Friday, September 30, 2011

FHA 203K Loans Bring New Life to Old Homes

The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), offers many home loan programs to help foster American home ownership. Perhaps one of the most unique programs is the FHA 203K loan. This program is designed to help communities revitalize their neighborhoods by providing loans to rehabilitate, repair or modernize homes.

According to HUD, an FHA 203K loan can be used to rehabilitate or improve a one-to-four unit dwelling in one of the following three ways:

1) To purchase a piece of property and the land on which it is located and rehabilitate it.
2) To purchase a piece of property on another site and move it onto a new foundation on a mortgaged property and rehabilitate it.
3) To refinance existing liens on the property and rehabilitate it.
The maximum amount that one can borrow on an FHA 203K loan cannot exceed 110% of the home's value after the rehabilitation is complete. The minimum amount one can borrow is $5,000. Many homeowners find these loans so helpful because they can be used it for such a variety of improvements. A borrower can use it to completely rehabilitate an old home or remodel a bathroom, repair a chimney, improve flooring, build a skylight or even complete major landscape work!

When applying for an FHA 203k loan, one or two appraisals will be required. Some lenders will require an "As-Is" appraisal to be done before rehabilitation takes place. This initial appraisal will determine the current value of the home. However, some lenders may deem the "As-Is" appraisal not necessary and will use the contract sales price on a purchase transaction instead depending on when the property was purchased.

After the "As-Is" value is determined, the borrower must submit their planned repairs to the FHA. After these repairs are submitted, another appraisal called an "After Improved Value" appraisal will be done to determine the fair market value of the property once improvements are completed.

To obtain a correct "After Improved Value" appraisal, it's important to include all of the eligible expenses in the cost of the rehabilitation. Eligible expenses that can be included are: cost of materials, labor, contingency reserve, overhead and construction profit, up to 6 months of mortgage payments, permits, fees, inspection fees by a qualified home inspector, licenses and consultant and architectural/engineering fees. These expenses will help the lender determine the maximum mortgage amount that the borrower will receive. It's important to include all of the cost and expenses into the plan because this will help the lender determine how much money is really needed and allow them to correctly assess the necessary mortgage amount for the project.

Once the borrower receives the funds from the mortgage, repairs on the house must begin within 30 days after closing and be completed within six months of closing. An approved FHA official will verify that the project is complete and the borrower may begin enjoying their beautifully renovated home. Help bring new life into an old home with an FHA 203K loan!

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Thursday, September 29, 2011

FHA 203k & The Power of Renovation Loans

The FHA 203k renovation loan is helping revitalize homes and communities across the country. Turn a bank foreclosure into a custom homes with FHA 203k loans, HomePath Renovation Loans and HomeStyle renovation loans.

Saturday, September 24, 2011

Buy That House - The Fix-up Loan

Have you been looking for a house for some time now, but you have not found the one that is just right for you?

It could be for any number of reasons that the houses that you are seeing do not meet your requirements.

The layout is all wrong; The kitchen cabinets and counters are old and warped; The baths were in style back in 1945; You would be embarrassed to bring your friends and family to the place; The windows are of the old and energy wasting single pane variety; The furnace looks like the space capsule; The hardwood floors would be nice if they were sanded and buffed; The walls need to be painted after you scrub off years worth of cigarette deposits; The basement is dark, damp, and downright spooky;... And, yes, unfortunately, the list can go on and on. Certainly, you do not want to buy someone else's problems related to their lack of maintenance or a house styled to their preferences in design. Who has the time or the money to deal with these issues?

But wait. There may be a solution. You may be able to get a house, which meets your wants, needs, and desires. You may be able to have a house that is within your budget. You may be able to overcome the problems, which were created by these neglectful homeowners.

Indeed, you may be able to meet your objectives and at the same time actually purchase one of these homes, which have just left you disappointed and wanting for more.

The solution: The FHA 203K loan. Basically, this loan will allow you to purchase one of these less than desirable homes, fix it up, and still stay within the values for homes in that particular neighborhood within which you are looking.

