Sunday, August 31, 2014

FHA 203k - HUD is Getting Back to Strict Adherence to the Guideline

This may be good or bad for you and your client.

It is impacting one client that I'm aware of right now on a commercial building that he wants to turn into a residential use or mixed use building.

The guideline has always been very clear on the building must be a residential or mixed use building with a certificate of occupancy dated at least twelve months prior. Yet for years that rule was relaxed substantially to allow any building with a certificate of occupancy to be turned into a 1-4 unit building or a mixed use building under the existing guidelines for those type properties.

NO MORE, it is now strictly by the book. The property must have had some residential use prior to the renovation. A commercial building cannot be renovated to residential use or mixed use under the FHA 203k program.

Where I think this is going to bite us most is where the guideline says there is only a foundation on the site all of it must be reused and an engineer must come out and  certify it is all good and all can be reused. HUD actually had me do on years ago that only had 3 piers on the site. We used that as the basis of rebuilding the home. It was quite common that even if we only had a piece of the original foundation we could rebuild a home. NOT going to happen any longer.

There was a pump house on a lot in Santa Cruz mountains and that is all that remains of the original house and structure... NO CAN DO

There was a home raised on a city lot but when they took it down they damaged a small portion of the foundation... NO CAN DO

It doesn't mean there aren't other construction loans available for these scenarios just not the FHA 203k.

Thursday, August 28, 2014

FHA 80th Anniversay

FHA Turns 80! Take a look back at 80 years of FHA and how it has helped millions of Americans become homeowners.

Monday, August 25, 2014

Streamlined k Software for Your 203k Department

Attention Lenders! This is a sales pitch...
  • So you do allot of Streamlined k loans, how do you manage the contractor/subcontractor paperwork? Cut that paperwork way down and get on to the next project faster.
  • Get a consistent package into your underwriting team
  • Close your Streamlined k loans even faster than you are typically used to.
Do you want even more Streamlined k loans in your pipeline?
  • Try our "Advanced Marketing Program". This program will increase the 203k loans in your pipeline and is a very reasonably price, one time fee.
Do you want more and I mean a lot more FHA 203k and/or HomeStyle® Renovation

  • Call us and we'll set up a meeting to go over the possibilities at your convenience.
Kick the tires on our software for FREE. You can use it in one of your branches or all of your branches absolutely free for 6 months

We will extend this offer to your contractors as well. If you have 203k contractors who aren't using the HUD format and you want them to, just send them here and we'll extend the same offer of a FREE six-month trial of our software to help you get them in line and make your underwriting job easier.

When you decide to purchase, this offer is a one year subscription thereafter for $250 per year. We have been providing this for 19 years. Sign up here

Friday, August 22, 2014

Wednesday, August 20, 2014

I’m a Contractor Why Should I Learn About the 203k Loan Program?


If you have all the work you need already then maybe you don’t need to know about the FHA 203k loan program but there are allot of you out there that have been buying my eBook “Contractors and the 203k” indicating that many of you are becoming aware of this program. Why is that? Simply put “more business” than you can handle.

When I take on a new contractor into our “203k Team” we ask one thing of them “Stop us before you get too much work from this program”. The last thing any of us want is for you to get a bad reputation for not being able to get these projects to completion in a timely manner and we have had some that don’t know when enough is enough until we start getting bad service. So… please just pull back a little when the time comes and then open the spigot again when it appears you are about 3-4 weeks from needing more work.

There are two types of FHA 203k loans. I will describe the differences below and YOU need to know them and choose the right one for your circumstances:

1) Full or Original 203k (started in 1961)

This program uses a 203k Consultant to create a bid specification. That specification is sent to you, the contractor for your bid. It is typically a blind bid situation. In some cases the contractor has already put in a bid for the work they think will be required but in many cases they aren’t aware of the HUD Guidelines so they may miss a few things but overall this seems to cut down on the time it takes to close the loan so it isn’t all bad. If the borrower has several clients come out and bid the project prior to seeing us to create the “scope of work” it can be a mess. As much as the client tries to have them bid the same project if you don’t write it down each contractor will have their impression of what they thought you said and each bid will be slightly different and the client will not have a clear bid that they can use.

