Sunday, December 30, 2012

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.
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Friday, December 28, 2012

203K Loan - Get To Know The Basics

The Federal Housing Administration's 203k Loan enables people to borrow finance for ownership and improvement of a home in a single loan. This type of finance is insured by the FHA, which will enable the borrower to keep the interest rate at a lower level. Some of the basic information about this type of loan is discussed in the content given below:

This loan would be of great use to people in the United States to purchase a home or refinance a property that requires some work. This type of financing is otherwise called as fixer or rehab finance and it offers funds not only for purchase of new homes, but also for home improvement projects as well. Rather than obtaining two loans, the borrower can bring everything together under one loan. Some of the benefits that can be acquired by a borrower from this type of financing are discussed below:

Instead of two different loans for home improvement and home purchase the borrower can get both these finances under a single type loan, the paperwork and cost will be greatly minimized for the borrower. Because this loan is offered with a competitive rate of interest, it makes it possible for the borrower to get the amount of funding that they need at a reasonable payment. Now, let us understand about how this type of financing works:

FHA 203k Loan is designed for single to four unit properties; however, townhome owners and condo owners can make use of the program for meeting their interior designing project requirements. The maximum amount offered depends on the location of the borrower and FHA enables up to 110% of the projected value of the property after improvement. Even though the least value of finance is $5000, the streamline FHA permits the borrower to do smaller projects that involve easier processes. When it comes to improvement projects, funds are allocated to an escrow account and the money is paid out as the work gets completed. Any additional funds left over are then applied to the principle loan unless otherwise specified.

It is compulsory that the work must be completed within six months of closing and there will be padding put into the cost of the project in case it reaches more than the expected amount. However, keep in mind that once that excess is used the borrower can't get any more extra funds so budget wisely. This is why it is better to work with a reputable contractor, who can offer accurate estimates. Terms can range from 15 to 30 years and interest rates in this type of lending are a little bit more as compared to traditional FHA loans. This type of loan is not available to investors currently but some lending sources can offer them to non-profit organizations and of course all owner occupants so take advantage.

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Monday, December 24, 2012

Happy Holidays!

Wishing You and Your Family
a Safe and Happy Holiday!

"Blessed is the season which engages
the whole world in a conspiracy of love!"

~Hamilton Wright Mabie

Friday, December 21, 2012

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.

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Tuesday, December 18, 2012

Contractor's Guide Now Available

Contractors can actually get business within a few weeks and lots of it by using the techniques in this eBook.

Learn the secrets of getting more 203k work.

Most of it is paid 35-50% up front and the balance upon completion if you concentrate on the Streamlined (k) and if you want larger projects you will work the "Full 203k" program (sorry no upfront money on this one)

The last builders group we talked to was shocked to see just how much business was going on around them that they were totally unaware of. Check with me, Your copy may be FREE. This is an eBook. You must read while you have access to the internet in order to utilize all of the links in this one.

I am having so much fun telling contractors about this program. It is amazing to hear some of their stores of how slow they are right now and they are amazed at how fast they can access this program.

We need more qualified contractors in the program. If you are a contractor "anywhere in the USA" and need work we can show you how to find the right people who can let you start bidding right now.

We actually need good reliable contractors and the problem isn't getting the work, it is that the contractors we get need to be honest and tell us when they are getting too much work and back off the bidding process till they catch up. So many just don't want to turn any work away.

It doesn't do anyone any good if you can't perform. Therefore we ask that you take a break once you are booked out and let us know as you get ready for more work. We will help you stay busy but we ask that you cooperate with us in that regard and we'll keep the clients happier, as a TEAM we are more powerful.

Saturday, December 15, 2012

FHA 203(k) Program - Additional Funds For Property Rehabilitation

The Section 203k Program is FHAs primary program for the rehabilitation and repair of single family properties. It has been a great tool for community and neighborhood revitalization. Many lenders have successfully used the program to help borrowers purchase and rehabilitate properties.
How it Works:
Typically when a homebuyer wants to purchase a home in need of repair or modernization, the buyer will normally need to obtain financing to purchase the dwelling; then additional financing for the repairs/construction; and finally a permanent mortgage when the work is complete to pay off the original loans involved.
With the FHA 203(k) program, the borrower can obtain a single long-term mortgage loan to finance both the acquisition and the rehabilitation of the property. In order to provide the funds the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.
When the loan closes, the proceeds for the rehabilitation/improvement will be placed into an interest bearing escrow account insured by the FDIC or the NCUA. The lender will release these funds upon completion of the proposed rehabilitation in accordance with the Work Write-Up and the Draw Request.
Example: $20,000 in repairs is needed on a home where the purchase price is $200,000. The total mortgage amount would be $220,000. $200,000 goes to the actual sale, while the remaining $20,000 is placed into an escrow account and will be paid out once the work is complete.
Property Eligibility:
The property must be a one to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling.
Homes that have been demolished or will be razed are eligible provided some of the existing foundation system remains. The program can also be used to converts a one-family dwelling into a two, three, or four-family dwelling, and vice versa. An existing home (modular unit) on another site may be moved to the mortgaged property.
The loan may be originated on a "mixed use" residential property and condominium units provide it meets certain requirements. Visit for more details.
Eligible Improvements:
All repairs/construction must comply with the following:
1. New construction must conform to local codes and HUD Minimum Property Standards
2. To improve the thermal efficiency of the dwelling, the following are required:
-Weather-strip all doors and windows
-Caulk or seal all openings, cracks or joints.
-Insulate all openings in exterior walls where the cavity has been exposed.
-Insulate ceiling areas where needed.
3. Replacement Systems
-Heating, ventilating, and air conditioning system supply and return pipes and ducts must be insulated whenever they run through unconditioned spaces.
-Heating systems, burners, and air conditioning systems must be sized to be no greater than 15% oversized for the critical design, heating or cooling, except to satisfy the manufacturer's next closest nominal size.
4. Each sleeping area must be provided with a minimum of 1 approved, listed and labeled smoke detector installed adjacent to the sleeping area.
Luxury items and non-permanent improvements are not eligible. However the program may be used for such things as painting, room additions, decks and other items even if the home does not need any other improvements.
Required Exhibits:
The homebuyer must provide the lender with the appropriate architectural exhibits that clearly show the scope of the work to be completed.
The flowing are recommended exhibits, but may be modified by the local HUD Field Office:
-A plot Plan of the site is required only if a new addition is being made.
-Proposed Interior Plan of the Dwelling shows where structural or planning changes are contemplated.
-Work Write-up and Cost Estimate. Any format may be used, but the quantity and cost of each item must be shown. Cost estimates must include labor and materials sufficient to complete the work by a contractor.

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Wednesday, December 12, 2012

Studio City Fixer-Upper

After four months' reno, new homeowners move into their Studio City home.

Sunday, December 9, 2012

Thursday, December 6, 2012

Monday, December 3, 2012