Tuesday, July 29, 2014

What is an FHA Loan and How Does it Work?



Finally! FHA loans explained and the information is up-to-date and accurate!

Saturday, July 26, 2014

Pitfalls of "Self Help" on a Renovation Loan, FHA 203k or HomeStyle

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It seems that everyone we know thinks they are a painter...

Self Help and the FHA 203k is not a good idea as much as you might think you can do something and save money... you don't save money. The FHA 203k consultant must build in enough money for a professional to do the work and you can only do it if you are a licensed contractor in the state where the home is.

If you should get the contractor to allow you to do that work under his/her license they aren't going to let you have all the money in that category, they must keep their profit and overhead.

Every time I see a "side deal" between the contractor and home owner it always seems to go sideways. The contractor wants to be a "good guy" and if allowing the borrower to do this makes him seem like a "good guy" he may be tempted.

The owner thinks they will get the entire amount in that category failing to realize the contractor has a bid from a professional painter for less than that amount by the profit and overhead. The home owner then rarely completes the task in a timely manner... in this example of interior paint, the contractor may be ready to lay the flooring and the painting isn't complete...

The contractor has the right to lay the flooring and then it becomes the owner's responsibility to tarp the floor coverings. It is just a mess looking for a place to happen.

Lets look at the HUD guideline... We must maintain enough money in the bid item to cover a contractor to complete the task in the case the original contractor or, in this case, the borrower doesn't complete it in a timely manner. The lender can force the work to be done. If, on the other hand there isn't enough money to do that job built into the bid it can't be done and you are in violation of the guideline.

The guideline also says the contractor must warranty his work, so if he lets the owner do the painting or any other task, he still has to warrant the work. Contractors must warrant the work for one year, most do it for two years and some use the 2-10 warrantee program that warrants the work for ten years.

Wednesday, July 23, 2014

Mike Young: What’s My Line? | FHA 203k Consultant

Photo of Mike Young


Who is Mike Young and what does he do?

Mike Young is a FHA 203k Consultant. 




 

What does an FHA 203k Consultant do?

  • Meets with clients and “consults” explaining the program
  • Reviews the contracts and procedures so there are no problems during the course of construction
  • Makes the FHA 203k compliance inspection to determine what it will take to bring the structure up to the MPS (Minimum Property Standards). This includes mandatory repairs such as ceiling insulation, caulking, weatherization, grading, etc.
  • Recommends contractors and lenders if they client does not already have them selected
What is the difference between an FHA Consultant and a Home Inspector?
 
A  home inspector and a 203k consultant can be, and quite often are, the same person. There is really no difference in the home inspection and the consultant’s 203k compliance inspection.

The inspections can be the same inspection. The home inspector quite often creates a “deficiency report” that can be the basis of a 203k report as well.

A typical home inspection might take 3-4 hours and a typical 203k compliance inspection might take 1-2 hours. During that time the home inspector will find deficiencies and suggest further inspections by the appropriate trades persons  and rarely is allowed by state licensing to “price the work”.

On the other hand the consultant does just that, they determine the issue, determine the repair, create a “scope of work” or “scope of renovation” and provides typical costs to repair those items. This is in direct violation of most state licensing “standards of practice” for home inspectors thus the difference between a consultant and a home inspector.

Mike Young can help any buyer in any state, in any city or town.  Mike is licensed by HUD to be an FHA 203 Consultant in all states.
 

Do FHA 203k Consultants charge a fee?  

The answer is, Yes. Nationally a typical fee for a 203k consultation is between $600 and $700, plus mileage. That isn’t very much for the responsibility assumed. The fee can range from $400 to $1000, plus mileage, for the consultation, but on larger projects additional fees may be incurred. Of course, one would need to contact Mike Young directly and get a fee quote specific to their project.  Clearly, one size does not fill. 

Are there any pitfalls or downsides to FHA 203k loans? 
As with anything in life, even with the best laid plans, things may not go according to plan. If you are having issues with a 203k loan anywhere in the USA contact 203k911.com for some direction and resolution to your issues. The best course of action is to first hire a consultant to ensure the project does go smoothly.

The Mike Young Team represents a group of FHA 203k and Fannie Mae HomeStyle Renovation consultants specializing in renovation loans nationally. No job is too big or too small for Mike and his team.  They recently helped a person in KS who couldn’t find a consultant due to state laws being so restrictive.  They were able to help the person's lender get the loan closed with little delay.

Another person called from CT asking if they could move a historic type home from a lot in VA to a new location in CT. The home was to be placed on a barge and taken to the new waterfront lot in CT.

The 203k program is amazing. Open your mind to the possibilities, or contact The Mike Young Team and they will open it for you.
 
Mike Young: What’s My Line?  |  FHA 203k Consultant  by Kathleen Daniels, San Jose Homes for Sale - San Jose Short Sale Agent - 408-972-1822

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Sunday, July 20, 2014

Can the Borrower Do "self help" on an FHA 203k Project?


Question from a consultant - 

Working on a work write-up the GC has in his bid the homeowner wants to do the demo and drywall repair, interior trim, ceramic tile, hardware, install appliances, hardwood floors and finishing, and clean up.  When the GC was asked "is he providing any materials?, he said no.  It looks like the homeowner is paying all of the materials out of pocket.  The GC is charging $6,296.00 to supervise the homeowner rehabbing his home.  

Do I need to pull the plug on this one?

 The way you have outlined it, this is clearly a self help project and no one wants to see that. We are obligated to have enough  in the project to complete the project if the contractor fails to complete it and you won’t under this scenario. In this case there is no money to do the work in the even the homeowner gets busy elsewhere or worse yet, should move out of town Therefore NO we can’t do it this way. 

Additionally, the appraiser can only see what we have in the scope of work and if the borrower is doing it, it isn’t in the scope therefore it won’t make the appraisal either. 

It sounds like the borrower has the money to do the work and just doesn't want to "borrower more money". The borrower will need to put the money up front and let you disburse it back to the contractor and borrower so we are covered, and the lender and HUD are covered if the contractor fails to complete the project, we’ll have enough to finish the project.

Now.. should you pull the plug on this one… I don’t think so, merely inform the borrower of the rules and ask if they have the money to bring to closing, they can do that so their loan amount is kept low, that isn’t an issue. Sounds like they might so this is still a viable project we just have an obligation to insure we have enough to finish the project if this contractor or home owner fails to complete their parts.

Most lenders for the FHA 203k loan guarantee program only allow self help if the borrower is also a licensed contractor.

Thursday, July 17, 2014

How Do I find an FHA 203k Consultant?

By

That is a good question. You can go to the HUD website and find one or you can go to Yadzooks website and find one, or you can contact us and we'll line you up with one. The problem is going to be the same in both cases. The question you should be asking is "how do I find a good FHA 203k consultant?"

They are not all the same just like all Realtor's are not the same. I see some that go way overboard to provide a quality service for their clients and others that do the bare minimum and they draw the same fee. So please don't just look for a consultant, find a good one.

The biggest difference is going to be in the service they provide to the client. We all work off the 1994 HUD guideline for the most part at least as far as it goes. No one in his right mind would charge less than the fees described in that guideline. No raise in 20 years... mmm. that is your first clue.

Example 1 - If the consultant tells your client they will do the inspection for $350 "beware". I lost a job because I quoted $800 plus mileage right off the guideline while my competition quoted $350. He got the job. It involved a room addition where he provided a penciled in sketch that barely readable... oh, how did I know he did this? The client told me and showed me when the consulting invoice came in at $800+mileage. Oh, and that first $350 was a "show up charge" for the initial inspection.  This client ended up paying $350 more than we would have charged and we do a professional looking sketch of the addition with a CAD program as part of our fee.

This consultant also had a contractor come out and provide a bid, then wrote the specifications around that bid.

Example 2 - Client calls us and asks for a "feasibility report", what do you charge? My competion charged $200 and then charged $700 for the consultation - I quoted $700 for the consultation to save the client the $200 fee and get the loan closed faster. All the lender saw was the $200 vs the $700 fee and guided them to the other guy. That is all just fine but the loan would have closed faster with us and at a $200 lessor cost to the client. Don't always choose the lowest up front fee and assume it is the best way to spend your client's money. In this case the loan officer chose to put his commission and the Realtor's commission back a week or three because he thought he was saving his client money. BTW, you don't need a feasibility report for a full 203k it is an additional fee that in many, most cases, it isn't necessary.

What should a 203k consultant do for their money?

The consultant should be making their inspection independent of the contractor and created a "bid request and job specification" then priced it out so the client has an idea of the cost of this project. Then that list goes out to the contractor(s) for bid. This way the client is informed up front and the contractors all bid the same list.

Monday, July 14, 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.

Pros:

- 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.

Cons:

- 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.

Pros:

- 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.

Cons:

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

Conclusion

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: http://EzineArticles.com/?expert=Cedric_B_Pitts

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Friday, July 11, 2014

Watch Out for 203k Consultants That Short Circut the Process

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A 203k Consultant should visit the site, determine what needs to be done to bring the property up to the FHA MPS (minimum property standards) then add the wish list items, if any, from the borrower. The idea is to provide the borrower with an estimate of the repairs prior to getting their contractor bid. This enables the borrower to know in advance if his bid is a "fair bid" or not.

Having said that there are a good many consultants who will send out a contractor or worse yet, have the borrower get a bid prior to the consulting meeting at the property so they can use the contractor's bid to create their "scope of work". This is not the way to do it.

