Wednesday, May 29, 2013

FHA Housing Loan - 203k FHA Rehab Loan

Every single individual wants and needs a home. A house serves as a person's fortress where he or she can retreat from worldly problems and complications. It serves as a haven for comfort, relaxation, and security. That is why is highly crucial for every single person in this Earth needs to have even just a single house that they could settle in every single day and night... One will have no problem doing that through the use of the 203k FHA rehab loan. This type of loan is about giving its buyers the ability to buy and rehabilitate or renovate a house at a much lesser price than those houses which do not offer an FHA loan.

Those qualified to avail of this type of FHA housing loan must possess and have these important criteria:

Criterion 1: The buying and refining of the FHA house must be its future owner.
Criterion 2: The FHA house and its buyer should engage in non-profit funds.
Criterion 3: Qualified FHA home buyers should not be investors as they are not allowed.

If you are interested in purchasing and rehabilitating/reconstructing an FHA house then it is very crucial for you to follow these seven easy steps for you to get started on using the 203k FHA loan and ultimately own an FHA house:

Step 1: A contract of purchase which is non-contingent must be submitted upon you finding the FHA house you want.

Step 2: Once the contract of purchase have been approved and signed, you should now contact the 203k FHA loan agent and schedule a house tour/inspection and discuss the pricings and specifics of the house.

Step 3: Once all have been settled and dealt with, the 203k FHA loan agent will contact the house lender or mortgage broker and shall work on the three bid packages of the contractors for you.

Step 4: Look for general or multiple contractors to bid for your job.

Step 5: The appraiser will work on the house write-up to determine the value of your chosen house.

Step 6: The loan closes approximately 30 to 45 days in average.

Step 7: The transfer of the house and its renovations will soon take place and be yours.

Truly the 203k FHA loan is a benefit for all of us. Everyone will now be able to own and reconstruct a home thanks to the FHA house loans and services. So go ahead and get your FHA house now.

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Sunday, May 26, 2013

Financing For Mixed Use Properties - 203k

Mike Young talks about how a 203k mortgage is a great way to find financing for a mixed use property. See more at

Thursday, May 23, 2013

FHA 203k Closing Cost

What Homebuyers And Homeowners Should Know About The FHA 203k Closing Cost For Renovation.
Like all other real estate loans, the FHA 203K has the same typical closing costs such as Title, Lender, Attorney, Escrow and Recording Fees to name a few, but unlike the others there are also additional calculations involved that you'll need to consider when financing a 203K Loan. The first thing you'll need to do when figuring out 203K closing costs is to list and estimate the cost of all the repairs & rehab that you are planning for the property. This is essential because the 203k closing costs will be calculated based on this amount. The following is a list and explanation of costs involved when financing a 203K Loan.
Standard Fees:
FHA 203k Contingency Reserve
The first step is figuring out the FHA 203k contingency reserve on the repair & rehab costs...The contingency reserve are for overruns and un-expected expenses that can arise during the project. Now, if you ever had to hang up a picture on a wall and had to make two holes to place one nail then you'll understand why this reserve is needed. The amount for this reserve is 10% based off of the repair & rehab amount but can go as high as 20% depending on the project and property. The amount of the reserve is actually not a true cost because if you were to stay on budget the contingency reserve left over can be used to pay down the original loan or used for any extra work if approved.
FHA 203k Inspections & Title Updates
Inspections and title updates are completed to make sure the work is done and no additional liens are put on the property. Inspections are done by HUD Cost Consultants or Appraisers depending on whether it's a Standard (Full) FHA 203k or a Streamline 203k loan. Costs can vary on both of these fees. An average estimated amount to use would be $150 to $250 for Inspections and $50 for Title Updates.
Mortgage Payments Financed
If you have an FHA 203k loan that is the Standard version (full) rather than a Streamline then you can finance up to 6 months of payments. Now as appealing as living with dust and loud noises while cooking on a Bunsen burner might be to some, it's good to know the rest of you have the choice to have all the repairs and rehab done before moving in. Of course there are economic factors that play a role as well. Adding more money to your new loan may sound financially un-feasible but the flip side would be the cost of your comfort or the extra work time needed to complete work phases when a property isn't vacant which in return would have a cost.
Architectural and Engineering Fees
If you're doing an FHA 203k Streamline these fees would most likely not apply. But for projects that do need an architect or an engineer this cost can be financed into the 203k loan. Keep in mind that this fee depends on the scope of the Architect/Engineer services and is associated with the type of project your doing rather than with the 203k loan.
Consultant Fees
Standard (Full) 203k loans need an FHA cost consultant and are optional on 203k Streamlines. Their role in short is to review the work estimates so that they can do the work write ups, inspect the completed work and fill out the paperwork needed to get the checks released. Their fees range from $400 to $1000 and higher when the repair or rehab amounts are over $100k and when there is more than one unit. My advice is to talk to your consultant so you know what to expect from them and what the cost will be.
The repairs or rehab for your project may require permits from local city or county agencies. When permits are required the cost can be added into your 203k loan amount as well. Your contractor should be aware of any permits needed and should let you know when giving you an estimate.
Supplemental Origination Fees for the Standard and Streamline 203k
On all FHA loans an origination fee is typical. An origination fee is a percentage of the loan amount. For instance a 1% origination on a loan amount of $100k would be $1,000. The difference with an FHA 203k loan is that a supplemental origination fee is charged on the repair & rehab portion. That amount is 1.5% of the repair or rehab amount or $350.00 whichever is more. Consider this cost as an administration fee for setting up the escrow account that will handle and disburse the checks as needed.
Discount Points on Repair Cost and Fees
Interest rates at times will come at a price on what is called discount points. (Discount points like the origination fee is a percentage of the loan amount.) Same example 1% discount on a loan amount of $100k would be $1,000. So, sometimes to get a certain interest rate discount points are charged. Those same discount points would also apply to the repair and rehab portion as well.
Well there it is...the costs associated with the FHA 203k renovation loan. Now remember, these costs only apply to the repair and rehab amount and as mentioned earlier there would still be the standard closing costs such as Title, Lender, Attorney, Escrow and Recording Fees but these costs apply to all Real Estate Loans.

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Monday, May 20, 2013

FHA 203k Loan Information

FHA home loans, which are insured by the Federal Housing Administration (FHA), are great financing options for any homeowner who wants to purchase a house or refinance his or her current mortgage. These loans have low interest rates and usually only require down payments of 3.5 percent! FHA loan requirements are simple, so current and potential homeowners are more likely to qualify for these loans than other types of loans.

FHA 203k Rehabilitation Mortgage Insurance Program

The FHA has a specific loan program to help homeowners who want to make improvements or repairs on their home, but do not have the funds to do so. These loans are called FHA 203k loans and can be used for either a purchase or a refinance. There are two types of loans in this program, one loan is for repairs that cost less than $30,000 and the other loan is for repairs that cost more than $30,000.

A streamline FHA 203k option is also available to homeowners who are interested in doing non-structural repairs or improvements. This loan requires less documentation and can be less costly. It allows a homeowner to finance up to an additional $35,000 into his or her mortgage in order to make improvements to the home. An FHA home inspector or appraiser can identify home repairs that need to be made.

How the Loan Can Be Used

Although there are some restrictions on what the loan can be used for, there are plenty of renovations and home repairs that the loan does cover. In general, these include modernization, eliminating safety or health hazards, making a home more accessible for individuals with disabilities, or making a home more energy efficient. More specifically, the loan can be used for roofing, plumbing, flooring, painting, minor remodeling and more.

Loan Requirements

There are certain requirements with this type of financing. Homeowners must spend at least $5000 on their home repairs in order to be eligible. Homeowners must get cost estimates from a licensed and insured contractor(s) before signing the sales contract. The total cost of the mortgage, including the repairs, must remain within the FHA loan limits for the county in which the home is located.

This loan cannot be used to flip houses, and the homeowner must use the loan on the home in which he or she lives. The work being done on the house must begin within 30 days of the loan closing. All work must be completed within six months to comply with the loan requirements.

If a homeowner wants to make repairs to his or her home and needs additional financing, this type of financing could be the best option. Many of the same eligibility standards used for standard FHA home loans apply to the FHA 203k loan. Most lenders will require that the borrower have a credit score of at least 620 to be eligible. To qualify for the loan, certain energy efficiency standards, as well as certain structural standards, must be met.

This loan could be great solution for homeowners who want a better way to finance home repairs and improvements without depleting their savings.

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Friday, May 17, 2013

203k Loan Program

The Section 203k program is the Federal Housing Administration's (FHA) rehabilitation program. The FHA is part of the Department of Urban Development (HUD) which administers various single family mortgage insurance programs. The 203k program is an important tool for revitalizing communities and expanding neighborhood home ownership opportunities.

Most lenders provide only permanent financing. Lenders typically do not close loans and release the mortgage proceeds until the condition and value of the property provide adequate loan security. When rehabilitation and/or repair is involved, the lender usually requires the improvements to be completed prior to the mortgage proceeds being distributed.

When a home buyer wants to purchase a house in need of repair or modernization, the home buyer usually has to obtain financing first to purchase the home. Additional financing is needed to do the rehabilitation construction and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively unattractive high interest rates and short amortization periods. The Section 203k program was designed to address this situation and provide home buyers with better financing options for rehabilitation loans. Borrowers can get one mortgage loan, at a long-term fixed or adjustable rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation of the home, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

For properties to be eligible for the 203k program, they must be a one to four family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling.

Cooperative units are not eligible for this program. Homes that have been demolished or will be razed as part of the rehabilitation work are eligible provided some portion of the existing foundation system remains in tact.

In addition to typical home rehabilitation projects, this program can be also used to convert a one family dwelling to a two, three or four family dwelling. Conversely, an existing multi-unit dwelling could be decreased to a one to four family unit dwelling.

An existing house or modular unit in a different location can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.

A 203k mortgage may be originated on a mixed use residential property provided the following items are met:

- The property has no greater than 25% for a one story building; 33% for a three story building; and 49% for a two story building of its floor area used for commercial (storefront) purposes.

- The commercial use will not affect the health and safety of the occupants of the residential property.

- The rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

The Department also permits Section 203k mortgages to be used for individual units in condominium projects that have been approved by FHA, the Department of Veterans Affairs, or are acceptable to FNMA under certain guidelines.

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Tuesday, May 14, 2013

An FHA Loan Could Be A Recent College Graduate's Best Friend When It Comes Time To Buying A Home

A recent college graduate who is trying to secure a California home loan, or a loan in any state for that matter, needs a loan program that has flexible guidelines. An FHA loan offers that flexibility when it comes time for qualifying for the home loan.

Being that the graduate recently attended school, they are not required to meet the entire two year work history requirement that a Fannie Mae or Freddie Mac conventional loan requires. An FHA loan will allow school attendance credit towards the two year work history.

Being in the workforce full time for one year coupled with the prior year being in school satisfies the two year work history guideline, which again many conventional lenders of today aren't allowing. If the home buyer is working in the field in which they received their degree, that would help the overall chance of getting approved for a home loan, however it's not necessarily required. Lenders and underwriters may have differing views and rules when it comes to this scenario so it's wise to check first with your Loan Originator before you enter into a loan application to how this situation is viewed before they pull your credit report.

In addition, an FHA loan may allow for longer employment gaps. For example, if the graduate decided to take three months off after graduation prior to gaining employment, FHA is more lenient than Fannie Mae conventional lending.

Also FHA may allow non-occupant co-borrowers, conventional loans don't. If the bank of Dad and Mom runs dry after paying years of college tuition, and they aren't able to donate a cash gift toward buying a home for their child, they can go on the loan to aid in qualifying for the home loan even if they aren't going to be living in the property. Again conventional Fannie Mae and Freddie Mac loans do not allow this.

These FHA guidelines are nothing new but with today's ever changing Fannie Mae and Freddie Mac lending environment it's easy for real estate professionals to forget them and most consumers don't know these differing rules even exist. FHA is here to stay and consumers and real estate professionals need to remember that even with these looser guidelines, including accommodating lower credit scores, the interest rates are very close to what Fannie Mae and Freddie Mac conventional loans offer. So whether you're a college graduate or not, this is valuable information for all prospective home buyers to know prior to searching for a home to purchase.

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Saturday, May 11, 2013

How FHA 203(K) Loans Are Used

What's unusual about FHA 203(k) loans is, the amount covers the costs of purchasing and making repairs. The program is an option for both first-time and previous homebuyers and offers a 30-year mortgage and an amount for fixing up the purchased property.

Yet, these home improvement loans come with guidelines beyond an ideal credit score and employment history. For borrowers considering purchasing and fixing up a home, keep the following points in mind:


Any FHA 203(k) loan must go toward a principal residence that must be lived in no later than one year from closing. The property cannot be for recreation, vacation, investment, commercial, or renting, unless the borrower is an owner-occupant of a multi-family home.

The loan, however, can cover the cost of transforming a commercial building into residential property or a multi-unit dwelling into a two- or four-family home. The loan can be applied to existing single-family properties and FHA-approved condominiums but not mobile homes.

Sales Price

Unlike other mortgages, the sales price for FHA 203(k) loans includes both the total purchasing price and any rehabilitation. The price cannot go above FHA Maximum Loan Limits.


No matter if an FHA 203(k) loan or 203(k) Streamline loan is used, any improvements must total at least $35,000. 203(k) Streamline loans, however, have a limit, specifying repairs and rehabilitation cannot exceed $35,000. All cannot exceed the loan-to-value ratio and the FHA Maximum Mortgage Limit.

Repairs for both types vary with each home improvement loan. FHA 203(k) loans can be applied to any structural alterations and damage repair; termite or water damage; converting a single-family home into a duplex or a three-family home into a six-family home; adding energy-efficient features; replacing any wells, septic tanks, windows, and water systems; repairing flooring, roofing, hand rails, down spouts, and exterior siding to improve living conditions; and adding handicap accessibility.

For 203(k) Streamline loans, however, all repairs must be made before the borrower moves into the property. Acceptable repairs include improvements to the basement, deck or patio, electrical system, floors, and HVAC system; minor remodeling; new modeling, and any new windows, painting, plumbing, roofs, septic or well system, sewer hookup, or weatherization.

Both loans, as well, require the repairs be carried out in a specific fashion. Once the loan is closed, all repair funds are placed in a separate escrow account, and the lender manages the payments made to a state-licensed contractor. A contract for all repairs must be put in writing, including a description of the work being done, a schedule, items and materials, and terms.

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Wednesday, May 8, 2013

Which Improvements Can You Make With FHA 203(K) Loans?

When it comes to home improvement loans, homebuyers wonder which changes can be made - and which can't. Although taking out a small loan for a do-it-yourself project has few restrictions, just as long as the amount is paid back, FHA 203(k) programs, which cover the costs of both purchasing and repairs, have more specific lists of improvements.

Like any loan, FHA 203(k) programs require the borrower to meet minimum credit score, income, and employment standards, and the property purchased, as well, needs to fall within certain guidelines. While it must be the primary residence for the borrower no later than one year from closing, the property cannot be for recreation, vacation, investment, commercial, or rental purposes, unless it's an owner-occupied multi-family unit.

In some cases, however, borrowers may want to convert commercial property into residential housing, and FHA 203(k) loans apply to this type of project. Nevertheless, with this exception, properties that can be purchased may include single-family homes, an FHA-approved condominium, or a multi-family building to be converted into a two- to four-family home. FHA 203(k) does not apply to mobile homes.

With the exception of specific improvements, loans for repairs range from $5,000 upward. 203(k) Streamline programs, however, cannot go above $35,000.

For FHA 203(k) loans, the following repairs can only be made:

• Any structural alterations and damage repair
• Repairing termite or water damage
• Converting a single-family home into a duplex or a six-unit property into a triple-decker.
• Replacing any wells, septic tanks, windows, or hot water systems
• Repairing any flooring, roofing, hand rails, down spouts, or exterior siding for general livability (not aesthetic improvements)
• Improving handicap accessibility

For 203(k) Streamline loans, all repairs must be made prior to the borrower moving into the property. The following are considered acceptable for this home improvement loan:

• Repairs to the basement, deck or patio, electrical system, floors, or HVAC
• Minor remodeling
• Installing new appliances (up to $2,000)
• Adding new windows
• Painting
• Plumbing
• Roofs
• Septic or well repairs
• Adding a sewer hookup
• Weatherization

Lenders, as well, monitor how all repairs are carried out and require a state-licensed contractor to do improvements. Once the loan closes, the amount for repairs is kept in a separate escrow account, with the lender sending the payments in installments to the contractor. So the lender knows what is being done, a contract must be drawn up in writing, with all changes, modifications, and materials described in detail with a completion date and payment terms.

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Sunday, May 5, 2013

FHA 203K Loan - The Best FHA Home Loan to Rehab a Home!

To understand what a FHA 203k loan is we must first understand what exactly a FHA home loan is. The FHA -- Federal Housing Authority -- offers government guaranteed loans to home buyers which gives the banks the confidence to lend money to people they may not normally grant a mortgage to.

This is not to say that the you are borrowing money from the government nor is it to say that by applying for a FHA home loan you will automatically be approved, but it is to say that you are more likely to approved for a FHA home loan than a conventional loan if you have average or below average credit, including a bankruptcy, and less than 20% for a down payment, currently the down payment requirement is 3.5% -- which is considerably lower.

Now that we understand the basics of a FHA home loan, it is time to introduce the fact that in addition to the standard FHA loan offered, there are many other FHA loan programs that home buyers may wish to take advantage of including the traditional 30 year fixed rate mortgage, standard 15 and 20 year mortgages and even any manner of adjustable rate mortgages as well, you can even get qualified for refinancing or taking out the home equity via a home equity loan through FHA programs as well.

It seems, though, that one of the most popular FHA loan programs that are offered is the FHA 203k loan. These loans carry the standard features of traditional FHA loans -- flexible credit, assumable loans, and low down payment to name a few -- but goes a step further by making it easy to rehabilitate a home all in one loan packaged together.

Using an FHA 203k loan can help people who need to renovate their current homes by securing financing to do so or home buyers can use these loans to purchase and rehab a preexisting home elsewhere.

This can benefit everyone involved from the community by making surrounding areas nicer for all citizens, to the home owners themselves by allowing them to purchase what could be their dream home and providing the funds to make their dream a reality. All of that and under one loan package, in today's unstable housing market, taking advantage of FHA programs is definitely the way to go.

With the glut of foreclosures on the market including HUD homes for sale which some of them requires repairs, the FHA 203K Loan may be the answer to purchasing your dream home at a bargain price!

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Thursday, May 2, 2013

FHA 203K Loan Makes Financing a Home in Need of Repairs Simple

The FHA 203K loan is a type of financing that is insured by the Federal Housing Administration. It is a unique type of financing that allows homeowners to obtain both a purchase loan and rehabilitation financing in the same transaction. Before this transcendent loan program, a homeowner had to obtain an initial, temporary loan to purchase the home and a separate rehabilitation home loan to make any necessary repairs. Only after the repairs were complete could the homeowner gain permanent financing for their newly improved home.

FHA 203K: How does it work?
The FHA 203K loan was designed to streamline the process of buying a home in need of repairs. In order to provide funds for the repairs, the loan amount is based on an expected future appraised value that takes into consideration how much value the completed repairs will add to the current value. Up to $35,000 over the purchase price of the home can be financed into the loan to cover the cost of repairs.

The contractors chosen by the borrower to do the repairs will receive the money for their work in two draws. One draw is for 50% of the work and is disbursed at the beginning of the repairs while the remaining 50% will be disbursed after the work is completed. The repairs must begin within thirty days of the closing of the loan and must be completed within six months. The amount paid to the contractor(s) must be determined before the loan closes by obtaining written bids on material and labor costs. The homeowner can do the work himself provided that he is a licensed and bonded contractor.

What types of repairs will the FHA 203K cover?
Some of the repairs eligible to be completed with the funds from an FHA 203k loan include: roof replacement, electrical or plumbing work, kitchen remodeling, accessibility renovations, appliance purchases, and painting. Although many cosmetic renovations are allowed, luxury items and upgrades are not permitted. Also, any funds needed to repair to any detached structures, like sheds, swimming pools, and gazebos, may not be included in this loan amount.

FHA 203K: Qualifications
The FHA 203K program has the same types of eligibility requirements that exist on any FHA home loan. A homeowner must qualify on the basis of both credit and income to be eligible and the property must be FHA approved. As a general rule, the monthly mortgage payment cannot exceed 41% of the borrower's monthly income and most lenders require at least a 620 credit score. Homes that qualify include: FHA-approved condos, 1-4 unit homes, and planned urban development homes (PUDs). The construction of the home must have been completed at least one year prior to financing in order for the home to qualify.

The FHA 203K program can be a great tool for any homeowner looking to renovate or repair his or her home. In a housing market that has seen foreclosures reach record highs, the FHA 203k loan can not only provide potential home owners with more opportunities to purchase a home, but can also help rebuild the housing market by facilitating the rehabilitation of foreclosed properties.

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