Tuesday, January 29, 2013

The FHA 203(K) Rehabilitation or Rehab Mortgage Loan Program

Summary - The FHA's Section 203(k) insurance was designed to enable homebuyers and homeowners. They can finance the purchase of a house and the cost of its rehabilitation through a single mortgage. They can also finance the repair, rehab or special needs update of their existing home. This program can be used to refinancing a borrower's existing home and also include the cost of any repairs or updates that are needed. All these options include any special needs updates such as ramps, safety equipment or home modifications that are needed.

Purpose - FHA Section 203(k) fills a specific need for an assistance program for some homebuyers. When a purchaser wants to buy a house that needs repairs, modernization or special needs upgrades homebuyers usually have to follow an intricate, expensive and a drawn out process. The interim purchase and rehab loans often have relatively high interest rates, short terms and a balloon payment at the end.

Section 203(k) offers a solution that is an advantages to both the purchaser and the lender. This program insures a single, long term, fixed or adjustable rate loan that covers both the purchase (refinance) and/or repairs of a home.

FHA Section 203(k) insured loans help purchasers save time and money. They also protect the lender by having the loan insured before the repairs are made to the home. This gives the lender complete protection for the total balance of the loan before the property offers adequate equity to secure the full loan amount.

If the borrower has a less expensive repair/rehab/up-grade project the Streamlined 203(K) program may fit the bill. The FHA's Streamlined 203(k) program lets homebuyers finance up to an additional $35,000 onto their mortgage to improve or upgrade their home before move-in. With the Streamlined 203(K) program homebuyers can quickly and easily access cash to pay for property repairs, improvements or upgrade to include special needs additions.

Assistance - The FHA Section 203(k) program insures a mortgage issued to purchase or refinance and/or rehabilitate a home. This home must be at least one year old at the time the application for the mortgage is made. Part of the loan is used to pay the seller for the home or, in the case of a refinance, to pay off the existing mortgage. The remaining funds are placed in an escrow account and released as the repairs or rehabilitation is completed.

The total cost of the rehabilitation/repair project must be at least $5,000.00 and the total value of the property must still fall within the FHA mortgage limit for the area. The value of the property is determined by either the value of the property before rehabilitation plus the cost of rehabilitation or 110 percent of the appraised value of the property after rehabilitation, whichever is less.

Many of the rules and restrictions that make FHA's basic single family mortgage insurance helpful for lower income borrowers apply here however lenders may charge some additional fees that are not applicable to the basic FHA insured mortgage. These fees include but are not limited to supplemental origination fee, fees to cover the preparation of architectural documents and review of the rehabilitation plan, a higher appraisal fee and other fees deemed appropriate by the FHA.

Eligibility - Any person who can make the monthly mortgage payments are eligible to apply. Cooperative units are not eligible but individual condominium units will qualify if they are in a condominium complex that has been approved by HUD/FHA or the VA.

Activities Allowed - The extent of the rehabilitation or repairs that are covered by FHA Section 203(k) insurance range from relatively minor, though total rehab. The costs of repairs must be more than $5,000.00. A home that has been or will be demolished as part of a rehabilitation/repair project is eligible, as long as the existing foundation system remains in place and intact. Adding on to the existing foundation as permitted.

FHA Section 203(k) insured loans can finance the rehabilitation or repair of the residential portion of any property that also has non-residential uses. This loan program can also cover the conversion of a property of any size to a one to four unit structure.

Improvements, repairs or upgrades that a borrower may make using FHA Section 203(k) financing include:

• structural alterations and reconstruction

• modernization and improvements to the home's function

• elimination of health and safety hazards

• changes that improve appearance and eliminate obsolescence

• reconditioning or replacing plumbing; installing a well and/or septic system

• adding or replacing roofing, gutters, and downspouts

• adding or replacing floors and/or floor treatments

• major landscape work and site improvements

• enhancing accessibility for a disabled person

• making energy conservation improvements

It should be noted that HUD requires that properties financed under this program meet certain basic energy efficiency and structural standards. Check with HUD or visit the HUD website for complete details - WWW.HUD.Gov

Application - Applications must be submitted through a FHA approved lender and not directly to the FHA.