Here are some general statements about using this type of loan:

First, if you purchase one of these homes, then you can expect the price to be lower, than if the house were in good condition. The appraiser will definitely consider the value to be lower than the better houses. So a house that has the potential to be worth $200,000, for example, could be purchased for let's say $100,000 or a number, which reflects the amount of work, which is needed. Second, the work which needs to be done, in order to actually qualify for an FHA loan, plus the work, which you would like to have done to make the home your own is determined. Let us say for our example that the cost of this work would be $75,000. Notice that the total of the purchase price and the fix up cost are $175,000 rather than $200,000. Typically, one can expect to pay less than the nice house price, because there are very few buyers if any who will want to take on this endeavor without some profit or equity involved. However, even if there were no equity at the completion of the project, remember that your other objective was to have a house, which meets your requirements. The basic steps to purchase a home by this method are as follows:

· Work with your lender to determine the amount of house that you can afford and payments, which would be in your comfort range. With this information, you can determine the price range for homes that you can afford;

· Work with your Real Estate Agent to find a property. Even if you are using a FHA 203K loan, you will still want to look in the neighborhood of your choice, look for houses, which have sufficient living area for your needs, and are within the cost and value parameters, which were established with you and your lender. It is important that your Real Estate Agent have some knowledge, although they do not have to be an expert, of the cost of various home improvement projects;

· When you find a house that will meet your requirements, prepare an offer to purchase. The offer must state that you will be using an FHA 203K loan. There should be a feasibility contingency which is to determine the full scope and cost of the repairs;

· Once, you have a ratified contract, you will start your feasibility study. This step may require several experts. These experts will be perform the following activities:

- 203K HUD Consultant: Walk-through with a visual inspection to determine if the property has any chance of meeting the cost requirements. If the numbers do not work, then the contract should be terminated at that point.

- Home Inspector: An inspector will look at things in more detail than, the 203K Consultant. For instance, the inspector will pull the electric panel and examine for any not to code, unsafe, or outdated wiring. If the inspection uncovers problems, which were beyond your original repair estimates, then you may need to recalculate to determine if the numbers can still be managed. If not, then the contract should be terminated;

- 203K HUD Consultant / General Contractor: Return to the property for a more detailed examination. At this time, he will prepare a report, which itemizes, with costs, those things, which will be done. It may be worthwhile to bring your Contractor with you for this visit. It is your Contractor who will need to agree to the pricing that goes onto the 203K HUD Consultant's report;

- FHA Appraiser: The appraiser will look at value in two ways, one the value of the property in its current condition, and two, the value of the property in its fixed up condition. Also, the appraiser will make certain that the report from the 203K HUD Consultant includes conditions related to Minimum Property Condition Standards;

- Termite Inspector: FHA will probably require a termite certification, but the termite inspection is not necessarily needed upfront. Between the FHA 203K HUD consultant and the Home Inspector, you should get a good idea as to whether this should be done upfront or not.

- Lender: The Lender will review the report from the FHA 203K HUD Consultant to assure that all of the numbers still work. If so they will process the paperwork.

· If everything is still within budget after all of the inspections and appraisals, then the deal will go to settlement and the Buyer will take over ownership of the property. Notice that it is still the house, which needs work.

· Per the terms of the 203K Loan, the work must be completed within 6 months and should be overseen by a General Contractor. Also, it is preferable that any work that is to be done be by licensed contractors, however, it is possible for the Buyer to perform some work such as painting, although it is under the eye of the General Contractor.

· The General Contractor should understand that he does not get paid upfront. He gets paid in phases after various stages of the work are completed. As each stage is completed, The FHA 203K HUD Consultant and the Buyer examine it and then sign off if it is okay before the General Contractor gets his money.

The Buyer cannot move into the house until the house meets occupancy requirements. It is possible that, depending upon the improvements, the Buyer can move in from the start or possibly not until the project is complete.

The loan amount is based upon the purchase price plus the cost of the estimated repair costs, as prepared by the FHA 203K HUD Consultant. If the actual cost is less than estimated, then it increases the equity, but does not reduce the payment.

Since some degrees of repair will preclude the Buyer from moving in to the property right away, the FHA 203K Loan has a provision, whereby up to 6 months of payments can be financed right into the loan. With this feature, a Buyer is not paying for rent and a mortgage payment at the same time.

This is the basic procedure for a FHA 203K Loan. Of course, there are other details and the procedure could deviate on any given deal.

That's it. You can get the home of your dreams and in your price range and all from someone else's mess.

