position you to be a powerful, educated consumer.

Article Source:

If you're interested in a 203k loan let the 203k expert, Mike Young, help you! With many years of experience working with and training others in the 203k loan, he will be able to help you every step of the way.

Saturday, December 24, 2011

Wednesday, December 21, 2011

FHA's 203K Program Allows Borrower to Purchase Home and Finance Improvements in One Loan

In today's market with so many foreclosures and short sales, many homes do not meet the minimum FHA property guidelines. This means a traditional FHA loan (203B) is not available to borrowers that may be interested in the home. However, there is another FHA program called the 203K program that allows a borrower to finance the purchase of the home along with the costs of the improvements and/or repairs to get the home up to FHA guidelines. It requires only a 3.50% downpayment based on combining the purchase price and the cost of the needed repairs. Few lenders offer this specialized program yet it is a great way for buyers to purchase a home at a great price and finance repairs such as roof replacement, HVAC replacement or repair, kitchen remodel, flooring, etc... into a single loan to keep their payments down.
Here is a real world example:
A first time homebuyer is working with a realtor to find a home. Her realtor was familiar with the FHA 203K program and searched for homes that may provide a better value for her client as she was on a strict budget. She found a listing that had been on the market for over 200 days and was listed as "Cash Only Offers." The listing included this comment because the house needed a new roof, termite damage repairs and it was missing all of the sinks and toilets in the home. It was located in the neighborhood that client wanted to live but the homes were outside her budget. She looked at the home and was able to see the potential of the home and made an offer using FHA 203K financing. The seller accepted the offer and the buyer financed the price of home plus the costs of the repairs to get the home to FHA standards plus added an appliance package and flooring. The total cost of the home plus repairs was still less than the homes in the same market that did not need repairs yet were outside her budget. She closed on the home with her 3.50% down payment and the contractor began work. In a few short weeks, her lump of coal home was turned into her diamond. She was thrilled and loves her new home in a neighborhood she didn't think she could afford. As an added bonus, she knows the roof, sinks, toilets, appliances and flooring are all new.
How does the 203K loan process work?
The initial application is the same as a standard FHA loan and the borrower qualification requirements are the same. The difference is just about the property. When the buyer's home inspection is done, it is reviewed to better determine what repairs are needed to adhere to FHA standards. This gives everyone a good idea of the extent of the needed repairs. If any structural repairs are required, it will require a HUD consultant to do an inspection and write-up of the needed repairs and to monitor the project to its completion. If it is not structural (HVAC, roof, flooring, cabinets, appliances, plumbing, electrical), no HUD consultant is required as long as the repairs do not exceed $35,000.
The buyer gets bids from contractors for the required work and selects a contractor. The contractor then has to submit an application to be approved by the lender. The contractor's accepted bid is given to the FHA appraiser and the property is appraised based on the value of the home after the repairs are complete. Another benefit of the 203K is that the combined cost of the home and repairs can go up to 110% of the appraised value. This is particularly beneficial if some of the repairs are cosmetic and may not add directly to the value but to the marketability of the home. The appraisal, contractor approval and borrower's loan application is submitted to underwriting for approval.
Once the loan is fully approved, it goes to closing. At the time of closing, the seller is paid and the ownership is transferred to the buyer and the remaining funds are put in an escrow account for the repairs. Once the closing is complete, the contractor can begin the work based on the bid. When the work is complete, it is inspected and the contractor is paid from the escrow account.
This is a summarization of the process, but the whole idea is there is a way to purchase homes in the marketplace that are not perfect with a minimum downpayment. This benefits the buyer, seller and neighborhood.
Article Source:

Saturday, December 17, 2011

FHA 203k - 5 Tips To Make Your New Roof Last Longer

Whether it's home improvements or house repairs or full-on rehabilitation, the FHA 203k is a great option. The mortgage loan option covers new purchases OR refinancing. Let's take a quick look at what the FHA 203k is:

A home buyer can finance a house and many repairs, renovations or improvements right into the monthly payments, amortizing the work over the life of that home mortgage loan. The great thing is that with interest rates where they are right now, it will only add about $6 a month for every $1,000 in repairs or renovations you finance. That means a $10,000 roof will only add about $60 a month to the house payment. Then, when you decide to sell, that cost stays with the house.

