Monday, May 30, 2011

203k Procedure

We are consultants & willing to help you in all aspects of this process. If you are coming to us first, that is not a problem. We will guide you to the lender that we feel can close your loan in the shortest possible time frame & pay your contractor in a timely manner to keep your project on target. Believe it or not that is one of the most important aspects of the 203k loan program. Getting paid promptly.

1) Find a lender and get pre-qualified... This is the logical first step as we need to ascertain the loan amount that you may qualify for or the maximum loan amount that keeps you at your comfort level. They may be two quite different numbers. We want you to feel comfortable that your payment is clearly within your budget. Many of our clients actually qualify for more than they want to make payments on & there is nothing wrong with that. In most cases the seller won't even accept your offer unless you have a "pre-qual letter" so they know you have already talked with a lender and started gathering your financial information. The lender can only process the paperwork after you provide it to them.

2) Get with one of our 203k real estate professionals to assist you in finding a property suitable to your needs, or alternate... you can also refinance your existing loan and get the money to rehab it in the same loan. Our professional teammates are going to show you several homes to choose from that need some degree of repairs. Not to worry as all those repairs are completed as part of the loan & rehab process. The great thing is that YOU get to choose the carpet, paint, and configuration of the property you are buying. I've always believed that a home isn't actually yours till to change the carpet and put your personality in the color schemes. If your real estate professional tries to steer you away from a 203k call me, please. Why wouldn't you want to gain additional equity in a home you are buying. You put down 3.5% but may end up with 20-25% equity, that what the 203k loan program is all about.

3) Call us at 1.877.207.6565 (customer service) to set up an appointment for a 203k Consultation. We will meet you at the site, go over the contracts and agreements that you will need to sign at the close of escrow. You will be given copies that you can take home & read at your leisure, mark up and get your questions answered by the lender or our staff. In addition we will make an inspection of the premises at this time. We walk through with you and determine what "must be repaired" then add your "dream list" of additional items specific to your needs & wants. An inspection report will be created which is the "cornerstone" of a good 203k loan project. We need to analyze what it will take to bring this property up to the FHA Minimum Property addition you may add any other work to the list of repair items within the guideline. You may choose to have a "home inspection" in addition to our property inspection. That is certainly your right. Many of our inspectors are home inspectors or licensed contractors who are capable of making that Home Inspection Report as well or you can choose someone else... remember that YOU are in control of the process.

4) Now we will go back to our office and create a "Job Specification & Bid Request". This is a list of the repair items that we intend to complete on your project. This "specification" is what will allow all of the contractors who bid this project to bid on the same list. This is important as you want them bidding "apples to apples". Up till now there is no real need for a contractor to have been to the site because we didn't know what work was to be completed.

5) Once the "Job Specification & Bid Request" has been created a copy will be given to the lender and another copy to the buyer or owner who is refinancing the property. It is technically the buyer's responsibility to see that the bid specs get out to several contractors for bid reality the home buyer typically will sit on the report and procrastinate and you'll loose precious time. Our software allows you to print the job specs with or without the consultants prices on the forms. FHA would like to see every bid come right from the contractor in a "blind bid" situation without any outside influence from the consultant. This will typically double or triple the time the contractors will spend getting the bid ready for the borrower. We have typically identified the borrower's choice for a contractor by this time and send it to them as well. If the borrower hadn't made a choice by this time we will send randomly to people on our "validated contractor" list who are willing to bid this project for the borrower. By the way, the appraisal can be ordered once the bid specifications are complete as that tells them the "scope of work" they need to determine value.

6) When the bids come back the borrower will choose the contractor. We are always available during this process to assist the borrower & offer suggestions as to which bid is the most appropriate for this project. It isn't always the lowest bid by the way, sometimes a bid comes in so low that it is clear they didn't understand the specs or too low to actually complete the project. The lender can close the loan.

7) The contractor is notified that the loan has closed so he/she can schedule the work to begin. Once the work begins the contractor will require continuing inspections to get progress payments for the completed work. The contractor or the home owner can initiate this draw request. The lender will initiate one if you don't do it in a timely manner.

8) This procedure will repeat itself until the project is complete.

Associates in all areas of the USA using our 203(k) software
1.707.812.7668 Fairfield CA
1.877.207.6565 works for all of our locations

Thursday, May 26, 2011

Tuesday, May 24, 2011

How To Become A 203k Consultant - HUD

If you are wondering what you could do to enhance your existing home inspection or contracting business or start one from scratch, this may be just what the doctor ordered.

Home Inspectors, contractors, and architects are already there. You already have the knowledge base in your arsenal.

We fill in the gaps by offering you 203k consultant training. You may have the construction background to qualify even if you don't have one of these credentials.

Our 203k training package takes you to the next level. We have trained hundreds of 203k consultants nationally since 1995 and continue to do so today.

We not only teach you about the 203k loan program but "how to" conduct the 203k consultation.

We show you how to make the bid specifications so all the contractors who may bid on your project are bidding apples to apples.

A poorly written specification results in a lot of headaches during the process. While a well written specification takes the drudgery out of it and makes it easy to provide the draw inspections.

We have completed thousands of projects and our software for consultants is designed to keep you and your lender out of trouble.

The contracts we provide are HUD recommended and come as part of our 203k software or 203k consulting software, whichever you may choose to call it.

We typically call it 203k software as we have designed it to handle several other similar products as well. If you are doing a Home Style loan by FannieMae you just click on a button and all the forms will be populated with their name instead of 203k pertinent data.

Similarly Wells Fargo has their own rehab program, just a click of a button and your forms are populated with their information.

In addition Wells Fargo & Bank of America have a couple forms unique to them which are added this same easy way... just a click and you have it.

203k Lenders will love that you use our 203k software and have take our 203k training as our software will provide the lender with 100% of everything they need to add to their 203b paperwork to make it a 203k.

This includes a MMW (Maximum Mortgage Worksheet). While the MMW is a form that is required for the lender to fill out, all they have to do it take your numbers and insert them on their form and it is done for them.

If you have a lender who takes our "203k training" we will extend your 203k consulting software to them as well and unlock it on your behalf so they can take the file electronically and then they can adjust the numbers if needed before they print the MMW for themselves.

We enjoy assisting you as you take off on this 203k journey and are happy to take your emails and answer any questions that we can to help make your business more profitable and enjoyable for you.

You can always reach us at money

Saturday, May 21, 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, May 18, 2011

Streamlined k

Many lenders are now treating every 203k as a "STREAMLINED k" initially. In most cases it will remain a Streamlined "k"

Procedure: The contractor goes out to see the property first and provides a bid on the work they decide needs to be completed. Whenever the cost of repairs exceeds $15,000 a consultant, plan reviewer, or appraiser MUST be brought in to do a final review once all the work has been completed.

Most every lender calls for a home inspection on the Streamlined "k" projects to get a feel for the condition of the structure, they will also likely call for a pest control report. Learn to read more than just section 1 and section 2 items as the written paragraphs are filled with information that may affect your project compliance. They sometimes call for a structural engineer and if that happens you are no longer a Streamlined "k", you may very well be a Full 203k at that point depending on what the engineer has to say.

The biggest problem I see with the streamlined k if you don't use a consultant to do the home inspection is that the home inspector or contractor misses something that the appraiser catches on the appraisal inspection. That is deadly to the process. The guideline clearly states that if the appraiser finds anything that should have been called by the contractor or home inspector this project is not forced to a Full 203k and now you call a 203k consultant out to the project and this could delay your closing if they can't get our right away. They have to complete a write up and that typically results in a 21-25 page report.

If we have been called in for a "plan review" to be sure there isn't anything else that needs to be added to the scope of work. We will create a draw request, and other necessary contracts and turns them in to the lender. This is an option not a mandatory requirement.