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Wednesday, September 21, 2011

FHA 203k Renovation Loan Success Story - HOT... Dog of the Week

Skip Schenker's HOT... Dog of the week shows how the FHA 203(k) loan program helped a young family in Los Angeles, CA buy a bank foreclosure that was severely distressed and eyesore in the neighborhood and turned it into a beautiful family home.

Saturday, September 17, 2011

203k Streamline Loan - HVAC replacment in Westminster, CA

This home only needs minor repairs. A 203k streamline can be used for cosmetic repairs, minor improvements and non-structural renovations. The owners of this house are using a 203k streamline to replace the stolen HVAC system and to repaint the interior.
The 203k Streamline loan can be used for any non-structural repairs, including kitchen remodeling, paint, carpet and appliances.

Wednesday, September 14, 2011

Saturday, September 10, 2011

Home Renovation and Kitchen Remodeling Tips

Whether you are considering a kitchen remodel for your own use or to add value to a home you are looking to sell, there are a few basics that can update any kitchen. Stick with the basics so you can set a foundation for the more creative changes you may want to make. Selling or keeping, these updates will make your kitchen a winner.

Think about how the space will be used

If you are someone who really enjoys cooking, you will want to be sure you have a functional room. Consider how much space you need to comfortably cook in your kitchen. You need to make sure that you have enough counter space and that the sink and appliances meet your culinary needs. If you entertain a lot you will also want to consider the flow from the kitchen to the dining area. An open design or a service counter can make entertaining easier and let the people in the kitchen stay engaged with their guests.

Modernize your flooring

If your kitchen has outdated flooring, you can really add polish to the room by adding tile or wood floors. This is a very big feature when you are showing your home to potential buyers. If you are not selling, think about the fresh new look and easier cleaning that a new floor will offer. Flooring can also link the kitchen to the dining room and create a visual flow through the space.

Update your appliances

If your kitchen is outdated, it will inevitably have old appliances. These are one of the first things that will catch the eye of guests or potential buyers. A new oven or refrigerator can make the entire room look cleaner and more modern. Newer appliances can also have a number of great features that will make your kitchen more functional and usable.

Install new lighting

One of the least expensive updates you can make in your kitchen remodel is new lighting. You can completely change the look of the room by putting in track or canister lighting. Fresh lights can make every feature of the room look new and fresh. The kitchen is one of the most important rooms in the house, that where families spend most of their time together and when kitchens get too out of style or old, or do not have enough storage space they become cluttered, old and messy.

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Monday, September 5, 2011

Cork and Bamboo: Kings of Green Flooring

Eco-friendly or 'green' living is gaining in popularity every month. As the planet's natural resources dwindle and disappear, 'green' options use less fossil fuels to manufacture and often are recycled or recyclable material. Today, cork and bamboo are the two most common green flooring options available.


Using cork in floors is not new by any means. Commonly used in churches and libraries since the early 20th century, cork is gaining popularity as a renewable, eco-friendly and renewable flooring material.

Cork is a layer of bark of the cork oak tree, or Quercus suber, that is harvested only once every nine years. The inner layer of bark is left in place, allowing the tree to continue to thrive and grow another layer of cork.

The material used in floors is the remaining cork after bottle stoppers and bottle cap padding are produced, called post-industrial waste. The remaining cork is boiled and ground, then mixed with an adhesive and rolled.

Cork floors also aid sound suppression, naturally insulate and resist fire. Cork also provides natural padding; it sinks slightly under weight, helping to avoid shin splints and joint aches. Because of the stress relief it provides, cork is included in the two most often used floor materials in home and commercial gyms.

Cork can be used as a top or finished surface or as an underlayment to other surface materials. If intended as a finished layer, pieces of dried bark, wood chips and other color- and texture-contrasting materials are often included to present eye-catching designs and durability.

With proper care, cork can last four to five times longer than vinyl and continue to provide reasonable water-resistant properties handy in kitchens, laundry rooms and bathrooms.


Bamboo is another green flooring option. Whether solid-all bamboo-or engineered-bamboo mixed with layers of plywood, bamboo is renewable, versatile and eco-friendly.

If the bamboo is fully mature, it provides greater water and mold resistance, but it is not naturally completely water-resistant. Care must be taken to promptly clean spills and avoid high-humidity areas, such as porches, laundry rooms and bathrooms. If exposed for long period or frequently to moisture, the bamboo can crack or buckle.