Some of the work covered by the FHA 203k (Full or Streamline) includes these projects:
  • New roof
  • New deck
  • Waterproofing the basement
  • New windows
  • New kitchen
  • Interior paint, wallpaper and flooring
  • Several other projects

Let's get back the project of a roof. Whether it's simply replacing old shingles with new ones, or tearing apart the entire roof, wood and all, you'll want to make sure you get the most money out this new roof. After all, you wouldn't want to go through all the trouble again in 5 or 10 years. So here's a look at a few maintenance steps you can take every season to make that roof last longer after the FHA 203k work is done.

1. Keep the roof clean. Keep twigs, leaves and other debris off the roof. Be especially vigilant after a storm. Make sure no branches fell on the roof from surrounding trees. As these wither, they can damage the integrity of the shingles and wood underneath.

2. Clean your gutters. You can get out the ol' ladder in the spring and fall or find a gutter topping to keep stuff out. Either way, keeping those gutters clear and flowing will make sure no water gets backed up into your roof. Water in your gutters can make them heavy and rip them off your roof. It can also lead to leaks in your walls and water in the basement. I've even seen some houses with so much junk in the gutters, it looks like they're growing trees!

3. Speaking of trees... Trim them! This goes along with the previous tips. Keeping the trees trimmed will help keep the roof and gutters clean.

4. Get rid of the moss. Keep your roof dry and moss-free to help make sure the shingles and wood underneath stay good for a long time. A little bleach and water mixture usually helps get rid of the moss, or call a professional if it won't come clean

5. Where it snows - prevent ice dams. Preventing ice dams begins with keeping the gutters clean. When snow melts and has no where to go because your gutters are clogged, it build up, re-freezes and creates ice dams. So it goes back to keeping the gutters clean. Another way to help is to get a snow rake for the roof and keep the snow build-up to a minimum. You can also find snow melt cables that heat up and keep the snow and ice from building up (we do not endorse these products, because we're not part of the inspection team or safety crew that makes sure they won't catch anything on fire - but they sure look cool!).

Article Source:

Tuesday, December 13, 2011

Get Trained In 203K

When Mike Young took his first seminar from HUD on the 203k loan program it was evident to him that there was no real guidance for being a consultant. He was quick to seek out another consultant who had been doing a few projects and on day two of their meeting came up with some excel spreadsheet with the beginnings of the first software for 203k consultants he was to offer.

In 1995 the 203k was going strong and Mike hired a programmer to create his first 'dos' version of the software. Also in 1995 Mike had to hire and train about 15 consultants for his own business and went on the road teaching consultants around the country.

At one point there were three 'for profit' companies listed on the HUD website as official trainers for 203k consultants. Mike had trained the other two.

Mike traveled extensively for several years from Allentown PA to Orlando FL, to San Diego CA, to Seattle WA and many places inbetween.

In 1998 he had the first of his 'Windows' versions created and in 2010 was the biggest advancement to his software offering. We are about to have this years advancements released.

We train consultants, lenders, contractors, home inspectors, architects, engineers, handymen, and appraisers how to become 203k consultants.

There is plenty of work out there. Look here for more information!

Saturday, December 10, 2011

It's A-OK With 203(K)!

Unfortunately, there are a bunch of foreclosed properties lurking about. The good news is that these same properties often are great deals for the right individuals. But when dealing with a foreclosure, typically, the seller won't make any repairs to the property. You see, the seller, usually a bank or a secondary lender, has already lost money on the property. So, these entities are very unwilling (or in some cases, completely unwilling) to put a new roof on the home or make sure the heat and air unit is working. And that poses a problem.

It's because when you get the fantastic 30 year fixed mortgage at the unbelievable low interest rates you hear about these days, the property has to be inhabitable. Certain things are a must. Health and safety concerns (banisters, working toilets and running water) are just non-negotiable. And the truth of the matter is that many foreclosed properties, while still fantastic deals, aren't exactly up to snuff in terms of "ready for the moving van." When one isn't able to make a mortgage payment, one doesn't necessarily maintain the property in top condition, which is the case many times with foreclosures. A lender requires you to be able to live in that residence you're buying. Otherwise, you may decide it's not worth it and walk away from your debt obligation.

So what are your options? Well, you can get a bank loan. But, the bank's guidelines are mostly short term. So it's not a long term solution. You can also perhaps get a 30 year fixed conventional loan, depending on the condition of the property. However, you can be limited by many factors. Especially if your credit score is below a 680, a conventional loan might not be very affordable.

That's where the FHA 203(K) loan comes into play if you're buying a primary residence. Because it's an FHA loan, you have a low down payment and premium pricing available with only a 620 credit score. So, that in itself is special about this product. Typically, FHA's standards regarding the condition of the property are pretty sound and unwaivering. Did I mention you have to be able to actually live in the home and have running water and a working roof when you close? Well, FHA is particularly particular on these matters. They want their customers in a safe, affordable home. That's the focus of their business. As well, you are limited by the FHA guidelines as far as loan size goes.

So, what's so special about a 203(K) loan? It allows the buyer to make some of those very necessary repairs or very wanted upgrades by financing them into the loan amount, and into only one loan. And I mentioned this earlier, but the 203(K) loan will work on a refinance, too. Maybe you want to bust out that wall and create a bigger closet. Whatever the need, it may be a solution.

The program allows you to finance up to $35,000 in improvements to the property. The value of the appraisal is based upon the "as completed" condition of the property once the upgrades or repairs are made. The repairs have to be completed by licensed contractor - you can't do the work yourself.

Thus, if you need a little work done, the 203(K) loan may just prove to be a top notch solution.

Article Source:

Wednesday, December 7, 2011

Buying and Remodeling a Home? Tips on Financing With One Loan

Buying and remodeling a home has always presented a financing dilemma: What's the most effective way to finance the home purchase and the cost of the remodel, without having to pay too much out of pocket? Many times, home buyers will shy away from these kinds of properties because they don't want to pay cash or put down a large down payment whn they buy, then have to turn around and pay out of pocket to rehab the home. There is a terrific financing option out there if you're willing to put up with a little red tape!
FHA's 203k loan program may not be as well-known as "typical" FHA loans, but it can be a terrific financing tool. Basically, the 203k loan allows you to purchase and rehab a home - all with one loan - all done at the time of acquisition. The FHA 203k loan has been around for years and was designed to streamline this process.
There are some guidelines and restrictions (after all, FHA is a governmental agency...), but it can be a very effective way to finance the property acquisition and rehab costs with one low down payment. Here are some brief highlights of the FHA 203k loan program:
  • Only One-to-Four unit properties are eligible
  • The structure must have been completed for at least one year
  • Cooperatives are excluded
  • Condominiums are eligible, but only for interior rehab
  • Demolition of existing structure is accepted, as long as the existing foundation remains
  • Rehab work has to be done by an FHA Certified contractor
There are many other restrictions, regulations and procedures, but it can definitely be worth it. This loan process can take a bit longer than a traditional FHA loan, and the appraisal typically costs a bit more (they have to estimate 2 values), so you would also need to factor that in. The lender also has to be FHA approved, but the down payment can be as low as 3.5%.
Thinking about remodeling your existing home? This particular FHA loan program is only for acquisition and rehab, but there are other financing alternatives out there for remodeling projects alone. 
The FHA 203k loan program is not perfect for every situation, but it can be worth checking out if you're planning to buy and rehab a property.
Article Source:

Sunday, December 4, 2011

7 Benefits of the FHA Home Loan Program!

The American dream of owning your own home is live and well in the United States because of the FHA Home Loan Program. The market for FHA Home Loans is booming and it is now the largest supplier of home mortgages. You can make your dream of owning your own home come true now!
The Federal Housing Administration (FHA) has many loan programs available that will help you achieve your goal of owning your own home.
What Is A FHA Home Loan?
FHA does not loan you the money to buy a house, what it does do is guarantee the loan. If the mortgage is defaulted then FHA will pay the lender.
This helps the lender because they will not have to write off the mortgage and suffer all of the loss.
Because of the FHA guarantee, lenders are certainly more willing the make more loans, and they will make them for larger amounts and also they will make them easier to get with fewer requirements.
Can You Qualify For The FHA Home Loan Program?
Of course, there have to be some limitations and requirements in order to get a FHA Home Mortgage. Here are a couple of restrictions:
Debt To Income Ratio
There is not an income limitation but you do have to have a certain debt to income ratio. This means your debt can not exceed a certain percentage of your income.
Limit On Amount Of Mortgage
Also, there is a restriction on the amount of the mortgage based on the area that you live in. Each area or region is different, you need to check with your FHA lender to see what the limit is in your area.
Is A FHA Home Mortgage Right For You?
A FHA Home Mortgage may not be right for you because of the limitation on the amount of money FHA will lend in your area. If you are looking at a $250,000 house and the loan amount limitation in your area is $200,000 then this type of mortgage will not work for you.
But, you can qualify for the FHA Home Loan Program then they can be great way to finance your new home or even refinance you existing home.
What Are The Benefits Of A FHA Home Loan?
1. You finance home improvements or repairs using a Streamlined FHA 203K Loan.
2. All FHA mortgages can be assumable. This can be a great benefit in the future if you want to sell your home and the interest rates are high.
3. The down payment is just 3.5% of the purchase price of your home. Most conventional home loans require at least 20% down payment.
4. Your down payment can be gifted to you.
5. Seller can pay your closing costs.
6. Credit scores can be as low as 585, but in today's mortgage market most lenders requires at least a credit score of 620. So, if your credit scores are a little low then a FHA mortgage may be for you.
7. Interest rates are low and very competitive with other types of mortgage loans. Because of the FHA guarantee most lenders will offer low interest rates.
With the low interest rates in the market and the abundance of homes on the market, now may be the time for you to persuade the American dream of owning your own home by financing it with a loan form the FHA Home Loan Program!
Article Source:

Wednesday, November 30, 2011

How Can I Use a FHA 203k Renovation Loan?

In a recent article I showed you how quick and easy the FHA 203K Loan process was and how it can benefit you and your family in their search for the perfect home. We talked about how you can purchase or refinance and get the money to buy or to pay off your current mortgage alongl with an escrow account for repairs all in one simple loan process at great FHA rates. Now I want to outline some of the common and not so common uses of FHA 203K Loans; from making a property handicapped-accessible to waterproofing a home to simply upgrading appiances in poor condition, the FHA 203K loan program gets the job done. So, how can you use the program?

1. New Freestanding Appliances

2. Complete Bathroom Remodel

3. Adding a New Master Bathroom

4. Upgrading Heating & Cooling Systems

5. Well & Septic

6. New Hardiplank Siding

7. Fresh Paint Inside or Out

8. Attic Build-Outs

9. Waterproofing the Basement

10. Finishing the Basement

11. Making the House Handicapped Accessible

12. Complete & Total Renovation

13. Adding a 2nd Floor

14. Adding a Bedroom

15. Moving a Historic House to New Location

16. New Deck & Outdoor Kitchen Area

17. Repairing Water Damage

18. New Hardwood Flooring or New Carpet

19. New Lighting Fixtures

20. New Windows & Doors

21. Upgrading Plumbing & Electrical Systems

22. New Fixtures for Tubs, Bathrooms and Kitchens

23. Opening Up a Floorplan

24. New Kitchen Counters

25. Vaulting Your Ceilings

26. Making Your House More Energy Efficient

27. Going Green with Solar Panels

28. Getting a Condo Ready for Your New College Student

29. Much, Much More

There are thousands of reason why people need to renovate and I couldn't possibly list them all here. FHA allows for nearly anything you can think of so long as the value of your renovation supports the new loan amount. I am getting more and more requests to help provide financing so green conscience homeowners can add new energy efficient features, including solar panels, to their homes and save on rapidly rising energy prices. Not to mention FHA will allow your debt to income ratios to be higher if you include energy efficient improvements to your renovation. So whether your renovation idea made the list or not, it is always good to check into FHA 203K Renovation loans before you finance your next home improvement or new home purchase.

Article Source:

Saturday, November 26, 2011

Why Use An FHA 203k Mortgage

The FHA 203k mortgage program has helped many to home ownership. With increase in foreclosures this program has helped a great deal. Learn why this program is a great one to use especially if your home purchase is in need of repairs.

Over the years, FHA has helped so many to navigate their first home purchase. They give practical home loan rates for those of the middle class and those with a meager income by making it affordable to purchase a home instead of renting. One way they have done this by creating a program so individuals can finance a home that may need improvements. This program is called the FHA 203k mortgage.

Another reason to use this type of program is the down payment is only 3.5 percent. So individuals who are still going to school or are newly married can realize their dream of home ownership. Most conventional mortgages require up to 20% for the down payment. For some this is just too steep so they give up on buying a home. But FHA makes that possible by requiring a lower down payment.

The FHA 203k mortgage is among the most favorite FHA home loans. It allows people to borrow anywhere up to 96.5 percent of their entire mortgage loan and it is a fixed rate loan. Thus a lower down payment and lower closing costs.

There is a requirement that you need to take into consideration. You have to meet the minimum income guidelines. Be sure you meet this minimum before applying for the FHA 203k loan.

The debt ratios can be very specific, based solely upon the state the individual resides in. What makes the FHA 203K mortgage so cool is you can purchase a house in need of repairs and simply have the repairs added into the mortgage. This can be very useful when you are looking at a foreclosure. Many times these type of homes have been damaged by the previous owner or they badly need upgrades. It is possible to finance these too.

You can even use the FHA 203k mortgage to improve a condominium. There are some restrictions but the possibility to rehab a condo is there. There is even the prospect of using this loan product to rehab a mixed-use residential property. The versatility of this product is amazing.

Many hear that only a first time home buyer can use the FHA loan products. So what is the definition of a first time home buyer? It is an individual who has not owned a home during the three years prior to their application. This would include their spouse.

You have to meet a minimum amount of rehabilitation to use the FHA 203k mortgage. That minimum requirement is $5,000 for eligible improvements on the existing structure. It is true minor repairs are unacceptable, but it is possible to include them once you meet the $5000.

Now there are some restrictions. You have to begin the work within 30 days of signing the agreement and the work must not stop for no more than 30 days. You also must stick to the original budgeted amounts. You cannot ask for an increase in your mortgage just because the costs went up. So make sure you get your estimates in writing and that the contractor will honor his estimates.

Of course you can be your own general contractor if you are actually qualified to do the work. You still have to complete the work in the specified time frame. But you cannot be paid for your labor. Only can be reimbursed for the materials.

So, if you are looking at a foreclosure and are wondering if you can finance the repairs, then consider the FHA 203k mortgage. It may be a perfect fit for you!

Article Source:

Wednesday, November 23, 2011

Become Part Of A 203k Team

I've always looked at the 203k as a team sport, even when I first got involved with it. When we put out our audio tapes in 1998 we even discussed it.

You are only as good as your 'team' in any case. If your consultant can't write a good report, the lender won't have much to work with and on the other hand if the lender can't get the loan closed it doesn't matter how good the 203k consultant writes the report.

This is true of the rest of the team as well. Your teams each should have a Lender that can close an FHA loan, even a 203b quickly.

Our trained 203k consultants will provide 100% of the 203k portion so the lenders can take our MMW and use it to help them fill out their form... it is their responsibility but we try to make it easier for them.

If we all do our part of the project and then pass the baton to the next team member this frees us up to get the next project started.

Example: A 203k loan may begin anywhere by any one of the team members. We quite often get calls from our websites or the HUD website from a borrower... we immediately asses the situation and more than likely we'll send them to a lender to get that process started.

They may already have a property, that is okay, we still need to get that lender take on the borrower to be sure they are credit worthy. Not wanting to waste time or the borrower's money we need to verify they have the ability to get the 203k loan going.

If they don't have a property then we suggest a realtor or agent to help them find one in a neighborhood of their choosing.

We may actually start consulting to determine what type property they might want. There are several possibilities in this realm.

Once they locate a property suitable for their needs we set up a 203k consultation and inspect the property to create the 203k bid specifications.

Once those 203k specs are complete the borrower should look them over to be sure everything looks like they want it. Then they go to the lender.

The lender takes the 203k specs and provides that information to the appraiser and the appraisal is completed with an 'after improved' value. Once we reach this point the loan should close within a week or so typically.

Once the loan closes the borrower needs to get that information to the contractor so they can get that project in their schedule.

This is an important step as this is the only way the contractor has of learning the loan has closed.

They have up to 30 days to get their first draw inspection but in most cases they will have someone start long before that. In many cases they will start within a few days of your closing the loan.

We look forward to helping you build your 203k business.

Know that this is much more than just 203k, you will be trained in all renovation loan products that you can also consult on.

You will have access to our marketing materials and power point presentations to increase your "Referral Partner" Base too.

We have referral partners that provide a considerable amount of work for us in the FHA 203k loan program.

We'll show you a way to finance 80% of the pool repairs or even add a swimming pool to a home that doesn't have one.

To place an order go to 
Mike Young, 203k Consultant
Cell phone 1.704.451.1599

We now have offices in

Charlotte, NC
Columbia, SC
Charleston, SC
Denver, CO
Detroit, MI
New York, NY
Los Angeles, CA
Santa Barbara, CA
Austin, TX
Dallas, TX
And we are growing our business!

Saturday, November 19, 2011

Asset Managers: Move Your Listings FASTER!

Why not move your listings faster than your competition?

That is the name of the game isn't it?

Actually it all comes down to KNOWING what it will cost to make the repairs in THIS home. If you have a "fixer" you are trying to sell and you have identified the cost to cure or make the necessary repairs then you have a salable home again.

No one wants to step into the unknown particularly a "first time home buyer" get your bank to cut loose with a little money to have us do a "feasibility analysis" which will identify the cost to make the repairs

1) to bring this home up to the Minimum Property Standards and

2) a second feasibility analysis to bring this this home to a "typical" upgraded condition.

By doing these two feasibility analysis I can assure you that your "hard to sell" homes will be easier to sell, will sell faster, and the buyers will have more information about YOUR listing than any of the other asset managers properties and therefore Yours sell faster.

I know most of you are selling 500-1,000 homes per year but as greedy as you can be, wouldn't you like to sell another 250-500 on top of that? By the way, you would be doing your employer a service by getting the "hard to sell" properties off their books faster as well. Everyone wins !

Who can do a feasibility analysis? That is easy, every FHA 203k consultant can do them. They don't all want to do them but FHA says if you are a consultant you MUST offer that service.

What does it cost for this service? I can't speak for other consultants on this issue but we have a set fee of $300 for the first unit on a project & $50 each for units 2-4. If you order both at the same time, a bare bones feasibility for a "first time home buyer" who may be on a very tight budget then that is all you need.

Then if you order the "fully updated" feasibility at the same time we will do both of them for a flat $500 for the two for a SFR plus $75 for units 2-4. YOU save your client $200.

Some of the agents who handle lots of REOs for asset managers are finding that even if they pay the fee they move many more houses and that is what they are supposed to do.

Wednesday, November 16, 2011

I'm A Contractor, Why Should I Learn About The FHA 203k Program?

If you have all the work you need already then maybe you don’t need to know about the FHA 203k loan program but there are allot of you out there that have been buying my eBook “Contractors and the 203k” indicating that many of you are becoming aware of this program. Why is that? Simply put “more business” than you can handle.

When I take on a new contractor into our “203k Team” we ask one thing of them “Stop us before you get too much work from this program”. The last thing any of us want is for you to get a bad reputation for not being able to get these projects to completion in a timely manner and we have had some that don’t know when enough is enough until we start getting bad service. So… please just pull back a little when the time comes and then open the spigot again when it appears you are about 3-4 weeks from needing more work.

There are two types of FHA 203k loans. I will describe the differences below and YOU need to know them and choose the right one for your circumstances:

1) Full or Original 203k (started in 1961)

This program uses a 203k Consultant to create a bid specification. That specification is sent to you, the contractor for your bid. It is typically a blind bid situation. In some cases the contractor has already put in a bid for the work they think will be required but in many cases they aren’t aware of the HUD Guidelines so they may miss a few things but overall this seems to cut down on the time it takes to close the loan so it isn’t all bad. If the borrower has several clients come out and bid the project prior to seeing us to create the “scope of work” it can be a mess. As much as the client tries to have them bid the same project if you don’t write it down each contractor will have their impression of what they thought you said and each bid will be slightly different and the client will not have a clear bid that they can use.

