and it works allot like the the HomeStyle Renovation Mortgage by FannieMae. What is the major difference? Simply PMI - Private Mortgage Insurance. If you have good credit and are putting 20% or more down on the property there is NO PMI with the FannieMae renovation loan versus the FHA 203k having PMI for the term of the loan.
So before you tell your client to get into a home with as little
money as possible... think about your liability. I know you told them
the roof might leak but if it turns out to leak... mmm, you just might
get sued anyway.
When your client decides to use a renovation loan I would encourage
them, if they can afford it, to get the work done, all of the work so
they don't become a slave to the house. Don't spend every waking moment
living on a construction site. Let the pros repair your home and enjoy
what you have.
While people are enjoying that new home in Fort Pierce FL please meet Pete Campbell if you haven't already met him.
Most projects will require one permit or another. This week we have had a couple comments from contractors as they attempt to put them into the line item bid form under "miscellaneous".
A couple were quite adamant about doing it that way and it isn't
going to happen per the HUD Guideline. The guideline states permit fees,
architectural and engineering fees are to be kept out side the line
items in the bid.
It is done this way so these fees can be paid out at 100% with no
hold back. Any of the "line items" if they could put it there would have
a 10% hold-back. If we put them in a line item then input them where
they should be the borrower would be paying for them twice.
What I think it really boiled down to was the contractors wanted to
see their mark up for profit and overhead on those expenses since they
were paying the upfront money for those services and rightly so.
The guideline and more-so the lenders have determined they will only
pay the exact amount of the permit fees and/or architectural and
engineering fees and NO MORE.
I suggests your contractor figures out how much that profit and
overhead would have been, take that amount and add a line item in the
bid called "permit processing fee" - this is the cost for the time the
contractor sits at the inspection department waiting for the permit to
be issued or meetings with the architect or engineer to get things
resolved. He is entitled to get paid for his time and this has been a
good solution that still keeps things within the guideline.
Yes, I know there is another instructor, and maybe more, out there
telling consultants that is is okay to put these fees into a line item
but "beware" you can be sanctioned and removed from the list for doing
something that it outside the guideline. It is your career at risk not