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.

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


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 To contact us for a consultation please go to 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
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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.


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
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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 To contact us for a consultation please go to 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.


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


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. 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 To contact us for a consultation please go to 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
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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.

- 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,, 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 []
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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 To contact us for a consultation please go to and "order a consultation".