The FHA credit rules have just recently gotten stricter. What was acceptable a year or two ago is no longer in effect. However, FHA loans still offer more leeway in their terms and conditions than most conventional loans.

Interest rates on FHA loans are competitive but, due to the volatility of today's mortgage market, rates can and do change quite often. Check with your lender, broker or agent to get the latest rates.

FHA rules are subject to change. These were the guidelines at the time this article was written - January 20, 2012. Please check with the applicable agent or agency to ensure that they are still current before making any buying decisions.

Article Source: http://EzineArticles.com/6831429

Saturday, January 26, 2013

How to Get a Loan to Buy a Fixer Upper

How do you get a loan to buy a fixer-upper? This is a common question. One of the criticisms of conventional loan programs is that they require the property to be in excellent shape. The whole point of buying a fixer-upper is to get a great deal and make a profit on the fix up. And a lot of sellers want to sell in as-is condition, they don't want to carry out the work. This leaves the buyer in a catch-22 situation; he can't get a loan because the house is in too poor a shape and he can't fix up the house because he can't close. The 203k program is the Federal Housing Administration's (FHA) answer to the criticism. The 203k program allows for the purchase (or refinance) of a property, plus the cost of repairs and improvements. A bank or mortgage company makes the loan under the guidelines of the FHA. You will need to qualify for the loan in the usual way.

The process starts off with a detailed proposal that includes:
o The scope of work
o A cost estimate for each repair or improvement

The next step is to obtain an appraisal that determines the current value of the property and the value after the renovation.

When the loan is made it will include the purchase cost, the remodeling expenses and the closing costs. A contingency reserve is kept of between ten and twenty per cent of the anticipated remodeling costs. The contingency reserve is to cover any additional work necessary that is not in the original proposal.

At the closing the seller is paid and the remodeling funds are paid into an escrow account. The escrowed funds are paid to the contractor through draw requests for completed work. As the contractor completes and shows that the work is satisfactory he can request draws on the funds. (Ten per cent of each draw is held back until completion of the job). These funds are released once the lender determines that there are no liens against the property.

The mortgage payments and remodeling begin after closing. If you will not be able to occupy the property due to the construction up to six mortgage payments can be added into the cost of remodeling.

The 203k program makes it possible to purchase properties that the buyer might not otherwise be able to get a low down payment loan on. You can take advantage of this program to purchase a single or multi-family unit, fix it up and build substantial equity. All this with a low down payment, below market, FHA loan!

Article Source: http://EzineArticles.com/2356154

Wednesday, January 23, 2013

FHA Vs Conventional Loans - Which is Better For You?

There are many different types of financing available to those looking to purchase a home or refinance their mortgage. The key to finding the right loan for a homeowner's individual situation is knowing what he or she needs from their mortgage and can afford. Homeowners should research the differences between what FHA loans and conventional loans have to offer to determine which financing option is best for them.

FHA Loan Information

The Federal Housing Administration (FHA) insures FHA loans, which protects the lender in the event that the borrower defaults on the loan. This insurance makes these loans less risky for lenders, and they are more likely to offer low interest rates on them. The FHA is fully committed to its borrowers and has assistance in place for borrowers who need assistance making their mortgage payments.

If an applicant has a credit score of at least 580, the down payment on an FHA loan will be 3.5%. If the applicant has a lower credit score, the down payment will increase to 10%. Although, while the FHA does allow for loans to be granted to people with credit scores below 620, most lenders today do not. The FHA also requires that applicants have at least one year free of any delinquent mortgage or rent payments. Overall, FHA loans have less strict credit and income requirements compared to other home loans.

With an FHA loan, the borrower must be financing his or her primary residence. There is also an upfront mortgage insurance premium (which just increased to 2.25% from 1.75%), as well as monthly mortgage insurance. These loans also allow homeowners to refinance a greater value of their home (up to 97%!) and feature a streamline refinance option, which requires less documentation and quicker processing.

