Wednesday, February 26, 2014

Seller Won't Give Us An extension For Our FHA 203k, What Do We Do?


Sometimes sellers can be a real pain. They say they want to sell the home, you get into contract and everyone agrees on the price... and then, and then, and then along comes John.

Just kidding. I had a consultant contact me first thing this morning with this problem. Buyer wants to add a second story to a home they are purchasing and due to the additional layer of plan review right now in this economy with everyone being understaffed it will take a little more time. The seller isn't willing to extend their ten day inspection contingency to fifteen days.

HELLO - we aren't talking about extending the close, just need a few more days to meet with the contractor and engineer to see what foundation adjustments will be needed so we can add them to the paperwork and insure we loan the borrower's enough money to get the job completed and not run out of money half way through the project. It is not unreasonable to ask for a few more days up front if you, as the buyer's agent, know there is going to be a second story addition.

The 203k consultant is an amazing part of the process in that we need to be all trades and come up with a solution, a bid that describes what we are going to do with prices or costs that reflect the work being done and we typically do it in 2-3 days and sometimes in a day, or 4-5 days on the big projects then it goes out to bid and while the loan officer is closing the loan with our numbers the contractors are bidding the project and they may take another week or two without pushing back the close date.

LITTLE KNOWN SOLUTION TO THIS ISSUE - A borrower can close the loan with the first story only being renovated, then, after it closes and the work begins they get their plans into the city or county for the addition of the second story... as long as we close the second phase of this project loan within the first six months of the original closing the money that was put down originally will be counted as money they have in the new new project loan.

You heard me correctly, they could potentially get the money for the second story addition with no more money out of their pocket (bank of course). Worst case is that they have to put up an additional 3.5% of the additional construction if they didnt' gain any equity from the first phase and inflation.

We just did one like this where we closed the first phase, now the plans were approved and after closing the first renovation, did another 203k right behind it, that construction is about to start, the loan just closed. Yes you can also add a unit and increase the loan amount dramatically if the zoning allows for the additional units.

Sunday, February 23, 2014

Thursday, February 20, 2014

Asset Managers - Move Your Listings FASTER

Why not move your listings faster than your competition. We have home buyers looking to purchase your fixers as well as financing for investors. Our lenders can close in 30-45 days and some in 21-30 days for owner occupants.

That is the name of the game isn't it?

Actually it all comes down to KNOWING what it will cost to make the repairs on THIS home. If you have a "fixer" you are trying to sell and you have identified the cost to cure or make the necessary repairs then you have a salable home again.

No one wants to step into the unknown particularly a "first time home buyer" get your bank to cut loose with a little money to have us do a "feasibility analysis" which will identify the cost to make the repairs to bring this home up to the Minimum Property Standards as that is all you are going to negotiate.

I know most of you are likely selling 50-1,000 homes per year but wouldn't you like to sell another 250-500 on top of that? By the way, you would be doing your employer a service by getting the "hard to sell" properties off their books faster as well. Everyone wins !

Who can do a feasibility analysis? That is easy, every FHA 203k consultant can do them. They don't all want to do them but FHA says if you are a consultant you MUST offer that service.

What does it cost for this service? I can't speak for other consultants on this issue but we have a set fee of $350 for the first unit on a project & $100 each for units 2-4. If you order both at the same time, a bare bones feasibility for a "first time home buyer" who may be on a very tight budget then that is all you need.

Some of the agents who handle lots of REOs for asset managers are finding that even if they pay the fee they move many more houses and that is what they are supposed to do. We had one for Wells Fargo where they hadn't received a single offer in eighteen months, with our report it sold in three days.

-Mike Young, 203k Team Leader

Monday, February 17, 2014

Friday, February 14, 2014

It Took 12 Weeks to Get My Permits Can I Get an Extension for My 203k?

By Mike Young

It took 12 weeks to get my permits can I get an extension for my 203k? We can't possibly complete the construction in three months that are left on my project. Will they foreclose on my house?

The Standard FHA 203k program was set up to take "no more than six months" therefore you won't get more than six months on the initial set up of the loan. Not a problem normally. I have had a couple contractors not want to do the job if they couldn't get eight months right from the start and that was a shame.

The Streamlined k on the other hand has a sixty day completion date and only one draw or final inspection for completion.

Contractor's make more money per hour the faster they get the job completed, why then do they sometimes take so darn long to complete a project? Mostly due to the delay in getting permits and plans for larger projects but many times it is due to changes to the scope of work after the work has been done by the owner... not a good thing and can cause delay. Some of the contractors we use like to nail down all the materials prior to commencing the project and will not vary from that. You can't blame them for that, the work goes much faster and ultimately the owner is happy if they chose wisely on the materials. is taking longer than months to complete

What are our alternatives to having to wait so long for the permits to be issued? 