I prefer to be the first one on the job to create the specification of repairs. I also will bid the job (never will do the work, just bid it) so the client has an expectation and we all know this project is still viable.

There is no “up front money” for this program. The contractor must be well healed and have credit or money or both to get the project started. Since each draw must be no more than 30 days from the prior one the contractor should have enough money to carry his/her business, materials and labor for that period of time plus whatever they need to run the rest of their business. This program allows for interim draws and you can get partial payments for anything that is partially complete but only for completed work. Some lenders will follow the guideline and let you get money for cabinets and finished flooring up having it delivered and stored on site. Some lenders will advance 50% of the window and cabinet materials money only when they are custom sizes and the check may be made out directly to the cabinet maker or window manufacturer.

This has been and can be a difficult situation for a small contractor or a contractor growing too fast. They need, heck, we all need “cash flow” which is the life blood of every business.

2) Streamlined “k” (started in 2005)

This program was intended to make the program easier to use for the majority of the lighter renovation projects. The significant thing with this one is that it cannot have any “structural” component. It is intended for smaller projects and though the maximum construction costs are limited to $35,000 per the Guideline in reality it is only $30,000-34,200. If you come up with Streamlined “k” loans where the work is $35,000 and your lender only does the Streamlined “k” you will be disappointed most of the time. The $35,000 must include the costs and fees associated with it. The $30,000 figure is due to the requirement of many lenders to maintain a 10% contingency reserved which takes a $30,000 right to $33,000 immediately.

The big thing here is that there is “up front” money for the contractor of 35-50% of the construction cost. The project must be completed in no more than 60 days, and there is only one final draw at the completion. No other interim draws.

