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: