Saturday, December 28, 2013

Become Part Of A 203k Team

I've always looked at the 203k as a team sport, even when I first got involved with it. When we put out our audio tapes in 1998 we even discussed it.

You are only as good as your 'team' in any case. If your consultant can't write a good report, the lender won't have much to work with and on the other hand if the lender can't get the loan closed it doesn't matter how good the 203k consultant writes the report.

This is true of the rest of the team as well. Your teams each should have a Lender that can close an FHA loan, even a 203b quickly.

Our trained 203k consultants will provide 100% of the 203k portion so the lenders can take our MMW and use it to help them fill out their form... it is their responsibility but we try to make it easier for them.

If we all do our part of the project and then pass the baton to the next team member this frees us up to get the next project started.

Example: A 203k loan may begin anywhere by any one of the team members. We quite often get calls from our websites or the HUD website from a borrower... we immediately asses the situation and more than likely we'll send them to a lender to get that process started.

They may already have a property, that is okay, we still need to get that lender take on the borrower to be sure they are credit worthy. Not wanting to waste time or the borrower's money we need to verify they have the ability to get the 203k loan going.

If they don't have a property then we suggest a realtor or agent to help them find one in a neighborhood of their choosing.

We may actually start consulting to determine what type property they might want. There are several possibilities in this realm.

Once they locate a property suitable for their needs we set up a 203k consultation and inspect the property to create the 203k bid specifications.

Once those 203k specs are complete the borrower should look them over to be sure everything looks like they want it. Then they go to the lender.

The lender takes the 203k specs and provides that information to the appraiser and the appraisal is completed with an 'after improved' value. Once we reach this point the loan should close within a week or so typically.

Once the loan closes the borrower needs to get that information to the contractor so they can get that project in their schedule.

This is an important step as this is the only way the contractor has of learning the loan has closed.

They have up to 30 days to get their first draw inspection but in most cases they will have someone start long before that. In many cases they will start within a few days of your closing the loan.

We look forward to helping you build your 203k business.

Know that this is much more than just 203k, you will be trained in all renovation loan products that you can also consult on.

You will have access to our marketing materials and power point presentations to increase your "Referral Partner" Base too.

We have referral partners that provide a considerable amount of work for us in the FHA 203k loan program.

We'll show you a way to finance 80% of the pool repairs or even add a swimming pool to a home that doesn't have one.


To place an order go to www.my203kconsultant.com 
Mike Young, 203k Consultant
1.707.812.7668
Cell phone 1.704.451.1599

We now have offices in

Charlotte, NC
Columbia, SC
Charleston, SC
Denver, CO
Detroit, MI
New York, NY
Los Angeles, CA
Santa Barbara, CA
Austin, TX
Dallas, TX
And we are growing our business!

Wednesday, December 25, 2013

Sunday, December 22, 2013

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 
707.812.7668

Thursday, December 19, 2013

Fast Track Your 203k Loan

Fast Track Your Loan!

Want to get your loan to close faster? Of course you do. It is easy if you put together all of your financial data and have it ready to hand to your lender upon application. You can even get your 1003 application form filled out in advance. Don't wait till the last minute, find a house, then start gathering this info... it may take you a week to get it together. The loan application period starts after you turn this info in to your lender.

Click here for an application kit

Monday, December 16, 2013

Our Latest Software For 203k Consultants & Contractors

Award winning 203k Report Writing Software

This version is loaded with new features, more forms, & has our proprietary system for recapturing the Streamlined "k" business for our 203k consultant clients and trainees.

Want the best of all worlds - get all of our marketing strategies, training aids, and we'll help you market YOUR business in YOUR town by being one of our business partners.

There are lots of areas still open but we do restrict the number of Franchises available in a marketing area. Be better than the rest by joining the company that prides itself on "Providing more than our clients expect"

Fore more information, please visit www.203konline.com

Friday, December 13, 2013

What Can I do If My Appraisal Came In Too Low?

By Mike Young 
Home Inspector with 203kOnLine.com, covering California & most other states S0289 

You hear stories now and again that indicate the apprased value of a home was lower than expected. That happens now and then but you must remember that the appraiser is only giving you their "opinion" of value and that if you disagree, you can suggest other comps you feel they should have used or have another appraisal done if you feel the appraiser didn't know the neighborhood. The appraiser will obligated to respond to your comps and tell you why they didn't use them.

You can even use the same lender's stable of appraisers. You don't necessarily need to change lenders to get that second opinion though you may want to. Using in AMC isn't always the right answer but they will have more than one appraiser to choose from for sure.

USPAP or Uniform Standards of Appraisal Practice calls for an appraiser to know the area they are appraising, and understand and apply their appraisal principles. Two appraisers given the same assignment and using the same comparables may come in 3-5% different. If it is more than that then you have to read the reports to see what each thought was more important and why they gave more weight to one comp over another and then decide if another appraisal is needed.

 I did an appraisal review years ago in Fairfield CA, about six blocks from where I lived. The subject property had a pool and the appraiser had given most wight to a home within a block that was at the entry to that micro neighborhood so each car in the neighorhood had to pass this house on the way home while the subject was the second house from the end of the block on a dead end street. Most weight was given to this first comparable sale. There was an adjustment for lack of a swimming pool.

Being the first house at the entry to the micro neighborhood it backed to a busy street, sided to a busy street. When I was doing the review I merely got out of my car, walked to the fence on the sidewalk and could see it had a swimming pool. I was able to use the exact same comps the appraiser used, correct their adjustments for the false assumptions and come up with a more accurate assessment which was about $20,000 less than the appraised value as I recall. As you make adjustments on the grid and you adjust properly the value should present itself. The amazing thing is it will be supported across the board on all of the comps if your adjustments are correct.

If you miss fixing some health or safety items like straps on the water heater or CO or smoke detectors your appraiser may have to revisit the site for a 442 inspection to see these items have been corrected at an additional fee and you have to let them in which costs YOU time and money. Best to have those fixed prior to the first visit.

If the appraisal is only 5-10% low you can change loan programs to the FHA 203k and gain 10% advantage as long as those little issues are included in the report the appraiser has to see them "as repaired".. Having had about 39 appraisers on my staff over the years it was an issue from time to time to prove but not a regular occurrence. FHA 203k loans, both the streamlined k which has no lower limit or the Standard 203k can gain you that 10% advantage on the appraised value.

Tuesday, December 10, 2013

Mike Young: What’s My Line? | FHA 203k Consultant

Photo of Mike Young 
 
 
 
Who is Mike Young and what does he do?

Mike Young is a FHA 203k Consultant. 




 

What does an FHA 203k Consultant do?

  • Meets with clients and “consults” explaining the program
  • Reviews the contracts and procedures so there are no problems during the course of construction
  • Makes the FHA 203k compliance inspection to determine what it will take to bring the structure up to the MPS (Minimum Property Standards). This includes mandatory repairs such as ceiling insulation, caulking, weatherization, grading, etc.
  • Recommends contractors and lenders if they client does not already have them selected
What is the difference between an FHA Consultant and a Home Inspector?
 
A  home inspector and a 203k consultant can be, and quite often are, the same person. There is really no difference in the home inspection and the consultant’s 203k compliance inspection.

The inspections can be the same inspection. The home inspector quite often creates a “deficiency report” that can be the basis of a 203k report as well.

A typical home inspection might take 3-4 hours and a typical 203k compliance inspection might take 1-2 hours. During that time the home inspector will find deficiencies and suggest further inspections by the appropriate trades persons  and rarely is allowed by state licensing to “price the work”.

On the other hand the consultant does just that, they determine the issue, determine the repair, create a “scope of work” or “scope of renovation” and provides typical costs to repair those items. This is in direct violation of most state licensing “standards of practice” for home inspectors thus the difference between a consultant and a home inspector.

Mike Young can help any buyer in any state, in any city or town.  Mike is licensed by HUD to be an FHA 203 Consultant in all states.
 

Do FHA 203k Consultants charge a fee?  

The answer is, Yes. Nationally a typical fee for a 203k consultation is between $600 and $700, plus mileage. That isn’t very much for the responsibility assumed. The fee can range from $400 to $1000, plus mileage, for the consultation, but on larger projects additional fees may be incurred. Of course, one would need to contact Mike Young directly and get a fee quote specific to their project.  Clearly, one size does not fill. 

Are there any pitfalls or downsides to FHA 203k loans? 
As with anything in life, even with the best laid plans, things may not go according to plan. If you are having issues with a 203k loan anywhere in the USA contact 203k911.com for some direction and resolution to your issues. The best course of action is to first hire a consultant to ensure the project does go smoothly.

The Mike Young Team represents a group of FHA 203k and Fannie Mae HomeStyle Renovation consultants specializing in renovation loans nationally. No job is too big or too small for Mike and his team.  They recently helped a person in KS who couldn’t find a consultant due to state laws being so restrictive.  They were able to help the person's lender get the loan closed with little delay.

Another person called from CT asking if they could move a historic type home from a lot in VA to a new location in CT. The home was to be placed on a barge and taken to the new waterfront lot in CT.

The 203k program is amazing. Open your mind to the possibilities, or contact The Mike Young Team and they will open it for you.
 
Mike Young: What’s My Line?  |  FHA 203k Consultant  by Kathleen Daniels, San Jose Homes for Sale - San Jose Short Sale Agent - 408-972-1822

Article Source

Saturday, December 7, 2013

What Happens If We Can't Get Our Project Completed Within the Time Frame Set by the Consultant?

You may need an extension of time to complete the project.

Each construction project has an estimated date of completion set by the consultant or the lender and based on the amount of construction. Variables exist that include the current schedule of the contractor at the time of the closing. If the contractor is notified the loan closed and they can start working asap, does't mean they have to drop everything and begin your project.

1) What really happens is that the contractor is notified of the closing,

2) The contractor checks their schedule and decides that they have a project completing in a week or two and that crew will be sent to the new project at that time.

3) Materials procurement then takes place, the contractor starts gathering the items they will need to complete you project.

All this is happening in the background and the borrower doesn't see very much happening and might be getting anxiety about their project. This shouldn't happen as they have been told what is happening behind the scenes.

Once the project begins construction the contractor is under contract to maintain a crew on the job each day thereafter to insure a speedy conclusion to the project. At no time should the contractor cease work on the project for more than a week. There must be a draw inspection for work completed each thirty days from the close of escrow.

If we look at this logically the first draw is typically is smaller than the future draws as there is less than thirty days of work. If the project is was originally set up to be completed in 4 months and we get to the 3.5 mark you will need to create and execute an extension request. The extension request should include the following:

A) Reason for the delay

B) Time line with a list of items not yet complete and an estimate of when they think each line item may be completed. This time line should be on the contractor's letterhead and signed by both the contractor and borrower.

C) New estimated completion date

If your project was originally set up for 6 months you could get up to five months additionally in this manner.

Wednesday, December 4, 2013

Instant Equity: 203K Loans


Watch the report from Action News' Nydia Han to learn more about the 203k Loan.

Sunday, December 1, 2013

Where Do I Get Help With My 203k Problem Contractor?

As smooth as most 203k projects go I hate to write this post. There is about one in a hundred that become what we refer to as "the 203k from hell" because no one seem to get along.

We had one years ago that three days before the project was to be finished... just three day and we are done... the contractor brought his foul mouthed wife to the project to show her what he had done. Holy cow, from that moment it went down hill fast. Up till then everything was going very smooth.

It turns out her mouth was a "gutter mouth" and she started using the wrong terms to describe his work and it offended the owner's wife who was living in the trailer just outside when she heard F this and F that describing her new home. It was all good just bad choice of words and to a religious person it was about to blow sky high. The owner asked her to leave NOW and that she didn't appreciate the language being used in her home. The contractor's wife being from the gutter didn't take kindly and finally the owner kicked them both off the property. The contractor was fired and not allowed to complete the small amount of work left, ever.

We took another month to find an acceptable contractor to complete the project but who would have guessed that could even happen? Not me. There was no resolution, they weren't going to be allowed back into the home for any reason. Up till then the project had gone very well.

Who knows what that "last straw" might be?

What happens when there is $30,000 in work completed for the first draw and...? 

...and none of the work done was listed on the scope of work? YIKES! This luckily hasn't happened to me but it did happened to a friend of mine in NJ and twice in three weeks. My question to him the first time is how was he going to pay it out? He answered correctly... "I can't pay for any of the work that was done as it isn't' on my list of repairs" - that is exactly right.

When it happened the second time, I had to question his consulting procedure. It seems to be flawed. You need to be very clear on staying with the "scope of work" as outlined in the bid specs because that is what the appraisal was based on and it MUST BE COMPLETED, it isn't an OPTION.

The house is much nicer than our scope of work laid out...

How do you handle that? I did have this happen on one of my projects and I was shocked to see the home was much more than anticipated. The borrower didn't want a draw, the bank called for it to see if anything was progressing. That is their option and obligation under the HUD Guideline. When I arrived it was so much more house. I couldn't believe my eyes. No permit on site, just did the second lender mandated draw and there is still no permit on site. PERMITS MUST BE POSTED AT THE SITE FOR AN INSPECTOR TO SEE ANY TIME THEY COME BY. This is also no an option. The lender was going to call and see if there were permits taken out. I haven't heard yet.

203k 911 is our solution to your problem 203k project

We have completed so many 203k projects that we have seen most everything that could happen, happen. We dealt with it and resolved it. There was some times where I stepped in and mediated for other consultants live and in person... to mutual benefit of all concerned. It actually helps us all to resolve issues amicably. The lender, the borrower, the contractor, all benefit from these services so we now have a place to go to help get these issues aired and resolved in the least costly manner. It is 203k911 and it works all over the country.

-Mike Young, 203k Team Leader 

With offices coast to coast and HQ now at PMB 168, 5055 Business Center Drive, Suite 108 Fairfield, CA 94534 1.707.812.7668. We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state. 

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation".

Thursday, November 28, 2013

Happy Thanksgiving!


Happy Thanksgiving!

Have a wonderful day enjoying food, family and friends

Monday, November 25, 2013

What Minimum Upgrades are REQUIRED on a 203k?

This will show you the minimum requirements for an FHA 203k project

30A-110V main panel no good for the FHA 203kElectrical 

The electrical system must be a minimum of 100 and with breakers no fuses are allowed. So if you're dealing with an older home that has a few system is a penny fuses or cartridge fuses they must be upgraded to a breaker type system with 100 A minimum 220 V.

Insulation 
Attic MUST be insulated
Attic MUST be insulated Attic insulation must be installed if there is none present. Many homes were upgraded some years back when R19 was the norm. It's my understanding that these do not have to be upgraded though we always recommend it as insulation is an easy way to recover your investment.

Weatherization 

Weatherization includes weather stripping, caulking at the window and door frames, and in general tightening up the home to minimize air and water intrusion.

Caulking 

Caulking goes right along with weatherization like a hand in glove.

Minimum property standards (MPS) 

The FHA minimum property standards primarily consist of or deal with Health and safety issues. That is, anything that is unsafe should be fixed anything that's a health or safety issue should be remedied. In general, this means badly soiled carpet should be replaced, broken glass or Windows need to be repaired. Boards with nails sticking out of them need to be removed from the site.

There is another aspect of the minimum property standards that deals with whether or not the home appears that it will last as long as the mortgage that were putting in place. So if the front porch is falling apart now, it likely won't last another 30 years and should be repaired. This would include termite issues, dry rot, and broken support members. The caveat is that the home under normal owner maintenance should have the appearance of lasting as long as the mortgage.

There isn't the day that goes by that someone doesn't tell me they just want to do the bare minimum repairs required by HUD/FHA. Then they'll fix the house up after they moved in at their own pace and at their own expense. In many cases the saddens me a bit because I think it's so important to do as many of these things as possible before they move in so they can enjoy their home.

We can do the minimum that is the problem, but is it what they really want. You do not want to be a slave to your house. With the interest rates as low as they are today. It makes no sense not to get most of the work done right now. Then sit back and enjoy your home.

We are seeing lots of failed septic systems which is repairable with the Full 203k. Need a lender try Don Jr at Prospect Mortgage

-Mike Young, 203k Team Leader

With offices coast to coast and HQ now at PMB 168, 5055 Business Center Drive, Suite 108 Fairfield, CA 94534 1.707.812.7668. We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation".

Friday, November 22, 2013

Basics Of FHA 203k Loan Rates

Before you learn about the 203k loan rates, you must know what it means and how it affects your finance. Basically, the Federal Housing Administration (FHA) is a United States government agency that was established as a part of the National Housing Act of 1934. This agency was created with the following goals:

1. To improve housing conditions and standards

2. To provide a proper home financing system through mortgage loan

3. To control and stabilize the mortgage market

Sometimes FHA 203k loans are also called 'rehab' or 'fixed'. 203k loan scheme comprises two loans together - home improvement loan and credits for buying a new project. Following is a discussion regarding the advantages and disadvantages of applying for credits with 203k loan rates.

Advantages and disadvantages

The major benefit of a 203k loan is that you get only one scheme for both home improvement and purchase of a property. This reduces your paperwork and the costs that are incurred in the whole process. Being a government funded agency, the rates are quite competitive as compared to banks and other lenders. With 203k loan rates of interest buying a home that banks might otherwise not provide funding for, becomes easier.

There are not many disadvantages of a FHA 203k loan rates for funding home improvement or property buying project. It just takes longer to close. To minimize the disadvantages, there are many credit broking organizations that might help you to drift smoothly with your money management.