Bamboo is easily stained in natural wood grains and colors, called direct print bamboo, prior to pressing together, providing green flooring to any d├ęcor. Regular and direct print bamboo are harder materials than carbonized bamboo-that which is allowed to boil until the sugars carbonize, giving the bamboo a darker natural color.

This natural source also provides a variety of pattern installation options. Checkerboard patterns, diagonals or straight lines can create unique room atmospheres and appearances. A soft material, however, protect the bamboo floor from heavy furniture and high heels to maintain its longevity and quality.

With proper moisture-related care, bamboo can last longer than many hardwood floors, simply because it's flexible. Wood cracks and chips more easily than the flexing bamboo, and each impact point on wood can leave a permanent gouge much more easily than on bamboo.

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Friday, September 2, 2011

Green Renovation Lending - How to Go Green With FHA 203K Renovation Financing

Today's world is changing at a dramatic pace. Skyrocketing energy prices and a planet showing years of abuse have led many to consider the way they live and how to change their lifestyle. The easiest and best way to reduce our energy consumption and to help preserve the planet for our children and grandchildren is to start at home. The place where we spend the most time, where we consume the most energy and our biggest asset all in one. Our homes are responsible for huge outlays of money and responsible for preserving and creating wealth for our families. Now is the time to do you part, help the planet, take advantage of the incredible tax and utility company credits, increase the value of your home and prepare yourself for energy price increases by financing your energy saving improvements with FHA 203K> renovation financing.

FHA 203K renovation loans have been around for decades, but they have recently found a new use in helping people go green. How do they work? The process is simple really, one loan closing with money to purchase the property or to payoff current debt and an escrow account for repairs. Loans over $35,000 are facilitated with the aid of a HUD approved consultant designed to help administer contractor draws and insure repairs are done to FHA specifications. Loans under $35,000 don't require a consultant and repairs can be done by the borrowers chosen contractor or, in some cases, the borrower themselves. FHA awards benefits in terms of higher allowable debt to income ratios along with loan amounts that can exceed FHA statutory limits. So, how can you use the FHA 203K to go green?

1.) Green Up Your Appliances -- FHA 203K loans will finance new free standing appliances for your home. Why not use that opportunity to buy EPA recommended ENERGY STAR appliances? Imagine beautiful stainless appliances that save you a bundle in monthly energy costs.

2.) Save Water, Save Energy -- You can finance brand new low flow toilets as well as tankless water heaters. Low flow toilets use less than half the water that older models do and tankless waters provide unlimited hot water without all the wasted energy of a constantly working water heater.

3.) Want New Hardwoods? -- Opt for sustainable bamboo flooring. Bamboo reproduces itself to maturity in 5 years as opposed to the 40-100 years than normal hardwoods take. Make sure and opt for formaldehyde free glues.

4.) Environmentally Friendly Landscaping and Lawn -- Making an eco-friendly outdoor area that saves water and provides shade, helping you reduce heating and cooling costs, is not as hard as you think. How do we you do it? First of all choose local plants that require less water and less pruning. Pruning creates waste and fills landfills, avoid it if possible. Choosing local plants can help you conserve water and require less work. If you have an irrigation system install a "smart" system that calibrates water needed based on local climates and plant needs.

5.) Solar Panels -- Solar is one of the easiest ways to dramatically cut monthly energy bills. Installing solar panels is so encouraged by HUD that they will allow you to exceed statutory loan limits to do so. In many cases the Federal, State and Utility company tax credits will pay for a good portion of the purchase and installment of solar panels. The rest we can finance.

6.) Better Insulation -- An obvious choice for a green home, insulating your home better can help you save thousands on energy bills.

7.) Choosing Green Building Materials -- A key aspect of any green FHA 203K renovation is the selection of environmentally friendly building materials. To reduce transport pollution and energy costs go local first. The second thing to look for is recyclable materials such as Glass, Terrazzo, Ceramic and Porcelain.

These are just a few of the myriad of green renovation choices you can finance with an FHA 203K renovation loan. There are literally hundreds of other ways to green your home, save yourself hundreds in monthly energy costs, increase your resale value and do your part in preserving the planet. The time is now to take action and do what you can. You never know, you might just be able to dramatically cut your monthly energy bills, create a bundle in home equity and substantially improve the marketability of your home.

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