The loan closes and the work is completed. The nature of a Streamlined "k" allows the contractor two draws if they choose to exercise that feature they can get from 35-50% of the contract amount at the start of the project, and one draw upon completion when the Consultant does a final inspection (if over $15,000 in construction cost) and turns in a "compliance inspection report"

For more information please contact:
Mike Young

Tuesday, May 17, 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 

Friday, May 13, 2011

What Items Remain Ineligible For The Streamlined (k) program?

What items remain ineligible for the Streamlined (k) program?

Properties that require the following work items are not eligible for financing under the Streamlined (k):

*Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall;
*New construction (including room additions);
*Repair of structural damage;
*Repairs requiring detailed drawings or architectural exhibits;
*Landscaping or similar site amenity improvements;
*Any repair or improvement requiring a work schedule longer than six (6) months; or
*Rehabilitation activities that require more than two (2) payments per specialized contractor.

Mortgagors may not use the Streamlined (k) program to finance any required repairs arising from the appraisal that do not appear on the list of Streamlined (k) Eligible Work Items or that would:

*Necessitate a “consultant” to develop a “Specification of Repairs/Work Write-Up”;
*Require plans or architectural exhibits;
*Require a plan reviewer;
*Require more than six months to complete;
*Result in work not starting within 30 days after loan closing; or
*Cause the mortgagor to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted. (FHA anticipates that, in a typical case,the mortgagor would be able to occupy the property after mortgage loan closing).

Monday, May 9, 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!

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Tuesday, May 3, 2011

Can You Move A Home From Another Site Using The FHA 203k Loan?

I've always found it interesting to see a home going down the street on it's way to another site, just waiting for someone to throw out some dish water out the back door... lol , not really

In the case of moving a home from one site to another several things must be present to qualify for a
203k loan.

1) The house being move must be on it's original foundation. It can't have been moved already to a storage sit while awaiting a lot to move it to.

2) HUD engineering must observe the home on the present site prior to the move and at the new location once sit & bolted on the new foundation.

3) The mover's insurance must cover the home during the move. Looking at the contract this mover has it suggests the borrower is responsible for damages up to $2,500, I don't think this will fly with HUD but apparently the borrower is willing to accept that responsibility. We'll see.

Once the home is bolted to the new foundation a draw payment can be made that covers the moving expenses as well per the 203k loan program.

The one we are doing right now is being moved onto a site that has a well and needs a septic system. In all cases the well and septic work must be part of the first draw or you may find you are waiting until it is. This sounds logical but years ago I was working on the first draw on a stick built home for a lender client. The home had a new foundation, the sub floor was installed, the well worked, and when I asked about the septic system was informed they hadn't started that yet.

I reported to the bank and told them I instructed the borrower to have the septic system ready for inspection at the next draw (not an FHA loan by the way). He agreed. I went to the draw 2 inspection to find out that they couldn't "perk" and a new "hillside" septic system is being installed at an additional cost of $70,000. I was shocked that they didn't have to pass the "perk test" prior to getting the building permits issued. Who would have guessed?

4) Permits is another issue, if you need permits on a job for the work that you plan to do... get them early. It might even save you a fine. I once had a fixer we had just foreclosed on. I had the property secured and hired a guy to mow the lawn. He called me and told me the building inspection department was pissed off at me and red tagged my building telling him he must STOP work and get off the property.

I immediately went to the building inspection department and told them of the incident. They looked it up and said "yes, here it is with a note that you are hereby fined and must pay double permit fees".

I said okay how much do I owe you... they said it isn't that easy we need to make an appointment to visit the property to see just how much work has been done... I said bring it on.. so far we just mowed about half the front lawn. Some of these inspection departments are just a little wacky.

The inspection cost me $25 and the inspector was the same one who 'red tagged' the property. When she made the inspection and found no work had been done she was a little red faced. I asked her why she sent the lawn mower guy away.. it isn't typically permitted. She got a little more red. Life is fun, then you...