Thursday, April 28, 2011

Energy Efficient Mortgage And The 203K

The Energy Efficient Mortgage (EEM) was set up in 1993 to Green UP the nation's housing stock. We must be more responsible for conserving our natural resources. Being more energy conscious is a MUST. Everyone wants to upgrade their windows to "dual pane" windows... they look nice and modernize the LOOK of the home but are they an effective means of spending your money on a rehab project? NO is the short answer. In most cases they make the home more aesthetically appealing and may make it sell faster but for being a prudent way to spend your money for a ROI (return on investment) it's just NOT there.

How should you go about KNOWING where to put your money for the PAYBACK you are really looking for? That is easy... get a HERS inspection. HERS = Home Energy Rating System. This is a comprehensive report that assesses the energy usage and loss and will provide information that will show you exactly what you should spend your money on to save you the most money in the shortest possible time and really make a difference in your energy usage and the money you pay for that energy. In most cases under floor and attic insulation are much more effective than dual pane windows. Every home inspection course I've ever taken has indicated that dual pane windows are one of the worst investments with regards to PAYBACK that you can make yet you might consider sealed triple-pane windows as an alternative. Now this is not to say you shouldn't use dual pane windows if you have an extensive rehab project. Just realize that it is the perception rather than the energy efficiency that you are using them.

Piggyback the EEM on top of the 203k. Instead of just "rehabbing a home" get a HERS report and be sure to rehab your home in the most efficient manner to maximize your savings. Wow, that is profound.

Wednesday, April 27, 2011

Which Properties Are Eligible For The 203K?

1. Any one to four unit properties which have been completed (with a certificate of occupancy) for at least one year are acceptable according to the provisions of local zoning requirements.

2. Homes that have been demolished or razed as a part of the rehabilitation process can be rehabbed as long as the existing foundation system is not affected and remains in tact. (as long as there is a portion of the original foundation)

3. A home can be moved onto a foundation on the mortgaged property, provided the proceeds from the sale of the previous location are not released until the foundation is properly inspected and the home is satisfactorily attached to the new foundation.

4. Any property the buyer wishes to convert either from single family into a two-four family property (if zoning will allow the change) or from a two to four family dwelling into a single family unit. Let’s take this one a little farther - You can take a 5-8 plex and turn it into a 1-4 unit. i.e..... Make an 8 plex into a fourplex and use this program.

5. A manufactured home that was built AFTER June 15, 1976, and has been on a permanent foundation for over one year is eligible, provided the unit must have been delivered to the site when it was new, prior to being occupied.

6. A 203k can be used on a "mixed use residential property” provided it meets the following requirements:

The floor space used for commercial purposes does not exceed...

25% for a one story building

33% for a three story building

49% for a two-story building

The commercial use must not affect the health and safety of the residential occupants.
The rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

7. Condominiums are eligible with the same restrictions as an FHA loan.

Tuesday, April 26, 2011

203K Eligible Improvements

There is a minimum requirement of $5,000 in eligible (necessary) improvements on the subject property. Improvements to a detached garage, a new detached garage, or the addition of an attached unit (if allowed by local zoning ordinances) can also be included in this first $5,000. * The look a likes have no minimum amount of rehab. ** Read this carefully - this minimum has been removed... there is no minimum amount of rehab now...2008

The mortgage must include one or more of the items listed below:

  • Structural repairs and alterations.
  • Items such as additions to the structure; repairing any and all structural damage.
  • Improvement in the functionality or modernization.
  • Such items as remodeled kitchens and bathrooms.
  • Changes for aesthetic appeal, and the elimination of obsolescence.
  • New exterior siding and new doors.
  • Repair of replacement of plumbing, heating, air conditioning or electrical system. Installation of new plumbing fixtures are acceptable, including interior whirlpool bathtubs.
  • Installation of Well and/or Septic System.
  • Must be installed or repaired prior to beginning any other repairs to the property. Properties less than one acre in size can be limited on this item.
  • Replacement of flooring, carpeting or tiling.
  • Energy conservation improvement.
  • New dual pane windows and doors, storm windows, insulation, and solar domestic hot water systems.
  • Major landscape work and site improvement.
  • Patios and terraces that improve the value of the property equal to the cost, or that are needed to preserve the property from erosion.
  • Improvements for easier accessibility to the handicapped.
  • Handicapped retrofitting can be included in the cost of rehab. This is particularly good to get this information into the hands of vocational rehab companies and companies that deal with disabilities. They may have a list of clients for you.
  • The following items can be included in addition to the minimum $5,000 requirements:
  • New cooking ranges, refrigerators and other stand alone appliances.
  • Painting and other cosmetic repairs.
  • Fencing, new walks and driveways, and general landscape work trees, shrubs or seeding).
  • Repair of an existing swimming pool, up to $1,500. Any costs exceeding $1,500 must be paid into the Contingency Reserve by the borrower.
Items that will not become a permanent part of the property are not eligible. Luxury items are not eligible. These items include, but are not limited to New swimming pools, exterior hot tubs, saunas, spas, tennis courts, and barbecue pits.