Working of 203k

This scheme can pay for a home and its improvement. The amount of the money borrowed that you are entitled to depend on your geographic location. The amount of coverage also varies accordingly. Generally FHA 203k loan rates of interest are for loans which are 110 percent of home's projected value after the improvement or purchase. There are also smaller schemes which allow you to take on smaller projects. 203k loan rates are based on the agreement that work must be finished within 6 months of closing. Remember that you cannot borrow extra amounts if you run out of the amount given to you. You must therefore consult with a good broking company that might help you with accurate estimation prior to application for the amount.

One such company is Great Northern Mortgage Corporation. You can get all types of solutions and services regarding mortgages, loans, debt consolidation, and managing your finances. Discover how to apply for 203K FHA rehab loan. Learn more about FHA home improvement loan and their requirements by visiting http://www.getlowrate.com.
Article Source: http://EzineArticles.com/?expert=Kathleen_Chester

Article Source: http://EzineArticles.com/5083368

Tuesday, November 19, 2013

FHA 203(K) Rehabilitation Loan, Is It For Me?

What is an FHA 203(k) Loan?

There seems to be a lot of confusion about the 203(k) loan from FHA. It is easy to see why, just look at the name, when I think of rehabilitation I think of a long drawn out battle. If I close my eyes and imagine a property that I would need a rehabilitation loan for I picture an old dusty mansion with exposed pipes, a broken down roof with mold damage everywhere, the hard wood floors are worn, warped and need replacing, there are holes in the walls exposing daylight through the bricks and I picture the only thing salvageable being the foundation and load bearing walls. In truth, the 203(k) is perfect for that type of home, but it is also a good program for other types of homes as well. Let's examine some of the options available with this wonderful program.

What is the 203(k)... Really?

One of the questions I'm most commonly asked is "Do you think that this property will pass FHA inspection?". My reply is always the same, as much as people seem to believe that FHA has their own super strict inspection, the do not. There is no inspection required by FHA. They do require that the house is insurable, and sometimes the insurance company will require a 4 point inspection, but FHA doesn't require it. The only other "inspection" required is the appraisal and as long as there are no obvious reasons for the house not to be in good livable condition it passes FHA guidelines. Why do I bring that up? Because the first thought I get when I think about a "rehabilitation" loan is a loan for properties that don't pass FHA's "required inspections", but the 203(k) is so much more than that.

If I were naming the 203(k) loan product, I would have used a slightly different term than rehabilitation. I would have called it the 203(k) Home Improvement loan. This loan can be used to modernize a perfectly livable home, or to change the flooring in a house because you would prefer bamboo flooring to carpet, or tile flooring to hard-wood because you like it better. There is a minimum $5,000 repair threshold in order to do the loan, that has to be met on structural changed, such as remodeling a bathroom and kitchen or changing the flooring. After that 5,000.00 threshold is met, you can even include items like new appliances.

Another great part of this program not many understand is that the 203(k) can be done as a re-finance to a home you already own, this truly makes it a home improvement loan rather than a rehabilitation loan.

Limitations

Of course this is still an FHA loan, so only owner occupied properties are eligible, though the program seems like the perfect fit for the investor buying a foreclosure property that needs some updating, investors need not apply. However a person looking to buy a foreclosed home as their primary residence is the perfect candidate for this type of loan.

Also the process for a 203(k) loan does take longer than a traditional FHA loan, but when you do move in you can have the house completed to the way you like it, with the repairs done by certified professionals and the cost rolled up into one payment with your mortgage.

All of the work must be properly permitted and completed by professionals that are licensed and insured, so there is no getting Uncle Larry to do the work for you to save money. For the right borrower, the 203(k) loan is a fantastic product and should be seriously considered as an option for those not 100% satisfied with the house they may be purchasing. I for one, am very excited about the opportunity to start offering these loans to my clients again.

If you are a realtor with a house that has been on the market for a while and is in need of some updating, it would probably be a good idea to talk about the 203(k) option with your favorite mortgage professional

Find more articles like this at Florida Mortgage Pro Get pre-qualified by me here
Article Source: http://EzineArticles.com/?expert=Wiliam_Anthony_Smith

Article Source: http://EzineArticles.com/7920185

Saturday, November 16, 2013

Can I Replace a Failed Septic System with the 203k Loan Program?

Yes, but it must be a FULL or STANDARD 203k. This work would be considered "structural" and therefore should not be attempted with a streamlined k loan. Now that I have said that there is a major lender that says they have done hundreds of septic replacements all under the streamlined k program. This could bite the borrower as it doesn't then comply with the program guidelines.

I actually received a call from a HUD official instructing me to get the word out that this repair is ONLY available with the FULL or STANDARD 203k.

There are a lot of homes that have septic systems that have been sitting idle for a year and more that have dried out and no longer function, the REO managers either don't now it or do know it and should be disclosing it with a note that this is an FHA 203k candidate or FannieMae HomeStyle candidate due to the septic issue.

We have several replacements or repairs going on right now or in the past few months in Vacaville, Langunitas, Templeton, Sanger, and Visalia to name a few. Call us if we may be of assistance...

-Mike Young, 203k Team Leader

With offices coast to coast and HQ now at PMB 168, 5055 Business Center Drive, Suite 108 Fairfield, CA 94534 1.707.812.7668. We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation". If

Wednesday, November 13, 2013

FHA 203(k) Loan Program Provides Money For Home Repairs and Renovations

Thinking about buying a fixer-upper, but worried about coming up with the money to pay for the construction costs? Or are you wanting to renovate your existing home but just don't have the available time or money? If so, the FHA may have a program to solve your problems. The section 203(k) program administered by the FHA provides funds to prospective and current homeowners to make repairs and/or do renovation work. A 203(k) loan combines a home's purchase price and cost of repairs into one FHA mortgage, with only a 3.5% down payment.

A growing number of people are taking advantage of this program, a reflection of the large housing inventory caused, in large part, by foreclosures resulting from the recent economic turmoil. The FHA reports that the number of 203(k) loans taken out in 2008 nearly doubled from the previous year, with 2009 experiencing a 40% year over year increase. Potential homebuyers, attracted by relatively low market prices on foreclosed properties, are often left to contemplate how (and when!) they are going to be able to pay for the repairs once they purchase the house. This is not an uncommon scenario as foreclosed homes, which are often left abandoned, typically need extensive repairs. The 203(k) loan program solves this problem by enabling homebuyers to finance the construction work and start repairs on the home immediately after a loan closing. All residential properties, not just foreclosed homes, are potential candidates for the 203(k) loan program.

