Monday, April 29, 2013

FHA 203K Loan - Getting an FHA Construction Loan

With the current doom and gloom that is all around, most especially plaguing the housing and mortgage market, getting a new loan or mortgage is a lot more difficult. One of the most difficult loans to obtain nowadays is a home improvement and construction loan. But borrowers need not worry because the currently popular FHA loan has a FHA construction loan that you could get for your home improvement requirements.

They call this FHA construction loan as the 203(k) streamline program. This loan can be used to buy a fully furnished or refurbished house or make certain major repairs and upgrades to their home. But it is not limited to that because it can even be used to refinance a current mortgage.

One good thing about this loan is that it is not re-qualified because it has only one underwritten time which is upfront. There is also no minimum amount required for home improvement, repair or upgrade but they have set a maximum limit which averages for most states at around $35,000.

The 203(k) streamline program gives you two good options for interests: fixed and adjustable rates. You don't need even to worry if it would be too high because it would also just be the same like obtaining any standard FHA home loan.

On purchase of a fully furnished or refurbished house, the evaluation is finalized as "subject to" which means that it would be after the repairs or improvements are done. As for refinancing mortgages, two appraisals are needed. The first one would show what would be the current value of the property and the second one would indicate the value after all the payments have been done (including the interest payments).

But not all properties are eligible for a FHA construction loan most especially on refinancing mortgages. HUD REO properties, condos and manufactured homes are allowed including one to four unit houses. One criterion for eligibility is that the house should be 100% complete.

As for eligibility of FHA 203K on home improvement or upgrade works, one important requirement is that it would be finished within three months after the loan had been approved. Private lenders often require the borrower to have the repair or upgrade to be done by a licensed contractor.

Although they may not licensed but the borrower should be able to prove the expertise of the contractor on the work that needs to be done by submitting a resume that contains at least two references who would certify the credibility of the contractor.

It could also be the borrower itself who can do the work but just like with the contractor, the borrower needs to prove his expertise and experience on getting the job done. But before that, they need to submit the cost estimates including labor and the materials needed. This is important just in case the borrower failed to finish the work satisfactorily and a need to hire a contractor is imminent.

Getting a FHA construction loan would really be a big help to you in these days of turmoil.

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Friday, April 26, 2013

Money to Rehab Your Next Home

When looking for a home, not everyone wants the biggest, best and the newest home. In fact, some people like an old home. Homes with some age tend to have unique architecture, larger lots, more established neighborhoods, little to no HOA fees and they often represent a different type of home ownership all together. But what happens when the home needs so much work, the lender won't give you a loan to buy the home?

Unfortunately, FHA requires any home sold with an FHA loan to meet strict guidelines. Essentially if the government is going to back a mortgage, they want to home to be in good working condition and habitable. This presents a problem to a lot of homeowners looking for an older home, because anything from cracked windows, non-standard flooring, roof damage, missing appliances, etc will be grounds for FHA denying the loan.

This is where the 203k program comes in. Through this program the homebuyer can receive an additional loan for up to $35,000 to repair or improve the home to meet FHA guidelines. In order for this to work, the buyer hires a contract to get bids on everything that needs to be done, they submit the bids to the lender and the lender finances the additional amount for the repair. The money for the repair goes into an escrow account to pay the contractor for the work when it is completed. After the transaction has closed and the buyer takes possession of the home, the buyer has 90 days to get the contractor to complete all the work on the home. Once the work is completed the contractor gets paid and the escrow account closes. This is a great program for anyone looking at a foreclosure home and the home may be in less than perfect condition.

A common question is, "will the additional loan hurt the appraisal value of the home?" The answer here, is "most likely no". As long as the purchase price of the home represents the fair market price of the home, then any repairs made with this program would increase the value of the home by the amount of the repairs being done, if not more. What if you are looking at homes in the top of your price range, and can not afford the higher mortgage amount? In this case, the best way to look at it would be to find a home that needs a fair amount of work done, and bring in a reasonably low offer. Lets say the home is priced at $170,000 but you see it will need at least $20,000 in repair. Place an offer for $145,000 to $150,000 and let the seller know of your intentions to bring the home up to FHA standards through the 203k Streamline program. In most cases, the listing agent or the owner of the property will be well aware of the challenges involved with selling a home that won't pass FHA inspection/approval, and they will welcome the lower offer and knowing you plan on making the deal work with an FHA loan.

Talk with a qualified loan officer about the additional details involved with this program. It is a pretty simple and straight forward, program, nevertheless, it is always a good idea to talk about the program with the person who will be helping you through the process.

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Tuesday, April 23, 2013

Section 203K Rehabilitation Mortgage Insurance

For home owners or home buyers who are looking for additional finance over their mortgage for rehabilitating the old home that they are purchasing, Section 203K rehabilitation mortgage insurance offer a convenient option of a single long term assistance, thereby saving them the time involved in finding another lender.

Among the various government loans given out in the US, the Department of Housing and Urban Development (HUD) has a specific financial assistance that is offered to home owners or buyers to either refinance the cost of rehabilitating, modifying or altering the house or to buy a house. This form of financial assistance is called Section 203K rehabilitation mortgage insurance and falls broadly under the category of housing loans offered by the US Government.

When a home buyer wants to buy a house that is not new, there are often repair and rehabilitation costs associated with the purchase. In most cases, it becomes difficult for him to get additional finance at reasonable rates for making improvements to the old building and Section 203K rehabilitation mortgage insurance is designed specifically to assist with this situation. Under this loan program, HUD insures the total amount incurred towards mortgage of the home and its rehabilitation. Thus, the lender is assured of recovery of his money in case of default of repayment while the home buyer gets the benefit of just one long term loan with a predetermined fixed or adjustable interest agreement, for the entire cost of the building and the renovation. This type of housing loans assistance also saves the buyer time as he does not have to find another lender for the additional loan towards home rehabilitation.

Once the Section 203K rehabilitation mortgage insurance loan is sanctioned, a part of the loan amount is given to the seller and the remaining held in an escrow account until the repair and rehabilitation work is complete. In the case of refinance, the earlier mortgage is paid off and the remaining amount transferred to the escrow for release after completion of rehabilitation work.

There are certain criteria to be met for a person to be eligible for this category of the Government Loans program. Any individual who is capable of making mortgage payments can apply for this assistance. The valuation of the property must meet the guidelines set by FHA with regard to the mortgage limit for that particular locality. The value is usually computed as the lower value of either the original value of the home and the cost of rehabilitation or 110% of the value of the rehabilitated home. The estimate for rehabilitation costs should be a minimum of $5,000. The home has to be at least one year old.

Applications for assistance under this housing loans program need to be submitted through a lender on the approved list of FHA. For further details on this financial assistance program, you can log on to the HUD website and locate an approved lender in your local area. Besides this, any further information about this loan program can be received from the online FHA resource center.

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Saturday, April 20, 2013

Getting FHA Home Loans Can Be Easy!

Buying a home is a dream that many people share. However, for those without a lot of income who don't have great credit or a large amount of savings, it can be difficult to get the mortgage that makes home ownership a possibility. One thing that might make it easier to find a mortgage is to look into FHA Home Loans.
FHA Home Loans are loans that the Federal Housing Administration insures. There are a wide variety of lenders that have been approved to offer these loans. It is a good idea to shop around and find out the rates and conditions that a number of these loan providers are willing to offer you since there are no set terms required.
However, these FHA mortgages are available to people with lower down payments and lower credit ratings than conventional mortgages, so it is a good idea to check into them and see whether this type of mortgage would work for you.
For those who don't have enough money to make a large down payment, there are a couple different options available. If you qualify for a conventional mortgage, you can get private mortgage insurance (also known as PMI) that will allow you to still get a conventional mortgage. If you don't qualify for PMI or a conventional loan, then it is a good idea to look into FHA home loans. With these loans you usually need to be able to put down a down payment of at least 3.5%, but you don't need as high a credit rating as you would for a conventional mortgage with this low of a down payment.
What can you use FHA Home Loans For?
1. You can get FHA home loans to purchase one to four family homes.
2. You can even use them to purchase mobile homes or factory built housing.
3. If you are purchasing a home that needs to be fixed up, you can get a FHA 203K Loan that will include both the cost of the purchase and the cost of fixing the house.
4. For those who already own their own home, you can refinance your loan to include the cost of fixing up your home or making it more energy efficient. This makes home ownership a much more reachable goal for many people.
As you can see you can use a FHA Home Loan for about any type of home ownership you want. And the best advantage is you don't have to have perfect credit scores. Most Americans want to own their own home and with the help of FHA Home Loans that dream can come true for most Americans.
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Wednesday, April 17, 2013

What Is the FHA Rehab Loan?

Homeowners who need to repair an older house, or potential homebuyers looking to purchase and renovate a run-down home may want to look into applying for an FHA rehab loan. These loans are designed to make homes in urban and/or low-income areas more attractive and more livable, and are ideal for individuals on a limited budget. Because and FHA rehab loan is meant to facilitate sustainable development, it cannot be used to construct an entirely new home.
What is the FHA Rehab Loan?
The Federal Housing Administration, part of the U.S. Department of Housing and Urban Development, created the 203k rehabilitation loan in 1978 as a way to improve urban development and provide low-income families with the means to renovate older homes in need of repair. The program also allows individuals to roll all purchase and remodeling costs into one loan, saving them time and money. Because loan lenders would typically consider these projects to be a high-risk investment, the government insures these loans, to encourage lenders to get involved with rehabilitation.
Community Rehabilitation
The FHA rehab loan program is actually the Department of Housing and Urban Development's main initiative dedicated to rehabilitating poor and disadvantaged urban communities. The FHA realizes that the individuals living in these communities, and those looking to move there, will have lower incomes and lower credit ratings than in more privileged communities, and therefore they have adjusted the FHA rehab loan terms and conditions to be more flexible and negotiable than a typical construction loan.
FHA Rehab Loan Required Applicant Information
Most of the application requirements for an FHA rehab loan are similar to those of any other loan. For instance, borrowers must submit to a credit check and employment verification, and they must meet the minimum requirements for individual lenders (which may vary by lending institution). However, the minimum requirements are often much lower than they are for traditional construction loans. Some lenders may approve FHA rehab loan applications for those with credit scores below 640, depending on the situation of the individual applicants.
Eligible Properties for the FHA Rehab Loan
While the FHA rehab loan comes with flexible terms for individual applicants, the fundamental requirements for eligible properties are fairly strict. The FHA rehab loan, for example, can only be applied to the renovation of existing properties that have been built for at least a year or more. The FHA rehab loan can also only be used to cover the renovation of a maximum of four units-in other words, it can be used to fix up an single family house, a duplex, or a condo or property that contains four individually occupied units. These properties are subject to an appraisal before the loan is approved.
Itemized Repairs
An FHA rehab loan allows borrowers to include the price of both purchase and repair in the overall loan amount. For example, if a family finds an affordable home, but discovers that it also needs a new kitchen, the loan amount would be calculated by adding the cost of the home with the estimated cost of repairs. FHA Rehab Loan applications require that all of these repairs be listed; in the case of the kitchen, this would mean obtaining a detailed price estimate from a certified contractor for everything from counter tops to permits.
Additional Provisions
The 203k loan program also builds in a contingency plan for the FHA rehab loan in case the cost of repairs exceed the estimate. For example, applicants can also request a 10-20% "contingency reserve" that can be allocated in the event that unexpected expenses arise. The percentage of the purchase price to be included in the loan can also be negotiated, as can the first several months of mortgage payments. This can be especially useful for people who must pay rent or mortgage to live elsewhere during the renovation process.
Rates and Interest
The interest rates on the FHA rehab loan are incredibly low compared to traditional loans. Additionally, borrowers are only required to put down 3.5% as a down payment. This percentage also includes the cost of repairs, so if a family buys a home worth $100,000 that also needs $20,000, the total value of the house-and the loan itself-would be $120,000. Therefore, the family would need to produce a down payment of at least $4,200, which is 3.5% of $120,000.
Are you tired of renting? Ready to finally buy a house?
I know how hard it can be to see all these great real estate deals pass you by, but if you really want to take advantage of this buying opportunity you'll need to use this single method that works amazingly well.
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Sunday, April 14, 2013

Why Use an FHA Home Loan?

I have had many come to me put off by how difficult it is to buy a home if you have bad credit. I have always encouraged people with bad credit to look into an FHA home loan before they give up on the possibility of owning a home.
FHA Home Loan Perfect for Those With Bad Credit
  • You can qualify with a lower credit score
  • You can use a gift as a down payment as well as other flexible down payment options
  • They are creative in proving credit when you don't have any or very little
Some of the reasons why people should seek out an FHA loan is when you may have some collections against your credit. Perhaps you have filed for bankruptcy or you have a mediocre credit score. They are especially good if you don't have money for a down payment or need help with closing costs.
Why can FHA do this?
Remember FHA is not the lender. They are the insurer. In other words, they insure the loan to the lender. Thus the loan monies are guaranteed. So the lender is willing to take a risk on you because FHA guarantees they will get their money. It's better than having a co-signer.
Although there is a cost for this guarantee. You have to pay mortgage insurance on your loan. Some might get upset with paying mortgage insurance, but for those of you who really want to buy a home and do not want to wait, it is possible.
Choose an FHA Lender
Since FHA insures the loan, they have some requirements the home may have to measure up to before they will insure it. Some real estate agents or loan officers don't want to work with those requirements, so they try to steer you away from any FHA loan products. That is why the search for a loan officer who is familiar with the FHA loan products is so hard to find.
But don't let that stop you. Be persistent in your search and find a loan officer who has closed several FHA loans to help you. Usually, a national bank will have loan officers who can work with these products.
There are many people who have seen their dream of owning their own home become a reality by qualifying for an FHA home loan. These mortgages are the best for the first time home buyer and those who need a bad credit FHA home loan. So its worth your while to see what you are eligible for.
My first home was an FHA home mortgage. I was really happy with their requirements for the home because there were some problems with the home that I hadn't caught. Of course I was very young (like 20 years old) and wasn't familiar with what problems to look for. FHA caught the problems and required the seller to fix them. That was my first home!
Even if the seller doesn't want to pay to fix the problems, there is an FHA product that will work with that problems as well. So if you are a first time home buyer, the FHA mortgage is your best choice!

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Thursday, April 11, 2013

203k "Look-A-Likes" for INVESTORS

Investors can purchase SFRs with 20% down on the purchase price plus the rehab amount. This gives you a loan amount up to 95% of the after improved loan amount. Find a buyer that has the 5% down payment and qualifies with the lender...close the home with a one time assumable loan and get your funds released from escrow. No additional appraisal is needed. This is the FNMA "Home Style" loan and the old "escrow commitment procedure" works on it.

Monday, April 8, 2013

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Friday, April 5, 2013

Have You Heard About FHA 203K Loans? - They Are Back!

Do you have clients looking for a "fixer upper" home? Does the home need repairs that your borrower doesn't have the cash to fix at closing? There's a solution!!

HUD has developed a new FHA insured mortgage program, called the "Streamlined 203k" Limited Repair Program that permits home buyers to finance up to an additional $35,000 of repairs into their mortgage to purchase and improve or upgrade the home before move-in or to refinance an existing mortgage and add up to $35,000 in repairs or improvements. With this new product, home buyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser. Unlike the standard 203(k) program, any FHA approved lender may originate a Streamlined 203K mortgage.

These types of loans close in 30 to 45 days- The borrower has 6 months to complete the repairs (you don't have to wait to close the deal after repairs are completed!!)

Purchase or Refinance!

Qualified Transactions = Multiple Marketing Channels:

o Purchase and renovate a home- Short Sales, Foreclosures, "Fixer-Uppers", Etc. Find a bargain for your buyers and help them turn it into the home of their dreams.
o Refinance- Work with homeowners wanting to renovate, remodel or upgrade.
o EEM Refi- Energy Efficient Mortgage Upgrades, including SOLAR OK.-
o Work with local remodeling contractors and EXPAND your referral network.

What is Renovation Lending?

o Renovation Lending is simply adding the cost of repairs and improvements into the mortgage to purchase or refinance a home.
o A Renovation Mortgage is a single, first lien position mortgage

Property Types:

o Same that qualify for FHA-Owner Occupied
o 1-4 units, including converting a 1 unit to a 4 unit or a 4 unit to a 1 unit.
o Condos and town homes- interior renovations only

Selling Points:

o Differentiate yourself from other agents and create a highly profitable niche
o Loan closes in normal time frame.
o Seller's are no longer responsible for doing repairs, good for buyers
o Customers can create equity, fast!

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Tuesday, April 2, 2013

FHA Rehab Loan - The Key to the American Dream For First Time Homeowners!

Home ownership - its part of the American dream. A place to call your own, to raise your family, a sanctuary when the world gets to be too much; a home is all of these and so much more. Unfortunately, many people believe that home ownership is out of their reach. They believe that due to a lack of credit history, low income, or any other number of things, they won't be able to secure a mortgage with a reasonable, affordable interest rate. Fortunately for them, the Federal Housing Administration offers various home ownership programs, including the FHA rehab loan.

The FHA rehab loan is one of the FHA's programs designed to help first time homeowners secure affordable home loans, and is specifically designed for the potential homeowner looking to buy and rehab a home.

As they are searching the housing market for a place to call their own, many first time homeowners consider purchasing a "fixer-upper". A good source of "fixer-uppers" is HUD Homes for sale. Oftentimes, homes that could use remodeling are the least expensive ones on the market. This, combined with the opportunity to remodel to their own specifications, draws many first time homeowners to these "fixer-uppers".

It is for these people that the FHA rehab loan is especially helpful. Traditionally, a homeowner wanting to remodel a home would have to acquire two loans - one for the acquisition of the property, and a second for the rehab. Then, when the property has been finished, they must acquire a third, permanent mortgage to pay off the first two loans. With a FHA rehab loan however, potential homeowners are able to acquire one mortgage, both for the acquisition of the property and for the rehab of it.

It is important to note that the FHA itself does not loan money. An FHA rehab loan is a loan offered by a bank or mortgage company, and insured against default by the FHA. Through this program, lenders are able to offer lower down payments and smaller interest rates, something they wouldn't otherwise be able to do for first time homeowners.

Many first time homeowners qualify for these FHA insured loans. There are no income limits, and you don't have to have perfect credit. And the benefits of an FHA rehab loan over a traditional loan are clear: they are easier to qualify for, they have lower down payments and interest rates, and they are easier to qualify for.

So if you are one of the millions of Americans out there ready to own your own home, then contact an FHA-approved lender today. The dream of remodeling your first home is likely closer than you think because of the availability of a FHA rehab loan.

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