Mike Young, 203K Team Leader
Well we had a nice meeting last night. A borrower and investor learned that he can use the FHA 203k to purchase the home is wants to live in and that he can now get easy financing on his investment properties and a second home if he likes using the FannieMae Homestyle Renovation loan product. Our Wells Fargo Home Mortgage renovation loan expert, Tim Floyd does both.
There were several contractors there whom I offered our book "Contractors and the 203k". They were asking how to become involved more with the 203k work. They learned that they can get from 35-50% up front on streamlined k loan depending on which lender they are working with. Wells Fargo Home Mortgage uses the 35%, Prospect Mortgage uses 40% and Bank of America uses 50% paid up front and they all provide the final payment and only additional draw. The streamlined k also allows several "trade contractors" but they all prefer a single contractor. They also learned that the "Full 203k loan" has no limit on the amount of the construction. We have several under construction that are in excess of $200,000 in renovation costs and many over $100,000 in renovation costs. One we are working on in SF has $250,000 in anticipated renovation with a purchase price over $600,000. Since the maximum mortgage amount in SF is $729,750 the borrower merely has to increase the down payment to get the loan back to the maximum loan amount. we can exceed that by an additional $8,000 if we have qualifying energy improvements. Just the room addition will likely have that much energy improvements.
Realtors learned about the "AS IS" letter that Tim Floyd can provide with the pre-qual letter. This is a powerful letter that an agent or Realtor is wise to accompany an offer to the seller of a property. It simply states that you are making an "all cash offer to seller" utilizing an FHA 203k loan and goes on to describe the process a little in that there will be contractors visiting the site to help identify issues that the borrower wants to get repaired at the borrower's expense, after it closes escrow.
I had to consultants in the room last night other than me. I'm recruiting and they both are on the team now. Wonderful. There is so much business out there that there is enough for everyone. We understand more than most that we are not capable of doing all the consulting needed in the area and are always looking for good consultants or people who are wanting to become a consultant. I think one of our contractors last night will become a consultant just from our conversation last night.