What is the FHA 203(k) Program?

The FHA 203(k) program is a home rehabilitation and repair program, designed to revitalize neighborhoods and spur homeownership. It can be used by people who are looking to purchase a new home, or by existing homeowners wanting to do repair or renovation work on their current home. What consumers end up with is a single FHA insured mortgage - the loan amount consisting of the home's purchase price (or current loan balance in the case of an existing homeowner) plus the estimated costs of the construction work.

Normally, someone purchasing a home that is in need of repairs has to first obtain interim financing for the rehab repairs and then additional financing to purchase the home. In this scenario - once the repairs are complete the homeowner must then take out a new mortgage to combine the two loans. With the 203(k) program, on the other hand, a borrower need only obtain one mortgage, which covers the home purchase and the property rehab.

The 203(k) program comes in two flavors; a standard version and a streamlined version. With the standard program, the construction costs must be at least $35,000. The maximum construction costs are limited only by the estimated "as-improved" value of the house (i.e., the value an appraiser estimates the property will be after repairs/renovations are completed). All FHA mortgages, with or without a 203(k) loan, are subject to mortgage loan limits. The mortgage amount can range from $271,050 to $729,750, dependent on where the home buyer resides. The total mortgage amount, which would include any cost of repairs, cannot exceed 110% of the "as-improved" home value. The streamlined 203(k) program is used for situations where the construction costs are under $35,000.

To be eligible, properties must be one to four family structures that are at least one year old. Condominiums may qualify, though there are some added restrictions and limitations. Additionally, FHA allows "mixed use" properties (i.e., properties with both residential and commercial use) to be eligible for the program.

A partial list of what you could use a 203(k) loan for include; replace a roof, add a room, remodel kitchen or bathroom, landscaping, update appliances, repair termite or water damage, update electrical and/or HVAC systems. It's also important to keep in mind that the program requires certain repairs (if needed) to be made. These mandatory repairs deal specifically with bringing the energy efficiency of the property up to code.

Con's

The FHA 203(k) loan does not come without some added costs and other potentially negative factors. Consumers need to carefully weigh the pros and cons in order to decide if this program is right for them.

o Homebuyer will incur fees up and beyond the normal mortgage closing costs. A supplemental origination fee - which is the greater of $350 or 1.5% of the portion of the mortgage that is being used for rehab purposes - is required. Additionally, a fee consultant (who is HUD approved) must visit the site prior to the appraisal to ensure compliance with program requirements. Expect to pay $100-$200 for this service.  o Takes longer time to close on mortgage loan - up to 4 weeks longs than a normal conventional mortgage

o Have to use an FHA approved lender. Though many such lenders exist- not all lenders will participate in the 203(k) program.

o Some lenders may prefer to deal with a home buyer who is able to pay cash for a home (versus someone using the 203(k) program) due to getting a quicker loan closing turnaround.

o Expect more paperwork than a normal conventional or FHA loan

Pro's


o Access to funds needed to complete repairs and/or renovations

o Convenience - homebuyer does not have to find separate financing for construction, plus construction begins immediately after loan closing

o Speed of construction - the process of completing construction work is typically quicker than if the homeowner were to conduct renovations on their own

o The 3.5% down payment - conventional mortgages typically call for 10-20% down payments.

o Ability to finance up to six monthly mortgage payments.

The 203(k) Loan Process Step by Step

The 203(k) process has more paperwork and steps than one would experience in a conventional mortgage process. The steps are as follows:

  1. Borrower finds a home to purchase and repair/rehab (or seeks to repair/rehab current residence)
  2. Borrower and their real estate agent completes a preliminary feasibility analysis to determine the extent of work required, along with an approximate estimate of the cost and expected market value of the home once all work is completed
  3. Sales contract is executed
  4. borrower selects and works with a FHA-approved lender
  5. Borrower, contractor, and an FHA-approved consultant meet at the property to determine "required" vs. "desired" improvements
  6. The fee consultant prepares the write-up
  7. Home buyer enlists contractors to make bids - then selects a contractor
  8. Lender gives the construction plan to FHA-approved appraiser to determine "as-improved" value
  9. Lender determines maximum insurable mortgage amount for the property based on the "as-improved" property value
  10. Loan is underwritten by lender- if approved lender issues a "firm commitment" and a loan closing is scheduled
  11. Loan is closed. Funds are set aside in escrow accounts. The loan is FHA insured after loan closing
  12. The work begins. Contractors are paid in draws as FHA fee consultant approves each phase of completed work. Homeowner has six months in which to complete the entire work
  13. After work is completed - and the borrower states that all work has been completed to their satisfaction, a HUD inspector conducts a final inspection. If the inspection proves OK - the lender pays the remaining draw to the contractor. A final 10% may be held back for up to 35 days to ensure no liens are placed on the property

It should be apparent that the FHA 203(k) program offers a viable solution for some home buyers seeking funds for home repairs or renovation. Each individual needs to consider the pros and con's and apply it to their own unique situation.

ConsumerFinanceReport.com features an extensive article library covering a wide range of personal finance issues and topics, such as the article regarding FHA 203(k) Loan Programs. Sections focused on mortgage topics educate consumers on loan modification and tips on refinancing.
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Sunday, November 10, 2013

What About Mold Issues, Can We Clean That Up With a 203k?

Yes, mold, asbestos, pet stains, and anything like that can be part of the FHA 203k repairs. We do mold testing so we see our share of mold.