I prefer to be the first one on the job to create the specification of repairs. I also will bid the job (never will do the work, just bid it) so the client has an expectation and we all know this project is still viable.

There is no “up front money” for this program. The contractor must be well healed and have credit or money or both to get the project started. Since each draw must be no more than 30 days from the prior one the contractor should have enough money to carry his/her business, materials and labor for that period of time plus whatever they need to run the rest of their business. This program allows for interim draws and you can get partial payments for anything that is partially complete but only for completed work. Some lenders will follow the guideline and let you get money for cabinets and finished flooring up having it delivered and stored on site. Some lenders will advance 50% of the window and cabinet materials money only when they are custom sizes and the check may be made out directly to the cabinet maker or window manufacturer.

This has been and can be a difficult situation for a small contractor or a contractor growing too fast. They need, heck, we all need “cash flow” which is the life blood of every business.

2) Streamlined “k” (started in 2005)

This program was intended to make the program easier to use for the majority of the lighter renovation projects. The significant thing with this one is that it cannot have any “structural” component. It is intended for smaller projects and though the maximum construction costs are limited to $35,000 per the Guideline in reality it is only $30,000-34,200. If you come up with Streamlined “k” loans where the work is $35,000 and your lender only does the Streamlined “k” you will be disappointed most of the time. The $35,000 must include the costs and fees associated with it. The $30,000 figure is due to the requirement of many lenders to maintain a 10% contingency reserved which takes a $30,000 right to $33,000 immediately.

The big thing here is that there is “up front” money for the contractor of 35-50% of the construction cost. The project must be completed in no more than 60 days, and there is only one final draw at the completion. No other interim draws.

If you are a contractor or know a contractor, have them send me their full contact information to include company name, full address, their name, license number, and I will send them FREE access to my eBook Contractor's and the FHA 203k program

Thursday, August 14, 2014

Sunday, August 10, 2014

Energy Efficient Mortgages and 203K Streamline

Ray Hall presents the best kept home loan secret in town - Energy Efficient Mortgages and the 203K Streamline program.

Thursday, August 7, 2014

Can I Add a Detached Garage with the FHA 203k Loan Program?

Yes, you can, detached garages are perfectly okay with the 203k it is a common missunderstanding that you can't but the rule actually states that IF there is living area at the garage addition or if you are adding living area it MUST be attached to the main structure.

 It was a common thing to add a second unit to an existing home when zoned for it and the lot was large enough by adding a garage or carport or two between the new unit and the existing unit all through the 1990's.

We had several in Rodeo where they had to replace the foundation and lifted the home high enough to add two units to the lower level and convert the original home to two units.

-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".

Monday, August 4, 2014

How Can I Rebuild My Home After a Fire That Destroyed It?

The FHA 203k or FannieMae HomeStyle Renovation loan products may be just what you need. In most cases you may find that you have no down payment but can get the money to make the repairs needed to bring your home back to it's original or better condition.

If your home was dated prior to the fire, this could be what you need to do the updating as you rebuild your home.

Loosing a home to a fire can be a very traumatic experience. Whatever those feelings are you have to make some choices, either rebuild and get on with your life of take your insurance money and move to another home. If you choose to rebuild, update, add on, etc, all these things are possible and you may be able to keep some or all of your insurance money in your bank and use the new loan to do it all.

In the event you choose to move away to another home and pick up the pieces there is still an issue remaining. You are on title still at the home that burned to the ground or at least was fire damaged. You are responsible for the taxes on that property and need to get it out of your possession. Who might buy that burned out home? ANY potential buyer in that neighborhood should jump at taking this home off your hands and paying you the "land value". They can use one of these loan programs to rebuild the home and this is a great time for them to make this home "all theirs" that means with their own colors, textures, roof, floor coverings, etc.

 What an opportunity for someone who might have been looking in that neighborhood before the fire. If you are an agent and had been showing homes in that area, you may be able to sell those buyers and give them the very home of their dreams.