When blueprints are needed it is a good idea to have them in hand and approved prior to construction... on a purchase that is next to impossible since you don't want to spend money on the blueprints till you have the sale closed and know for a fact that it is your home.

Close the loan with a smaller 203k like the Streamlined k and do some minimal work to get the loan closed fast. While that work is being completed you get your plans drawn and apply for the permits, in sixty days close another but "standard 203k" as a refinance. All of the money you put down within the last six months gets to be credited as though you just put it down for this refinance. Holy Cow, that is amazing, you say? Yes it is and what is more amazing if you purchased a home recently and realize it needs more work even it it was a for sale by owner or has conventional financing you get to count that original money you put up as a down payment as money in the refinance transaction provided the refi happens and closes within six months of the original purchase.

Contrary to conventional thinking that says you can't refinance until you have six months seasoning, this loan MUST be closed within the six month period to take advantage of this feature of the program.

BTW, we are now covering South Fork CO.

Tuesday, February 11, 2014

FHA Loans Vs Conventional Mortgages - Which Option Is Better?

During the housing market boom, which lasted from 2003 to 2007, most home buyers (around 90%) chose to take out conventional mortgages. After the market went down, the situation changed dramatically and in 2009 some 40% of all home loans were FHA loans. It is 2014 now and you are naturally asking yourself which option is better given that interest rates have gone down and the market is recovering. Use this comparison to decide.

FHA Loans

The Federal Housing Administration home loans are designed to help first-time home buyers with low income to get their dream house. It is important to note that the low-income criterion varies considerably from one US state to another and in most cases individuals with average and even above-average income can qualify.


- Low down payment - The down payment with FHA loans is 3.5% while with conventional mortgages is 5%. The lower down payment means that you need fairly small savings in order to get your dream home. This is a great benefit.

- Easy to get - You can qualify for such a loan with credit score of just 620, debt-to-income ratio of 57% and 3.5% down payment. In order to qualify for a conventional loan, you will need credit score of at least 680, debt-to-income ratio of 45% or lower and 5% down payment. It is certainly easier to meet the first set of criteria.


- Growing costs - This is due primarily to the mandatory mortgage insurance, whose annual premium can be as much as 1.35% of the total outstanding loan amount. There is also an upfront fee of 1.75% which the borrower has to pay. That way, an FHA product can become much more expensive than a conventional mortgage.

- Smaller borrowing amounts - There are lower limits for the maximum borrowing amounts so you may not be able to afford the house that you need.

Conventional Mortgages

These are commercially available home loans. They are offered by banks, credit unions and specialized lenders. They are not backed by the FHA.


- Various opportunities to save - With a credit score of 740 or higher you can secure lower interest. You can do this with a larger down payment, with buying credit points and with proper comparison shopping as well. If you make a down payment of 20% of the property value, you will not have to buy insurance so you can save on the premium. These are just some of the main saving options.

- Great flexibility - You can select from a huge range of mortgages depending on your requirements. You can go for fixed or variable interest, for a 15-year or 30-year loan or for a jumbo loan which allows you to borrow a large amount of money. You can take advantage of special deals.


- Stricter requirements - As explained earlier, you need a fairly high credit score, low debt-to-income ratio, considerable savings and good credit history.


Overall, if you can qualify for conventional mortgages, they are certainly the better option. If not, you should consider FHA loans. In any case, you will need detailed financial planning in order to qualify and minimize the risk of default.

Article Source:

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Saturday, February 8, 2014

I Just Want To Do The Bare Minimum For My FHA 203k Project

This is an "all to common" statement that our buyers tell us. What is wrong with this picture?

The home needs work, they have cash but they want to control the cash and they can't get any kind of loan if they don't do some work on the home... let's do the bare minimum then we can use our own money to do the additional things we want to do to the home. NOT necessarily a good thing.

If the work the owner wants to do delays the FHA 203k work... the completion of the project for the contractor will be delayed therefore his "10% hold back" will be delayed, and for what? I would much rather see all the work they want to do put into the project now so they can enjoy the home and become a slave to the home repairs.

One client recently stated that they did the bare minimum and they wish now that they had gone in an fixed it up from the "get go" so they could have enjoyed it... oh, purchase price $300,000+/- just appraised at over $700,000 as they got out of the 203k loan and the PMI just two years later.

Hidden benefit of putting your cash in up front so the work gets done asap... maybe a larger down payment might let you get a "HomeStyle Renovation" loan and get rid of your PMI altogether. The FannieMae product that works just like the FHA 203k loan program and has no PMI. Loan limits are a bit lower and they only do single family homes.

If you are a Realtor and your client is thinking about doing this... remember that if they fix the home more completely now, and relist with you in three years... you will be selling a much nicer home than they purchased.

-Mike Young, 203k Team Leader 

Wednesday, February 5, 2014

What To Know Before Buying A Fixer-Upper Property

If you want to purchase an inexpensive property, you can check out the several fixer-upper properties. These properties are cheap but they need some repairing. This is why you have to take note of essential things before purchasing such properties. Below are some tips:

1. Have the property inspected by a professional. This is crucial no matter how cheap the property is. You have to know the work to be done and the money you will spend on repairs. Always remember that there is something more than what meets the eyes. The sunken floors could mean a floor replacement all together. Insulation may be worst and you have to redo the entire house. Have the property checked and review the report thoroughly.

2. Be ready to walk away. Homes are not school projects that you can easily finish. These are investments. If you purchase the wrong property, you have to live through it for a while. You would not want to spend a lot of money on something and regret it afterwards. if the house has more damages than what you can manage, walk away. There are more homes in the market.

3. Be wise in making an offer. You do not have to impress the seller with making a good offer. Remind yourself that buyers have the upper hand today. You can make a low-ball offer and sellers will still consider them. You might not get the property for the initial offer made, but you will get a pretty discount on the property. If the seller refuses to sell you the property, then move on. Again, there are more properties to choose from. You do not have to settle.

4. Prepare a realistic budget for repairs. Do not underestimate the expenses you will incur for repairs. As mentioned earlier, things are not always, what they seem. A small hole on the roof could call for an entire roof replacement. The scratches on the wall might need more than just painting. It would be great to add a little extra on your original repair budget.

5. Find good contractors. You will need them especially if you are not familiar with doing the repairs and renovations yourself. When looking for contractors, make sure that they have good reputation. Work with someone who has a nearby office. Do not make up front payments. You can pay a percentage as the project starts and pay off the entire amount once the project is done.

You can land a good deal for fixer-upper homes. However, you have to make the necessary preparations before you buy one. First, it is essential that an inspector checks the property. You should have an idea of how much it will cost you to make the essential renovations and repairs. If the state of the property is more than what you can chew, then walk away. There are several properties in the market today. Take note to be wise with the offers you make. Giving low offers is not bad at this point. After all, you need to overdo your budget for repairs to make sure that you get everything fixed. See to it that you find good contractors to get the job done as well.

Consider the Payson Real Estate and the Bank-Owned Homes in Payson for your next home.
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Sunday, February 2, 2014

Investor Renovation Loans Are Available

I get such a kick out of people who say they are "investors" as I use-ta was one. I must hear someone each week that says they just pay all cash then fix them up all cash and do one at a time, over and over again.

I guess in their eyes that makes them an investor. If they leveraged their investment just a little they might be able to do four at a time with the same amount of money. The power of OPM (other people's money) can rocket a small investor into an entirely different world of investment.

Don't get me wrong, the small investor has their place and if that is what they want, they should do that just the way they are doing it. But I don't look at them as an "investor" just a person who buys a second home and fixes it up. They may do 1-2 per year and maintain their "other job", the one that pays the bills. The "investor" part of their life is for play money. That means they are whatever they do at the other job and a "part time investor".

When I think of investors or developers I see that as their full time job, their livelihood. I have met a few of those young entrepreneurs recently and it is such a different mental. I met two recently and it turns out they knew each other, one referred the other to us.

Both purchased their personal homes with renovation loans and the second one just couldn't stand to see that vacant lot two doors down from his home and purchased it. Finished his home and when I drove by the vacant lot a few days ago there is a home about 40% complete, yahoo. Now that is an "investor". These young investors have anywhere from 5-15 homes going at any one time. Holy Cow, to be young again.

The HomeStyle Renovation loan program is designed for second homes and investors. We have no less than three different lenders who specialize in these loans and you guessed it "NO PMI" like the FHA 203k loan has. You get the money to purchase and renovate the home all in one 30-year fixed rate loan.

These loans work just like the FHA 203k without the additional expense of PMI (private mortgage insurance) which at some of the loan amounts we see can be substantial. If your credit is good and you have some money in the bank you may be better off with this renovation loan over the 203k.

-Mike Young, 203k Team Leader