I once had a job at the "Cat Lady's House" what a smell. One of the most difficult smells to really get rid of for sure. Most houses we deal with show signs of animal stains, how can any home be yours till you change the carpeting and clean that sub floor? Transite pipe

This pipe or flue to the right is transite pipe and is commonly known to contain asbestos. Asbestos Air Cell wrap
Transite pipe

Quite often there will be asbestos paper wrapped on the duct work in older homes. I used to wrap asbestos paper on the fittings when I was a kid. Of course we didn't know it was bad for you. It is now commonly known to be a health hazard but only when it is friable In this case it has been damaged and must be repaired. This particular type of wrap is called "Air Cell" but it is very much like a cardboard box with asbestos paper used as the outer liner and foil as the inner liner.

Asbestos Air Cell wrap

-Mike Young, 203k Team Leader

With offices coast to coast and HQ now at PMB 168, 5055 Business Center Drive, Suite 108 Fairfield, CA 94534 1.707.812.7668. We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation".

Thursday, November 7, 2013

The Power of Renovation Loans

Investing in a home is a major part of any ones life. The thought that you are making, in most cases, a 30 year commitment to your lender is pretty intimidating. So if you are going to move and you have a budget to live within, why not maximize your buying potential to get exactly what you want? The answer is that a majority of homes for sale in the United States are old and in need of updates. Luckily a loan exists that allows to you make that old home-new. It is understandable how home buyers do not want another owners design, style and appeal to a house. It is challenging and in some cases a deterrent from making the purchase. In walks the Renovation Loan...

Most home buyers do not realize that they can purchase a home in a town they like, neighborhood they enjoy and property size that fits there liking AND design or renovate the home to there liking before they even move in. The popularity of the 203k loan product is increasing now more than ever and it is this type of loan that allows you to add the proposed improvements to the sales price thus increasing the value to the home before you even move in. The bank in turn will pay an approved contractor the amount of allocated draws to complete the work done that you have specified in the contract.

The true benefits of this are that home buyers can buy less than perfect homes in great locations and turn them into the home they envision, eliminate problems with the property right away and expand the home to meet their families needs. By financing these improvements into the initial loan, the home buyer can keep there savings in the bank and more importantly, not spend the next 5 years improving and repairing each room one at a time.

These loans come in fixed and adjustable rates just like any other home mortgage, they just allow for improvements to be financed into the loan at the time of purchase. Think for a moment, you can want to budget for a $300,000 home but find a home in a nearby neighborhood for $200,000 that is old, dated and in need of a lot of work. You can work with an approved contractor to add $100,000 worth of improvements that may include replacing electrical, HVAC, wells and septic tanks, siding, painting, landscaping, eliminate health hazards, kitchens, baths, decks and even installing new swimming pools. In this example, the home buyer now has the home of there dreams in the town or city they desired and they have still leveraged financing the same amount they would have if they purchases another home for $300,000, only having to face years of costly improvements to make the home likeable to there taste.

The Renovation Loan is available on residential properties (1-4 families), condos and manufactured housing and in some cases mixed use properties.

Jim Gaffney is a Mortgage Consultant specializing in educating home buyers in ways to build wealth through home purchases. He speaks at first time home buyer workshops and actively coaches industry professionals on how to reshape the home buying experience for there clients. To learn about what you should know before buying a home that can save you tens of thousands of dollars contact Jim at http://www.jimgaffney.com.
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Monday, November 4, 2013

Best Mortgage Deals: 203(K) Renovation Loans From FHA

Want to add value to a home? Some of the best bargains are properties in need of repair. The FHA 203(k) mortgage includes the cost to purchase or refinance and make repairs in one loan. This allows home buyers to borrower more than the sales price in order to make repairs if value increases. Borrowers are guided in the process by a certified consultant.

Since the mortgage is government backed, credit terms are more flexible and loans are allowed up to just over 95% of the property's after-improved value. These loans offer competitive interest rates.

FHA Lending

The Federal Housing Administration (FHA) guarantees mortgage loans. Borrowers not eligible for non-government, also called conventional, financing may be eligible under FHA's more flexible underwriting guidelines. FHA also allows the seller to pay a part of they buyer's costs, allows down payment assistance from family, close friends or nonprofits, and has competitive interest rates.

The minimum borrower investment of 3.5% is a welcome contrast to the up to 20% some conventional loans require. The loan can also be used to refinance owner-occupied properties. The 203(k) loan is no longer available for investors.

The 203(k)

The FHA 203(k) offers the following advantages:

- Repairs are included in determining the after-improved value. The maximum mortgage is based on the home's value after improvements are done;

- HUD Certified Consultants oversee home improvement from cost estimating to inspections. Contractors sign a written agreement to comply with 203(k) requirements. Changes to approved work, if any, must be deemed necessary by the HUD Consultant and approved;

- The lender's escrow department disburses funds only after work is completed and inspected;

- Borrowers can finance up to six mortgage payments if the property is uninhabitable during renovation;

- The escrow department will ensure there are no mechanic's liens before final payment is made to the home improvement contractor.
Disadvantages:

- FHA loans charge mortgage insurance upfront in addition to a monthly premium;

- Contractors are paid after each stage of work is finished, usually in three to five installments, so they must have their own funds to get the work started in most cases;

- Underwriting can take longer due to the need for coordination between homebuyer, contractors, the Consultant, and special renovation lending teams;

- An extra appraisal and a HUD Consultant fee must be paid upfront. That is an $800 to $1,500 additional expense.

Finding a Lender

Since so much is involved, be certain your lender is familiar with 203(k) requirements. Ask your Mortgage Loan Officer for details. You can visit HUD's website, http://www.hud.gov, and search "find a lender." Be sure the 203K box is checked on the Lender List page.


Kenneth Bossard, MBA helped hundreds gain loan approval and find cash to buy homes. His twenty years mortgage finance experience includes work as a mortgage lender, nonprofit housing counselor and licensed Realtor. Ken's techniques are revealed in an eBook available at [http://www.RepairRuinedCredit.com]
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Friday, November 1, 2013

Choosing the Right Contractor for Your 203k Project

This is getting harder and harder to find good contractors who will charge a "fair price" for your renovation project. I actually hate to get that call from a lender who is doing a streamlined k loan and wants to get a list of contractors from us for that project because we don't typically work that way.