Mike Young, 203k Team Leader Mike ready for your 203k order

With offices coast to coast and HQ now at 
1351 Oliver Road, Fairfield, CA 94534 

Saturday, November 12, 2011

FHA 203(k) Loan Program Provides Money For Home Repairs and Renovations

Thinking about buying a fixer-upper, but worried about coming up with the money to pay for the construction costs? Or are you wanting to renovate your existing home but just don't have the available time or money? If so, the FHA may have a program to solve your problems. The section 203(k) program administered by the FHA provides funds to prospective and current homeowners to make repairs and/or do renovation work. A 203(k) loan combines a home's purchase price and cost of repairs into one FHA mortgage, with only a 3.5% down payment.
A growing number of people are taking advantage of this program, a reflection of the large housing inventory caused, in large part, by foreclosures resulting from the recent economic turmoil. The FHA reports that the number of 203(k) loans taken out in 2008 nearly doubled from the previous year, with 2009 experiencing a 40% year over year increase. Potential homebuyers, attracted by relatively low market prices on foreclosed properties, are often left to contemplate how (and when!) they are going to be able to pay for the repairs once they purchase the house. This is not an uncommon scenario as foreclosed homes, which are often left abandoned, typically need extensive repairs. The 203(k) loan program solves this problem by enabling homebuyers to finance the construction work and start repairs on the home immediately after a loan closing. All residential properties, not just foreclosed homes, are potential candidates for the 203(k) loan program.
What is the FHA 203(k) Program?
The FHA 203(k) program is a home rehabilitation and repair program, designed to revitalize neighborhoods and spur homeownership. It can be used by people who are looking to purchase a new home, or by existing homeowners wanting to do repair or renovation work on their current home. What consumers end up with is a single FHA insured mortgage - the loan amount consisting of the home's purchase price (or current loan balance in the case of an existing homeowner) plus the estimated costs of the construction work.
Normally, someone purchasing a home that is in need of repairs has to first obtain interim financing for the rehab repairs and then additional financing to purchase the home. In this scenario - once the repairs are complete the homeowner must then take out a new mortgage to combine the two loans. With the 203(k) program, on the other hand, a borrower need only obtain one mortgage, which covers the home purchase and the property rehab.
The 203(k) program comes in two flavors; a standard version and a streamlined version. With the standard program, the construction costs must be at least $35,000. The maximum construction costs are limited only by the estimated "as-improved" value of the house (i.e., the value an appraiser estimates the property will be after repairs/renovations are completed). All FHA mortgages, with or without a 203(k) loan, are subject to mortgage loan limits. The mortgage amount can range from $271,050 to $729,750, dependent on where the home buyer resides. The total mortgage amount, which would include any cost of repairs, cannot exceed 110% of the "as-improved" home value. The streamlined 203(k) program is used for situations where the construction costs are under $35,000.
To be eligible, properties must be one to four family structures that are at least one year old. Condominiums may qualify, though there are some added restrictions and limitations. Additionally, FHA allows "mixed use" properties (i.e., properties with both residential and commercial use) to be eligible for the program.
A partial list of what you could use a 203(k) loan for include; replace a roof, add a room, remodel kitchen or bathroom, landscaping, update appliances, repair termite or water damage, update electrical and/or HVAC systems. It's also important to keep in mind that the program requires certain repairs (if needed) to be made. These mandatory repairs deal specifically with bringing the energy efficiency of the property up to code.
The FHA 203(k) loan does not come without some added costs and other potentially negative factors. Consumers need to carefully weigh the pros and cons in order to decide if this program is right for them.
o Homebuyer will incur fees up and beyond the normal mortgage closing costs. A supplemental origination fee - which is the greater of $350 or 1.5% of the portion of the mortgage that is being used for rehab purposes - is required. Additionally, a fee consultant (who is HUD approved) must visit the site prior to the appraisal to ensure compliance with program requirements. Expect to pay $100-$200 for this service.
o Takes longer time to close on mortgage loan - up to 4 weeks longs than a normal conventional mortgage
o Have to use an FHA approved lender. Though many such lenders exist- not all lenders will participate in the 203(k) program.
o Some lenders may prefer to deal with a home buyer who is able to pay cash for a home (versus someone using the 203(k) program) due to getting a quicker loan closing turnaround.
o Expect more paperwork than a normal conventional or FHA loan
o Access to funds needed to complete repairs and/or renovations
o Convenience - homebuyer does not have to find separate financing for construction, plus construction begins immediately after loan closing
o Speed of construction - the process of completing construction work is typically quicker than if the homeowner were to conduct renovations on their own
o The 3.5% down payment - conventional mortgages typically call for 10-20% down payments.
o Ability to finance up to six monthly mortgage payments.
The 203(k) Loan Process Step by Step
The 203(k) process has more paperwork and steps than one would experience in a conventional mortgage process. The steps are as follows:
  1. Borrower finds a home to purchase and repair/rehab (or seeks to repair/rehab current residence)
  2. Borrower and their real estate agent completes a preliminary feasibility analysis to determine the extent of work required, along with an approximate estimate of the cost and expected market value of the home once all work is completed
  3. Sales contract is executed
  4. borrower selects and works with a FHA-approved lender
  5. Borrower, contractor, and an FHA-approved consultant meet at the property to determine "required" vs. "desired" improvements
  6. The fee consultant prepares the write-up
  7. Home buyer enlists contractors to make bids - then selects a contractor
  8. Lender gives the construction plan to FHA-approved appraiser to determine "as-improved" value
  9. Lender determines maximum insurable mortgage amount for the property based on the "as-improved" property value
  10. Loan is underwritten by lender- if approved lender issues a "firm commitment" and a loan closing is scheduled
  11. Loan is closed. Funds are set aside in escrow accounts. The loan is FHA insured after loan closing
  12. The work begins. Contractors are paid in draws as FHA fee consultant approves each phase of completed work. Homeowner has six months in which to complete the entire work
  13. After work is completed - and the borrower states that all work has been completed to their satisfaction, a HUD inspector conducts a final inspection. If the inspection proves OK - the lender pays the remaining draw to the contractor. A final 10% may be held back for up to 35 days to ensure no liens are placed on the property
It should be apparent that the FHA 203(k) program offers a viable solution for some home buyers seeking funds for home repairs or renovation. Each individual needs to consider the pros and con's and apply it to their own unique situation.

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