Conventional Loan Information

Conventional loans are not insured by the government, so lenders mitigate their risk by imposing tighter qualification standards. These loans tend to have higher interest rates than FHA loans because the rates are more likely to be driven by a borrower's credit scores and other risk factors. With a conventional loan, an applicant needs to have a good credit score and income to receive competitive loan terms. These loans do not have to be used only on primary residences, but can also be used on investment properties.

The down payment on conventional loans tends to be higher, with the requirement currently set around 10% for most loans. Applicants will need to have a credit score of 660 or higher to be eligible and, in most cases, will need a 700 to receive competitive interest rates. There is no upfront mortgage premium requirement, but there will be monthly mortgage insurance if the borrower's loan-to-value ratio is greater than or equal to 80%. There are refinancing options with conventional loans, but the amount a homeowner can refinance is only 80% for a cash out and 95% for a non-cash out, compared to 85% and 97% respectively for FHA loans. There is also no streamline refinance option available.

Which Type of Financing is Right For You?

After assessing his or her financial situation and weighing the pros and cons of FHA and conventional loans, an applicant can determine the best loan for his or her situation. Different loans are beneficial for different types of situations and it is important to be well informed so the best choice is made. An FHA loan would likely be more beneficial for those wanting to borrow more than 80% of the purchase price or home value, those with lower credit scores, or those who do not have a lot of money for a down payment because they can have access to lower interest rates. This loan might also be better for borrowers who want a cash-out loan because they will likely receive a lower rate than with a conventional loan.

On the other hand, a conventional loan may be better for those who have excellent credit, those borrowing less than 80% of the purchase price/home value and those not wanting to get a cash-out loan because they can receive low interest rates and, unlike FHA loans, they will not have mortgage insurance if the loan amount is less than 80% of the purchase price or home value. For those who need further assistance choosing a type of loan, there are a variety of resources available. Speaking with a knowledgeable loan specialist is a good way to make the decision process less complicated.

Article Source: http://EzineArticles.com/4070903

Sunday, January 20, 2013

Bad Credit Score Mortgage - No Problem With FHA

If your FICO credit score has tanked due to temporary cash flow issues in the past, the good news is you may still be able to qualify for a mortgage - and at a decent interest rate.

FHA has been making it affordable for millions of "less than perfect credit" borrowers qualify for a bad credit score mortgage since 1934.

The reason you'll get a mortgage loan is FHA doesn't require a strict FICO score to qualify for the program. There are guidelines however, but the whole process is a bit more subjective than qualifying for a conventional loan, taking into account any offsetting factors that tend equalize bad credit.

For example, say your income has gone up and your ability to pay monthly obligations has improved. FHA likes that. You can't erase bad credit, but you can present yourself as less of a risk to the lender.

An FHA lender will look at your increased income as an offsetting factor that decreases your risk as a borrower. This is a good thing for you.

Also, these loans are insured by the Federal Government, so once you are approved, the lender is covered in case you default on the loan.

The Federal Housing Administration also requires you only put 3% down payment toward the loan. This holds true for a purchase or if you are refinancing your home. You can even get the cash from a relative or in the case of a refinance, use the equity built up in your home as the down payment.

So, If you're looking for a bad credit score mortgage or refinance, strongly consider an FHA loan, you'll benefit by being able to afford a home that you otherwise could not afford.

Hard working families that may have damaged credit and very little down payment can still experience the joy of home ownership with an FHA loan. Qualifying is much easier than you may think - visit: FHA qualifications

Article Source: http://EzineArticles.com/1163158

Thursday, January 17, 2013

Your Contract With the Contractor on the FHA Renovation Loan Program

My personal opinion is about mortgage loans is the FHA Renovation Loan Program is the most exciting loan program available, There are so many exciting things about this program so it becomes very complex and that is why it is very important that anyone involved with this program really understands.
By taking the time upfront to learn this program is will save a lot of problems during processing and closing. Once the loan closes, the Borrower and the Contractor must be on one accord or there can really be problems. The Borrower and the Contractor must sign the FHA Homeowner/Contractor Agreement Form. This form has 15 different sections that should be thoroughly understood by everyone involved with the loan.
Here I touch on some of the sections that I feel are very important:
The Permits 
  • The Contractor must provide a copy of the permit before he/she is paid.
  • The Contractor must provide a proof of payment to be reimbursed.
  • The owner must pay for any necessary easements
  • If a permit is required for the easement, it must be provided to the underwriter.
The Contractor 
  • The General Contractor must supervise all the work that is performed on the job. The Contractor is responsible for all Sub Contractors. Sometimes a borrower will want a specific sub-contractor such as a painter, that decision can not be made solely by the buyer. The General Contractor is responsible for all Sub-contractors and has the right to accept or reject the buyer's request. The Contractor is responsible for all work done on the project.
  • The borrower does not have to allow the Contractor to use as Sub-contractor that he/she finds objectionable.
  • Usually the Contractor will pick up all materials and have them delivered to the site. If this is not the case the you must make sure that you have a written agreement of what is to be done.
Removal of Debris 
  • Cleaning up the debris from the construction site is the responsibility of the Contractor right? Wrong, it should be spelled out who is responsible for the removal. There is a cost to removing the debris and if the costs were not in the first work write-up, it needs to be spelled out on this form. It can cause problems during the renovation phase. The city can fine either the homeowner or the contractor for any debris that is left on the property.
Solving Disputes 
  • This section is very important for the Borrower and the Contractor to understand. When and if a dispute arises, then the dispute may be settled by binding arbitration. Arbitration is very expensive and the Arbitrators are from the Construction Industry Arbitration Rules of the American Arbitration Association. Both parties can agree in writing to other methods to solve the problem, but there may be an Underwriter that will require the Arbitration. Arbitration can resolve problems faster than the Courts. Personally, I would not want Arbitration if the arbitrators are Contractors.
  • The work must begin within 30 days of closing, unless delays have been caused by the weather.
The FHA Renovation Loan Program is the most exciting loan program on the market, anyone involved with this loan should be educated. Educate yourself.

Article Source: http://EzineArticles.com/5911649

Monday, January 14, 2013

Borrowers Should Not Be Their Own General Contractor On the FHA Renovation Loan Program

Borrowers think they can save money by acting as their own General Contractor when they are using the FHA Renovation Loan Program, but they can not unless they are a general contractor by trade. There are some small items of repair that the Underwriter will allow the borrower to do, one of them is painting the interior and on some occasions the exterior will be allowed.
When a borrower is allowed to act as their own General Contractor and complete the repairs. They must give a copy of their resume' for the underwriter to approve and review.
They must provide verification that they have enough funds in the bank to cover the cost of purchasing the materials. They will not be reimbursed until they can provide receipts for each item purchased. The Borrower must also show enough funds to pay any Sub- contractors, remember Contractors are reimbursed. Some Lenders may not allow the contingency funds that are on the Maximum Mortgage Worksheet to be financed into the loan, therefore the borrower will have to put up those funds in cash.
Some Underwriters may need the borrower to provide a time line to show how they plan to complete the project if they are approved to do the work themselves. Home Owners that want to do the work themselves don't understand that when they finish working their 8 hours on their day job, the last thing they want to do is go to a house that needs to be renovated and work another 4 to 6 hours. Finding help at the end of the day is another problem for home owner turned General Contractor, friends and family have worked the same 8 hours and the last thing they want to do is volunteer to help renovate a house.
Time is of the essence when working on a renovation project. If the work write-up states that the renovation will be completed on a certain date, then the Lender is going to look for that property to be completed on that date. Weather delays are acceptable. If the completion date is not going to be met, then the lender may or may not grant an extension. Delays in completion can cause the loan to go into foreclosure.
It is something to think about if you want to be your own General Contractor.
The most important thing to remember is to get educated if you want to use the FHA Renovation Loan Program. It really is the most exciting Mortgage Loan Program on the market; you can purchase and renovate or refinance and renovate all with one mortgage loan.