Contractors, like any other trade contractors, have a tendancy to increase their prices when times are good and get competitive when times are not so good. This is not a bad thing and by the end of the year most of the contractors we know are flush again, waiting for the winter months when they get competitive again. It is just the way things are. Please don't misunderstand this isn't necessarily a bad thing, it is just the reality of it all.

Here is what the results are however and that is a sad reality for the owner, borrower, buyer, etc when a project comes available for bid.

Streamlined k project - This is where everyone else tells you that the maximum amount is $35,000... it's not but that is what the guideline actually says. Your contractor bids the job at $34,500, the lender says the loan is dead or it must be a Standard 203k loan because the contractor failed to realize this particular lender REQUIRES a 10% contingency reserve to be included in the loan dropping the actual work to about $32,000. Remember this loan as the one with NO structural work.

NOTE: once this happens the HUD Guideline says this loan has tripped the check valve (my words not HUD's) and is now a Standard 203k. This can also happen if the appraiser sees repairs that should have been called out and weren't... oops, another tripped check valve, it is now a Standard 203k.

If your lender does both Streamlined k and Standard 203k loans this isn't a problem but if your lender only does streamlined loans you will hear the new story line like "there is too much work for the 203k so you need to find another home to purchase" or "we need to get the cost of the work down.

Standard 203k project - This type loan has no $35,000 limitation. In fact the loan in most of the areas I work has a maximum loan amount of $729,750 so the limit is the purchase price + renovation costs not to exceed the $729,750 limit. Yes, of course the home must appraise for the loan as well as the borrower must qualify for the higher amount.

What does the consultant do for their fee? 

We just completed a project where we put the bid together along with the scope of work and bid the job for the client. This is what we do for our fee. Then the project went out to bid. Contractor 1 bid the job at $85,000 in construction costs, permits, fees, etc. On the surface it is pretty straight forward. Oh, almost forgot, my bid was about $59,000 including costs and fees, permits etc. Why such a large difference? Two possible answers, one is that my bid was not very good. We aren't perfect and are not above making a mistake from time to time, or, two - the contractor was very busy and used this opportunity to make up for a low bid on the last job.

Second bid came in at $60,000 from a contractor that we knew and recommend all the time. What does a consultant do for their fee - simply let the borrower know what a "fair price" might be for their project then helping them find a contractor who isn't so busy or one that is not trying to recover from a bad season.

What can you do about high contractor bids? 

Shop more, this is time consuming but certainly the right thing to do if you are way high. If you are only a little higher than you need to be there are other solutions. Talk to the contractor and see if they can help meet the necessary requirements. Remember that they are just people with a skill and being nice guys we all want to see the deal progress. Sometimes a contractor will step up and work with you to make it happen. This is clearly the fastest solution. Or, you could contact your "consultant" and get a few names.

Back to the original question - When a lender asks me for a list of contractors it just isnt' the right question... they should be asking for the name of a few contractors who are hungry right now. Again, we like to promote the contractors that we deal with on a regular or semi regular basis as we believe them to be the best in the business. This doesn't mean that we know them all and we take on new contractor all the time. If you have a favorite contractor and want them to be added to our list please have them contact us. We are located in every area of CA and most other states.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation".

Tuesday, October 29, 2013

Bring New Life to a Home With a Home Renovation Loan

You have your heart and mind set on a mid to late century split level with a large lot not far from the interstate and downtown. But your friends and family feel a new home is a much better deal as they warn you about termites, faulty wiring and leaky pipes. You could go with a brand new home, but the 30 to 40 minute commute overwhelms you. Don't give up on your plans; you can make an old home feel new again! With a home renovation loan you can purchase and fix up your new home with one loan. Now you can have it all: the nice home, the awesome neighborhood and the short commute to downtown.

First, you need to know your loan options.

There are 4 types of home renovation loans:

Streamline FHA 203K

This loan is for primary residencies that need limited repairs of less than $35,000. The 203K requires as little as 3.5% downpayment of your acquisition cost. So if you get a $200,000 loan, your downpayment after the contract price and repairs is $7,000. The Streamline 203K is great for folks who have a lower credit score of 640. There's no consultant to manage the repairs-this loan is for "streamlined," and it can be occupied immediately after closing. You can have up to three contractors that need to be licensed for any specialty work. The contractor will receive one draw in the amount of 50% of the total contract and then the final payment balance upon work completion.

Consultant FHA 203K

This loan is typically used for homes with repairs of over $35,000 or that require structural repairs for the foundation, well or swimming pool. There should only be one general contractor (GC), but there can be up to three contractors. The main difference between this loan and the Streamline is you need to hire a HUD-approved consultant to work with the GC to protect the buyer's and lender's interest and makes a draw schedule so that the renovation funds are disbursed properly. Contractors get no money up front, and their fee is based on work completed. The HUD consultant will know what money to draw out to the contractors based on the amount of work completed.

Homestyle Renovation Loan

This is a conventional Fannie Mae loan requiring as little as 5% down for primary residences, 10% down for a second home and 20% down for an investment property. If you put 20% down, you do not need to have mortgage insurance. This loan works like the 203K and has a streamline and consultant category.

Homepath Renovation Loan

This loan is for foreclosures owned by Fannie Mae and it can be for a primary residence, a second home or an investment property. You can put 3% down for primary residences with no mortgage loan, but for investment properties you'll need 15% down.
Most people don't know these loans even exist, but now you do! The best part of these home renovation loans is that you're working with a team and you don't have to renovate a home on your own dollar.


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Saturday, October 26, 2013

The FHA 203(k) Rehabilitation Mortgage Insurance Program - The "Fixer-Upper" Loan

Under Section 203(k) of the National Housing Act, the Federal Housing Administration (FHA) offers mortgage insurance on loans issued by approved FHA lenders to help borrowers purchase and rehabilitate a home. The home should be one that the borrower plans to use as their primary residence. This same insurance program also covers cash-out refinance mortgage loans whose proceeds will be used by the borrower to rehabilitate their current home.