Monday, April 25, 2011

Things You Can Do With A 203K Loan

Mixed Use properties - You can renovate a mixed use property provided the commercial space represents less than one floor of the structure. The commercial uses cannot affect the health and safety of the occupants.
  •      Home buyers and non-profits that purchase HUD-Owned properties can refinance the property using the 203k within six (6) months of the purchase, the same as if the buyer purchased the property with a 203k insured loan to begin with.
  •      The borrower will be eligible as a first time home buyer without the three year waiting period if they are legally separated or divorced, even if they had an interest in a home with their spouse, provided the individual no longer has an interest in the home.
  •      Non-profits can purchase a property, rehabilitate it and sell it or keep it. If the non-profit intends to keep the property as a rental then they should keep the acquisition and rehab costs at the lowest possible number to increase the cash flow.
  •      If the non-profit sells the property they can take advantage of a unique aspect of this program called the "escrow commitment procedure" which allow them to secure a loan based on the "after improved" value of the property. Once a buyer is located that qualifies the non-profit is relieved of liability on that loan since it is fully assumable and the buyer takes over the mortgage. The buyer comes up with a 5% down payment that can be borrowed from the non-profit or anyone else to complete the transaction. If the buyer takes a second with the seller then it must be a five year note or longer. The non-profit may chose to forgive the second or collect it but in either case the non-profit has received 95% of their money up front. It has been setting in an escrow account since the original loan was funded drawing interest in the non-profits name.

Saturday, April 23, 2011

Streamlined "K"s

Why you should you use a consultant on Streamlined "k"s ?

Simple answer is that you don't always know when it is a Streamlined "k" or a Full. We had a glazier buying a home... he felt that he could repair the broken windows so they had the contractor bid on the roof, carpeting, & new kitchen leaving off the broken windows. The appraiser called the broken windows tripping this into a Full 203k requiring a consultant. Had they merely mentioned this ahead of time this would have been a Streamlined "k".

Another one we just saw appeared to have structural issues but turned out that we were removing the garage which then left it a Streamlined "k".  Had they wanted to repair the garage it was a Full 203k.

Having your consultant do the inspection on the property can let you know sooner that is one or the other, & in some cases save it as a Streamlined "k"

Friday, April 22, 2011

Book - Borrower's Guide

If you are going to purchase or refinance this year
you really need to  read this book. It could save $$$
  • How to "Live Rent Free in America"
  • Beginning Investors learn how to buy "Mixed Use" and "Small Income Units" using the 203k loan program.
  • How to refinance an existing mortgage and get the money to fix your property. If you recently purchased the home you may be able to get the money to fix up your home without any more money "out of pocket" if under six months seasoning. How to save money on your next purchase on your appraisal and consultation fees.
  • A guide through the maze of paperwork associated with the 203k. You get to see what is in those contracts and view our comments on many of them.
  • If you are considering buying or refinancing you should do yourself a favor and take a look at the 203k. Easiest loan to qualify for, loan amounts recently increased in high cost areas to $729,750 so they can be done in most American neighborhoods.
  • Realtors - have you sold a home recently that needed work... do your client a favor and let them know about the 203k refinance & rehab.
CLICK Here to Order Your Copy

Wednesday, April 6, 2011

Buying a Fixer-Upper-HGTV

These prospective parents consider three homes in various states of repair. This video is part of House Hunters show SHOW DESCRIPTION :The Stagers goes inside the hectic world of professional home stagers as they rush to transform a problem house into a showroom - often in just a few days. Amid the tantrums and turmoil are tips and touch-up ideas you can put to work in your own home.

Monday, April 4, 2011

203k Contractors Chino, CA - Filling An Empty Pool

The owners of this Chino Hills house used a 203k loan to buy this foreclosure house. Singer Construction filled in the old pool, painted the interior and scraped the popcorn ceiling off. We also installed a new furnace and air conditioning system.