Article Source: http://EzineArticles.com/5911732 

Friday, January 11, 2013

Consider Repairing Your Home With the Help of FHA 203k Streamline Rehab Loans

Are you considering buying a home that needs repairs or rehabilitation? Are you living in a home that needs repairs or updates, but can't find a loan to pay for those needed repairs? HUD has a program for which you may qualify. The FHA Streamline 203k Rehab Loan is designed just for people who would like to purchase a home that needs repairs or would like to refinance their home and make needed repairs.
Typically, when you purchase a home that needs repairs, you have to set up a complicated series of loans. First, you have to take out a loan for the home's current value, then find a lender to borrow the money for the repairs. Finally, after the repairs are finished, you have to refinance the home at its new value and pay off the first mortgage and the repair loan. The FHA 203k Rehab loan is designed to streamline that process. With a FHA 203k loan, you take out a mortgage on your home and specify the repairs needed and their expected cost. The amount for the repairs is put into an escrow account on which you can draw as the work is completed.  FHA 203k loans are available to first time home buyers and others who may not qualify for traditional commercial loan products.
How can I use the FHA 203k Loan program?
FHA 203k loans can be used to secure a mortgage in three ways:
- You can use an FHA 203k loan to buy a dwelling and the land on which it sits and do repair and rehab work in place
- You can use an FHA 203k loan to buy a building on another site and move it to a new foundation on the mortgaged property and repair it
- You can use an FHA 203k loan to refinance an existing mortgage and repair the mortgaged dwelling
What properties are eligible for Arizona FHA 203k financing?
FHA 203k loans can be used to purchase or refinance one to four unit family dwellings, including condominium units under certain circumstances.
What repairs are allowed under an FHA 203k loan?
A homeowner can use a 203k loan to make needed repairs that become a permanent part of the existing home. The cost of the repairs must be at least $5,000 and less than $35,000, except under very specific circumstances. If a home requires updates or repairs to meet energy efficiency or safety standards, those must be included in the loan amount and must be completed before other repairs. If there are no required repairs, then FHA 203k financing can be used for painting, room additions, decks and even to upgrade appliances in a home. Among the repairs that qualify under the $5,000 minimum requirement are:
- Reconstruction and structural repairs like chimney repairs, repairs of termite damage, roof repairs, addition of skylights
- Modernization or projects that improve function like adding or updating a bathroom, remodeling a kitchen or adding built-in appliances to a kitchen
- Eliminating health and safety hazards, like lead paint or asbestos abatement
- Changes for aesthetic appeal like new siding or adding a second story to the home
- Plumbing replacement or reconditioning, including the installation of new plumbing fixtures like interior whirlpool tubs
- Energy efficiency improvements like the addition of solar panels or caulking and weather stripping, or installation of double hung windows, etc

Article Source: http://EzineArticles.com/1983398 

Tuesday, January 8, 2013

Today's "Green" Home is Going to Be A Typical Home Tomorrow

We all are living in a world which is turning green. Have you noticed that? It seems like every man, every woman and child, every organization and product, really want to become "green" and Eco-friendly.

Lots of time and energy placed powering the green changes is often a wonderful idea. We hope our children and grandchildren are going to appreciate it.

However, a ton of what's happening is often just a "greenwashing", where any excuse to label something" green" brings you to the circumstances which are sitting on very thin ice. Really, besides its green color, how "green" may your car be? And what about Eco-friendly cleaners or genetically engineered food? These products are stretching out the definition of "GREEN" beyond any reasonable meanings.

The good thing is that during the construction and restoration of America's housing, we are able to combine designs, practices and materials, which help protecting our environment.

And, to assist this effort and hard work, those, who are in the business of building and remodeling homes as well as those, who are buying and owning homes are becoming more and more knowledgeable and more dedicated to this motive.

The good thing is that the most significant tips for effectively "greening" America's existing inventory of housing can be obtained from 203k loan and Energy Efficient Mortgage. The 203k Mortgage is truly a "Green Mortgage" because it comes with a simple, cost-effective solution and provides funds for "green" housing innovations.

Typically the 203k Mortgage permits home owners to amortize the cost of improvements offering long-term cost benefits within the lifetime of the home loan, benefiting them with lower interest rate, than a short-term financing would ever offer. Implementing an Energy Efficient Mortgage, "green" improvements can easily be included to a 203k mortgage loan, enabling home owners to surpass the Federal housing administration loan limit total by the approved energy efficient costs. For many people this offers a chance to not just offset the cost of these improvements along with utility cost savings, but also lowers the overall cost of homeownership. Plus, along the process, we are supporting reduce America's energy dependence.

While an increased exposure of preserving our environment and saving of our natural resources continues, it would make sense for all of us to accomplish our best to help more american people not only make their home-dream come true, but with the effectiveness of the 203k, even turn these dreams genuinely "Green."

Article Source: http://EzineArticles.com/4558688

Saturday, January 5, 2013

FHA 203 K Mortgages - Full Rehab - Major Renovations

The Federal Housing Administration or FHA a division of HUD offers the 203k loan program. This loans primary focus is the rehabilitation and repair of single-family properties or a home improvement loan. This full rehab, major renovation loan offers affordable ways to improve an existing residential home.

Quick Facts on the this Loan:

This full rehab, major renovation loan can be used for rehabilitation and/or improvement of any one-to-four unit dwelling. It is designed to be utilized in one of three ways:

o To purchase a dwelling and the land it sits on and revitalize or rehabilitate it. For condos, only the interior repairs may be financed, no outside construction to the dwelling can be financed.
o To purchase a dwelling on another site and move it onto a new foundation on the mortgage property and rehabilitate it.
o For refinancing of existing dwelling and rehabilitating it.

To purchase a dwelling and land and to refinance indebtedness, the mortgage must be a first lien on the property and the loan proceeds must be available before the rehabilitation begins. If moving a dwelling to another site and foundation and rehabilitating it, the mortgage must also be a first lien on the property but the loan proceeds for moving of the dwelling can't be made available until the dwelling is attached to its new foundation.

How it all Works

With home foreclosures on the rise and lenders unwilling to finance repairs, the 203k loan allows repairs and improvements to be financed and the home may be appraised after the repairs enhancing value.

The borrow can finance all repairs, improvements and additions with the 203k rehabilitation loan and it acts as a regular loan, not a construction loan where you must find a conventional mortgage when the construction is complete.

Realtors also find this rehabilitation loan effective as property listings become more attractive if the buyers are aware of the rehab loan and that it is an available option for them.

Dwellings not eligible are properties built less than a year from the time of the request for the 203k loan. Income producing properties, non-residential, and cooperative homes are also not eligible with the exception of interior repairs or rehabilitation to a cooperative home.

This loan is perfect for bathroom and kitchen remodels, removing lead paints or asbestos to meet building standards, eliminate the old or obsolescent look of the dwelling, plumbing and heating repairs, and connections to public utilities like water and sewer. Additional eligible improvements are tile and carpeting, energy improvements, landscape, handicap accessible improvements, and roofing, gutters, downspouts, and new appliances.

Ineligible improvements for this particular loan include barbeque pits, dumbwaiters, and exterior hot tubs as well as saunas, outdoor fireplaces, and swimming pools. Satellite dishes and tennis courts are also considered to be ineligible repairs.

Where to Start

While HUD makes no loans it will work with your lender when you apply for a 203k full rehab, major renovation loan. These loans are effective ways to revitalize a property to enhance its value or for owner-occupied homes.

Article Source: http://EzineArticles.com/2128046

Wednesday, January 2, 2013

Third Time's a Charm

Meredith and Bill finally buy a home on their third attempt.

The 203k loan is perfect for people looking at buying a fixer-upper! The 203k loan is a fully disbursed loan which allows a borrower to purchase or refinance a property and finance the cost of rehabilitation with one loan. Fore more information give Mike Young a call!