We had a buyer pick up a lot for the cost of the taxes... $2,500 after a fire. The lot was worth $50,000-75,000 by itself so the "investor" made money on the purchase... oh, that is why they are called investors.

Can an investor purchase a fire burned home and rebuild it... YES, we can show you how it's done.

Mike Young, 203k Team Leader Mike ready for your 203k order 

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 ten offices in CA covering both CA states, NorCAL and SoCAL 

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 you like what you see here please take a look at Another blog by Mike Young in Spanish and other languages.

Friday, August 1, 2014

Conventional V/S FHA Financing

Conventional Financing vs FHA Financing

There are several financing options today when buying a home and it can be confusing to choose which option is best. Making the right decision is essential so that in the long run there won't be any financial constraints in paying up loans and you won't have to give up your dream home.

So today we will talk about what financing options that are available. Also the pros and cons for the home buyer to be able to determine which loan best suits their needs and eligibility.

There are 2 common types of loans offered when purchasing a property: Conventional Financing and FHA Financing.

What Is the Difference Between Conventional and FHA Financing?

Conventional loans are not guaranteed by any government agency. Typically they are offered by brokers, banks and credit unions. Buyers can obtain a conventional loan with a down-payment of less than 20% but qualifications are uncompromising. Although a conventional loan may have more rigorous credit requirements than FHA loans, if you are in a position to use one you might find that the payments are lower than FHA loans which are insured by the Federal Housing Administration. An FHA loan is guaranteed by the federal government through HUD or Housing and Urban Development Department. The federal government guarantees the lender that if the house is foreclosed on they will buy it. Since the loans are 100% covered in case of mortgage default, FHA financing offers lower down payment requirements and relatively tolerant qualification requirements. FHA loans are common among first-time home buyers and consumers with less than perfect credit history.

What are the PROs and CONs of Conventional Financing and FHA Financing?

Conventional loans are offered through private lenders without government restrictions; they may offer more room for negotiation and are more flexible. It offers many more loan program options and a higher loan than FHA.

However, in addition to higher down payments, conventional loans may have higher interest rates and require higher credit scores. You have to read contracts very carefully, since lenders can include additional clauses such as prepayment penalty clauses. Always be sure you know all the terms of your mortgage before signing any paperwork and read the fine print!

Now for FHA loans, in addition to low down payments and lenient credit requirements FHA loans offer low interest rates and no prepayment penalties. It also has lower mortgage rates and it may be easier to qualify for than a conventional loan. However, FHA loans also have disadvantages. It is subject to mortgage insurance for the life of your loan. In this case your only way out of the mortgage insurance is to refinance into a conventional loan in the future when you qualify. FHA loans also have fewer loan options than conventional loans; it is only available on owner-occupied properties and you are generally only allowed to have one FHA loan.

Who is eligible?

Conventional loans require a credit score of at least 620 most of the time; and scores under 700 may lead to either higher interest rate or additional fees. Conventional loans usually require a down-payment of between 5 and 20%, and typically allow 45% for the debt-to- income ratio. Other criteria for conventional mortgages may include a good job history, full documentation of income and assets, and price stability in the area where the home is located. Conventional loans are also available at almost every bank and lender and it can be used to finance just about any property. Meanwhile, FHA loans require a minimum down payment of 3.5%. The minimum credit score required is 500; however, only borrowers with a credit score of 580 or higher qualify for the lowest (3.5%) down-payment option and in general lenders want 640. Others are required to put 10% down.
This may vary from lender to lender though so it's best to always ask.

Now that you have an idea how Conventional financing and FHA financing works, here's a quick summary for you:

Conventional mortgages are easier to process and they allow home equity to build faster since they require higher down payments. However, you need a good credit score to qualify for a good interest rate, and some lenders require up to 20% for a down payment. These are for people who have good to excellent credit.

Lenders for FHA loans are more willing to look at the overall credit picture, rather than just the credit score alone. They require a much lower down payment and have no minimum credit score requirement. FHA loans are good for those with poor credit or for those who have less money for down payment. The mortgage insurance is high though and last for the life of the loan.

What financing option will you choose?

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