Sunday, April 27, 2014

The Contractor Hasn't Started Work And We Closed Our 203k Last Week


How many times to we hear this?

I always tell the client at the consultation that THEY must tell the contractor when the loan closes because they just signed the paperwork. If they fail to do so the pot will boil over a bit and everyone gets upset yet NO ONE has told the contractor it closed escrow.

We always tell the client that they are responsible to let us know when it closes, and we are more than happy to tell the contractor but in all cases the borrower is the boss and the boss should notify the contractor when it is time to start work.

What happens once the contractor learns it has closed escrow?

1) The contractor will set up a meeting with the borrower and lay out a plan to get this project completed,

2) The contractor then buys and gathers materials for the project construction, and

3) Then the contractor will mobilize to get the materials and work force to the job and begin construction

All of this takes about a week. 1st draw is due 30 days from the close. Many borrowers think the contractor should be on the job an hour or so after they have the keys... NOT SO. 

The contractor has 30 days to get their first draw inspection and payment. If they have another project winding down in a week or two, they may very well wait for that crew to mobilize to this new project. It doesn't mean that they won't purchase materials and have that all important meeting with the borrower to make the plan. 

Thursday, April 24, 2014

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.

Click FHA Rehab Loan for more information on FHA Home Loans! Learn more about buying HUD Homes fixer-uppers click FHA 203K Mortgage [].
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Monday, April 21, 2014

Want To Sell More Properties Or Fewer Properties? Which Is Better?


I get such a kick out of agents who just don't get it and then sit on a listing for a year or two.

A major lender had a property in Oakland that had some major problems. No one knew what it would take to fix all the issues. In over eighteen months no offers came in, not even all cash offers with a low-ball price. Nothing.

We were called out to do a feasibility analysis report for them. They took our report, placed it in the house and sold the home in three days.

Then you get, how do I say this nicely, those who just don't get it who put this kind of dribble in their listing. I thought that was a lot tamer than I was really thinking.


If in fact, it is remodeled then why couldn't it be financed? mmm

If it needs some work then a renovation loan is the best, fastest way to close the sale.

Friday, April 18, 2014

The Benefits and Drawbacks of FHA Loans

During the years after the housing market crisis of 2007, the FHA loans enjoyed great popularity among home buyers. Now as the economy is improving while the interest rates remain low, they are facing growing competition. The general trends are always important, but when you have to make a decision on whether to get such a loan, you need to focus on the facts. Here is a detailed evaluation of these types of mortgages. It will certainly help you make up your mind.

Understanding FHA Loans

The abbreviation stands for Federal Housing Administration. This is the Federal Government agency responsible for insuring the mortgages. That is why they are called FHA loans. It is important to note that the Federal Housing Administration is not a lender and does not issue mortgages. It backs them up with insurance. It works with a multitude of approved lenders that provide the actual house financing products, which are accessible to all qualifying American citizens.

The Good Things

There are two main benefits of FHA loans which the other mortgages do not offer. It is worth looking at them in greater detail.

Lower down payment - With these mortgages, the minimum down payment requirement is 3.5%. This means that you will be able to quality for financing even if you have modest savings. For comparison, most conventional lenders require a down payment of at least 10%. Some may offer products with 5% down payment, but these are typically harder to qualify. You may be required to present evidence of bank reserves which would allow you to make the mortgage payments for a set period of time. Simply put, these loans require the lowest possible down payment.

Lower credit score requirement - Far from perfect borrowers can secure an FHA mortgage with ease. The official minimum credit score requirement is 580. Over the past few years, lenders kept their minimum score requirement higher at around 640. Now the biggest players in the market have announced that they have lowered their minimum requirement to 600 and others will certainly follow as well.

The Bad Things

The FHA loans are easier to get, but are they affordable? They may actually not be the most cost-efficient solution.

Potentially Higher Cost - Home buyers who make a low down payment will have to borrow more money to finance the purchase of a house and this will result in higher interest payments. These push the total cost of the loan up and the size of the monthly payment as well. Furthermore, borrowers with lower credit score can expect to pay higher interest rate.

Costly mortgage insurance - All such loans are backed by the government and borrowers are responsible for paying insurance premiums. There is an upfront premium of 1.75% of the value of the mortgage. Currently, the annual premium ranges from 0.45% to 1.3% of the mortgage amount depending on the term and on the initial loan-to-value ratio (LTV). If the initial LTV is higher than 90%, which corresponds to down payment lower than 10%, premiums have to be paid during the whole term of the mortgage.

Overall, the FHA loans are a good choice for people with limited means and less than perfect credit score. Others should consider conventional mortgages as well.

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Tuesday, April 15, 2014

I Want To Do The Bare Minimum Required by HUD For My FHA 203k Project


How many times have we heard that? About  every week someone tells us that and it is likely the worst thing you can do or for sure one of the worst things you can do.

Why? There are no guarantees in life, and I don't want you to become a slave to your house. Get it fixed up like you want to live in it. Yahoo, then enjoy the heck out of your new home. Take the weekends off and have fun. Invite your friends over for a BBQ, swimming party, or just to play cards.

So many times I see people that put so little into the home for fear of the mortgage payment... a real concern for sure, but not the only concern.

I don't want to hear that you came up short of funds for the repairs due to something discovered during the course of construction that was more than your contingency reserve. It happens folks.

Once you get the work completed we suggest you go back to your lender and look into refinancing out of that high PMI loan and get rid of the PMI (Private Mortgage Insurance).

I'd like to see more activity in the Central Valley, selling or buying a home that needs any amount of work can also gain you 10% on your appraised value.

Saturday, April 12, 2014

Typical or Common FHA 203k Projects Might Look Like These


What does a typical 203k project look like? Here are a few that we saw in the past year...

Typical 203k project 1
SFR south of San Jose. Needed a new roof, heating system was well beyond it's useful life. Vegitation growing all over the home... clinging vines, dated kitchen and bathrooms. Seller ignored repairs for years thus a lower than typical sales price would be in order.

Typical 203k 2
Duplex northease of Davis. Lack of typical maintenace over a long period of time caused damage to wood members that might have been avoided with normal owner preventive mainteance. Seller should eat the loss here as this never should have gotten this bad.
Typical 203k project 3
SFR in Vallejo. This cute home just need some updating and weatherization.

Typical 203k project 4
SFR in SF had an illegal lower level unit. Someone convered the basement to a second living area but forgot to obtain permits and then failed to use common construction methods. Seller should carry the brunt of the cost in a lower sales price.

Pretty much anything is a typical FHA 203k renovation potenial property. If you are trying to sell a home with a bad roof or a marginal roof and it leaks just after the home is sold, you will likely get sued... not if you had suggested a 203k to replace that faulty roof as it would be a warrantee item.

Wednesday, April 9, 2014

Major Differences Between FHA Home Loans and Conventional Mortgages

The Federal Housing Administration (FHA), guarantees loans through the U.S. Department of Housing and Urban Development (HUD), within specific parameters and through specific lenders. While originally created for the benefit of first-time home buyers, and limited to one FHA-insured mortgage at a time, people who are not first-time buyers may also qualify. Unlike a conventional loan, the FHA requires certain property condition standards, as well as a termite report and clearance, in order to qualify for a loan.

 A conventional mortgage is a loan that is not insured by any federal agency, is not a government program, and can be obtained from most commercial lenders such as banks and mortgage companies. If you have 20% equity, a conventional loan will be the best choice most of the time. Conventional loans come in terms from 10 to 30 years, with some offering interest only options.

Conventional and FHA loans are relatively similar in some of their features. Both offer fixed and adjustable rate loan programs, as well as 15-year loan terms for borrowers concerned with building equity faster, or the lower payments of a 30-year term. Some of the benefits of an FHA mortgage include:

  • Low monthly mortgage premiums
  • Low, HUD regulated closing costs
  • Low down payment
  • No credit score requirements
  • Qualify even with previous bankruptcy or foreclosure


While a credit score of 620 will allow you to automatically qualify for an FHA loan, unlike a conventional mortgage, a credit score below 620 will not disqualify you. You may qualify for an FHA loan three years after a foreclosure, two years after a chapter 7 bankruptcy and one year after a chapter 13 bankruptcy, whereas a conventional mortgage may entail a waiting period from two to four or more years.

Down Payments

A conventional loan requires a higher down payment, typically ranging from 10 to 30 percent of the home purchase price, and based on the property type, such as condo or single-family home. An FHA loan requires a smaller down payment, typically between three to five percent of the home purchase price. In addition, an FHA loan allows accepting monetary gifts as a down payment, whereas conventional mortgage lenders do not.

Mortgage Insurance

Mortgage insurance assists the lender in recouping some of its loss in case you default on your loan. You will be required to pay an FHA insurance premium as a fee at closing, as well as a monthly premium, but the up-front payment may be financed into the loan. While you may or may not be required to pay for mortgage insurance on a conventional loan (depending on whether you make a down payment of 20 percent or more) there is no up-front charge.

The best loan program for you, whether FHA or conventional, is whichever one helps you accomplish your goals. Your perfect loan will address your out of pocket finances, the total cost of the loan for your anticipated time frame, and your specific budget and circumstances. Because there are so many variables, request a careful review by your lender to ensure that you are making the right choice. Submitting a full loan application and committing to an hour or so of analysis with your mortgage professional is key to finding the right answer.

A seasoned entrepreneur and mortgage industry veteran with over 15 years experience in managing and loan consulting. Prided in establishing successful Mortgage Consulting teams that create and foster long-term relationships with clients. Contact Allied Mortgage Direct
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Sunday, April 6, 2014

Some Interesting Questions This Week About What We Can Do With A 203k


This last week was riddled with questions of "can I do this with an FHA 203k?"

1) I have a house on a lot zoned for a triplex and large enough for a triplex. Can I build two more units on this lot using the 203k? Yes, you can.

2) I have a single family home on a lot zoned for a duplex. Can I add a second unit on top of the first or existing unit? Yes, it is possible. The foundation may not be able to support the weight so, if not, it may be better to lift the existing home and install the second unit on the bottom as you replace the foundation. But to answer your question, yes, it is possible.

3) I found a wonderful property in the Los Gatos hills area but all that is left on the lot is the original foundation. Can I build a home on that foundation? Yes, you likely can. We would have to take a look at the foundation to verify that but we can build a home on an existing foundation. We can also put a foundation under an existing house. We had 104 year old home that was on a pier and post foundation and using this program we were able to build a perimeter foundation.

4) The pool at my new home is shot... terrible condition. Can we remove or fill in the pool using the FHA 203k program? As you know we can only make improvements to a pool for up to $1,500 as it is considered a "luxury item" but to "decommission a pool" isn't making an improvement, it is grading and landscaping to fill in a large hole and is acceptable. Too bad it isn't quite that easy though. There are rules about "decommissioning a swimming pool" so check with your local jurisdiction. It has to be done in a particular way so it doesn't float to the surface one day.

Thursday, April 3, 2014

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.

The FHA 203k is the perfect solution and it's worked for thousands of people for over 40 years, you can read all about it in my free report here: FHA 203k loan Don't give up hope, it's NOT impossible. Learn how to get your own home at 203k home remodeling mn Again by clicking the link.
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