I had one not too long ago where the borrower called me to see how much would it cost to do her consulting. I asked what her budget was as our fee is based on the amount of construction on the project. When I quoted her $800+mileage for her $65,000 project she told me the other guy she had been talking to was at $350.

I told her that my price is quoted right off the 1994 HUD price list and I would doubt very much if the other guy would do the job for $350 as we have had no increase in fees for many years and it would be an idiot who would charge less than the going rate.

It was about a month later when she informed me that he collected $350 up front at the time of the inspection... a "trip charge" then billed $800+mileage. She ended up paying more from this other "consultant" than she would have had she used our services.

Watch out for those "low ball" quotes as many are "bait and switch". He then proceeded to have her get a bid from a contractor before he would do the write up.

Typically we see a house before a contractor then provide a scope of work and bid within 4-5 days. This lets the project move forward while we wait for the contractor bids to come back to us.

Make sure your local home inspector is trained correctly. If you need the name of a good one in MS try Charlie Sessums at Alpha Building Consultants

Tuesday, July 8, 2014

Top Renovation Budget-Savers



The top 10 best budget-savers from House Hunters Renovations are listed.

Saturday, July 5, 2014

How Do I Get a "Sewer Lateral Waiver" for the Refundable Security Deposit EBMUD

By
Home Inspector with 203kOnLine.com, covering California & most other states S0289


East Bay Municipal Utilities District (EBMUD) need a copy of these three pieces of the puzzle signed by the parties involved in your email requesting them provide the waiver;

1) Borrower's acknowledgment 

2) Homeowner/Contractor agreement, and

3) Specification of repair that states clearly "Sewer Lateral - Provide/install to replace the sewer lateral from the house to the hook up at the street - [NOTE: this work must be the first work started on this project and must be included in the first draw inspection permits requirement and request. The first draw request will not be processed unless and until the sewer lateral permit has been pulled to prove this work has been started and draw 2 must show this work replaced and signed off. or it won't be processed.]"

EBMUD has been very good about working with us using this format for renovation loans. Otherwise they required a $4,500 refundable deposit which they hold until the work is completed. The work must be completed within six months of COE. Please also understand that it is approved on a case by case basis and not just a slam dunk.

Feel free to contact me for the correct email address to send this information and I'll be happy to send it to you.

Wednesday, July 2, 2014

Pros and Cons of Buying a Fixer Upper

Real estate is an extremely flexible industry where anything can happen and everything is definitely possible. In terms of home purchase, there are different options that potential home buyers and real estate investors can choose for the kind of home they wish to buy. One specific type of home available for sale is fixer upper homes. This may not be basically a popular option especially for first time buyers and those who want to transfer in their new dwelling place minus the hassle of fixing it up.

What is fixer upper?

Basically, this homes are ones that you purchase which obviously need some fixtures and repairs due to its poor condition. This is where its unpopular notion originates. For most home buyers, first impression is always influential in their choice of home purchase. Yet for those who see things in a different perspective, such homes are great investments in the future. It actually depends on the buyer's initial judgment and overall assessment whether or not buying a fixer upper is a sound investment or not.

What are the benefits of fixer upper?

Here are some of the deemed advantages when you buy such home. Take note that all the given benefits are only applicable for properties which are strategically located in venues with high appreciative value. Location is a must in real estate, thus, even if you have done wonders in fixer upper homes, if your house is still located in an undesirable and declining area, the result is still not that rewarding.

o Low price cost. This is a premium benefit that buyers who prefer fixer upper homes are entitled with. Compared to the price rates of regular homes for sale, you definitely get tremendous discount when you purchase a property that is less quality and that nobody prefers to purchase in the first place.

o Less competition. You do not have to contend with the seller's price or compete with other potential buyers since the house is yours waiting and sellers eagerly waiting for the liquidation of their property.

o High profitability potential. Again this is only applicable for such homes which have great
location. Look for a fixer upper home that is located in an area that promises an appreciative value in a long-term basis. Homes which are situated in declining places will never get price rates that will compensate all your hard work and invested finances in the renovation of the house.

Are there any bad points for fixer upper homes?

The consequence of purchasing such homes is that you are bound to experience the hassle and bustle of repairing and renovating your home before you can finally settle down. There are conditions that may cost you a fortune for mere fixtures and repairs. Furthermore, you really need to have the required budget for the renovation from start to finish.

Those who are more business and profit inclined, they definitely see a diamond in the rough with fixer upper properties. It depends on you how you make the most out of your investment especially in these types of properties.

For more ideas, tips and information on fixer upper homes, you may visit Relocating in Arizona. You may also check out Arizona Homes for Sale for other real estate advice.
Article Source: http://EzineArticles.com/?expert=Maria_Faith

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