Why the "Fuss" About FHA 203(k) Loans?

Trying to buy a "fixer-upper" home and rehabilitate it can be a very complicated process for borrowers. It typically requires taking out multiple short-term loans with high interest rates. These loans often require a balloon payment when they become due.

The FHA created Section 203(k)-insured loans to address the needs of such borrowers wanting to rehabilitate new or existing homes. This program makes the process of buying and fixing up a new home much simpler by providing the borrower with one long-term mortgage loan that covers everything.

How Do Section 203(k) Loans Work?

There are several basic requirements for a home loan to be covered under Section 203(k). The home must be at least one year old, and the planned rehabilitation must cost a minimum of $5000. The property value of the home must fall within the FHA loan limits for that area of the country. FHA maximum loan limits differ for each county, borough, or county in the state where the property is located..

When a 203(k) loan is closed, some of the money goes to pay for the purchase or refinancing of the home. The remaining money is placed in an escrow account to pay for the work on the home. Funds from the escrow account are paid out as rehabilitation work is completed.

Work Covered By Section 203(k)

Many types of improvements can be covered under this program. They include but are not limited to:

  • modernization of the home
  • correcting health or safety hazards
  • repairing or replacing plumbing
  • repairing or replacing electrical
  • repairing or replacing roofing
  • repairing or replacing floors and floor treatments
  • landscaping and other work to improve the appearance of the property
  • energy efficiency improvements

Other types of home improvements are covered. You will want to consult your lender to find out if your particular rehabilitation needs can be covered under the program.

Who Can Apply?

Anyone can apply for an FHA 203(k)-insured mortgage as long as they can afford the monthly house payment based on their debt-to-income (DTI) ratio. To apply simply contact and FHA-approved lender. Many services are available online where you can fill out a single form and get referred to multiple lenders allowing you to compare multiple rates and loan offers.


J Hodson operates FHA-Loan.org, an online resource for borrowers seeking information about FHA loans. There you can find more information on FHA 203(k) loans including the specific FHA maximum loan limits that apply to the particular county, borough, or parish where your property is located.
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Wednesday, October 23, 2013

FHA Refinancing - Need a Home Improvement Loan?

You hear it almost everyday that getting a mortgage is getting harder. One of the hardest loans to get right now is a construction or home improvement loan. Once again FHA is helping borrowers with their home improvement needs.
 
FHA has a program call 203(k) streamline. This program can be used for refinancing a current mortgage, or to purchase a home and make upgrades or repairs to the property all under one single loan. Unlike conventional mortgages it is not re-qualified, as it is only underwritten one time, upfront. There is no minimum amount for the repair cost; however the maximum is $35,000.
 
The FHA 203(k) offers both fixed and adjustable rate options, and the interest is the same as a standard FHA loan. On a purchase the appraisal is completed as "subject to" meaning after the repairs and or improvements are completed. On a refinance two appraisals are required. The first appraisal will reflect the current as is value. The second appraisal will reflect the subject to completion value.
 
Eligible properties include one to four unit residences, including HUD REO properties. Manufactured homes, and spot approval for Condos are also allowed. The property must be 100% complete - no partially built homes.
 
Contractors and repair criteria

All repairs/work must be completed within three months of the closing date. Repairs must be completed by a licensed contractor unless the borrower can demonstrate the required expertise. The contractor making the repairs does not have to be a licensed general contractor; however, he or she must provide a resume along with two references. 
Self Help (borrowers completing work)
 
The borrower is required to have the necessary expertise and experience to complete the work in a satisfactory manner (ie: borrower is a licensed plumber and will complete that portion of the work). The cost of labor is included in the repair / rehabilitation cost in case the borrower is unable to complete the work and a contractor needs to be hired. The borrower must provide written estimates of the repair / rehabilitation cost as well as written estimates from the suppliers of the materials.

See more FHA loans [http://www.midwestfhaloans.com/fhaprograms] DClark Sr. Loan Officer Cole Realty and Lending, Inc. [http://www.midwestfhaloans.com]
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Sunday, October 20, 2013

What is the Maximum Number of Draws You Can Get on an FHA 203k loan?

That depends on who you ask... shouldn't be that way but it is. It should be per the HUD guideline but most lenders dont' know how to read the guideline except the portions or parts that they want to enforce. Now even HUD representatives have succumbed to the popular myth there are to be only five... read on

1) They all quote the guideline as "no more than 5 draws will be allowed". If they read the entire paragraph is says "on a project size of $10,000" just before it limits them to five.

The guideline actually suggests 4 draws and a final for smaller projects

The fact is that they will be whatever they are.

There are people at Wells Fargo that know we can't do a $500,000 project with five draws in most cases. If you make the request you can enter eight or ten right up front and include them in the loan amount.

Prospect Mortgage says they will go 6 if the 6th is the final but threw out a $300,000 project when the contractor asked for ten draws which was a reasonable request. They also told the client that they need to find a contractor that is more suitable for this size project.

The system is set up for a 1.5% "supplemental origination fee" which is intended to cover the draws and other related expenses on larger projects. In the case of a $300,000 project Prospect would have been provided $4,500 to set up the account and make those payments and would rather loose the loan, and did btw. 6 draws means $750 per draw check, versus 10 draws which would have only been $450 per check. Considering most accountants indicate it costs about $25 to actually run that check... you decide. But if you are going to require more than 6 draws take your loan elsewhere is pretty much the message they sent load and clear.

Bank of America on the other hand also does six if number six is the last one. This really gets good. If you have a $500,000 construction cost on a project and ask for 10 draws you will not get them here either. In fact if it takes six they will do them in six draws like Prospect Mortgage provided the sixth one is the final. However if it looks like there will be seven draws they will cut it off at five... they want all the money then moved to the contingency and it becomes a bit if a test to draw the rest of the money without the benefit of a draw request. They want everything listed on a change order and drawn as change orders from here out. What a nightmare. It reduces the accountability so to maintain that accountability we actually continue using the draw froms and then move the info to the change order form.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation".