Monday, December 29, 2014

FHA 203k is Just Another Renovation Loan

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.

Friday, December 26, 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, December 23, 2014

Saturday, December 20, 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 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

Wednesday, December 17, 2014

The Skinny On FHA Loans

The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders. FHA insures these loans on single family and multi-family homes and has insured tens of millions of properties since it was created in 1934. It's important to note that the Federal Housing Administration does not issue the home loan - this is done by your mortgage lender. However, if you default or stop making your mortgage payments, your home loan lender receives financial recourse from the FHA, therefore reducing the lenders' risk and making them more willing to loan money, while also keeping borrowers' costs down.

The combination of low rates, low down payment, and flexible lending guidelines have made it one of most attractive loans for home buyers today. It may help you save money and possibly qualify for a larger mortgage.


The FHA is more lenient and understanding about credit issues and personal problems. If you had a previous bankruptcy, you can usually get an FHA loan only two years after the discharge date. If you had a foreclosure, you'll have to wait 3 years to apply. If you had late payments within a distinct time frame and had a good payment history the rest of the time, they may overlook that. Collections are usually not a problem. However, you will not be eligible for the FHA loan if you have had federal liens such as tax liens or defaults on student loans. Your credit score needs to be only a 620 when putting down the minimum three percent unlike other conventional loans that require a score of no less than 680 and sometimes in the 700s.

Down Payment

The super part of the FHA loan over conventional loans is the low amount of cash needed at closing. With an FHA mortgage, you can make a down payment as small as 3.5%. This benefits those home buyers who don't have a lot of money saved up for a down payment; and, home buyers who don't want to give up all their cash, but would rather save some of their money for moving costs or emergency funds.

Few loan programs will allow your entire down payment for a home to come from a gift. The FHA loan program allows your entire down payment to be a gift from a parent or relative an employer, an approved charitable group, or a government home buyer program.

This program will also allow seller concessions. This means you can ask the seller to pay up to 6 percent of the closing costs. Closing costs are additional expenses associated with buying a house such as; loan origination fee, title search fee, recording fee, survey fee, prepaid interest, prorated taxes, and insurances.


FHA loans have very competitive rates, which means a lower payment each month. Having a lower interest rate means you will pay less over the life of the loan.

Debt to Income

The FHA loan does allow a high debt-to-income ratio. Having a car payment and student loans will still allow you to qualify. Still feel that you can afford the payment? The FHA will allow a maximum of 43 percent debt-to-income ratio, whereas conventional mortgages allow a maximum of 36 percent debt-to-income ratio. Figure your debt-to-income ratio by adding up all of your current debt, including your proposed new mortgage payment (including taxes and insurance), and divide it by your monthly income. The answer will be your percentage.

Basic Documentation Required To Apply

Copies of paycheck stubs for the past 30 days

Copies of W-2 forms or 1099 forms for the last two years

Complete tax returns, including all schedules, for the past two years (if self-employed)

Copies of all bank statements and investment account statements for the past two months

Identification (driver's license, passport, or military ID)

Year-to-date profit and loss statement (if self-employed)

The FHA is pretty lenient about whom they will lend to. If you meet the credit requirements, have the 3.5 percent down payment, and have steady employment, you will probably be approved. Like any other loan, you will be required to provide all information related to your assets (personal property, cash in the bank, and investment account statements), which helps lenders determine the source of your down payment and closing costs. All-in-all, it can be an easier process than a conventional loan.

Let's do it YOUR way! Buying a home in Kokomo or Lafayette areas? Let me know your dream home and the kind community you wish to live in. Tell me your wants and needs. Let me know what's important to YOU, and we'll find the community and home that you desire. Selling your home in Kokomo or Lafayette Areas? Let me help you to make you the most money possible in the shortest amount of time. I offer sellers a professional, written marketing plan, the most progressive marketing strategies in the industry, consulting, and staging. I am a mobile agent committed to helping you around YOUR schedule. Can't drive to my office? No worries... Let me come to you. I am here to help YOU make this transition and this transaction as convenient and smooth as possible. Gena can be reached at 765-210-5582 or you can email her at You can also visit Gena's website:
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Sunday, December 14, 2014

Permit Fees for a 203k

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 theirs.

Thursday, December 11, 2014

Renovation Doubles Home Value

A large renovation budget doubled the value of this older Colonial home.

Monday, December 8, 2014

203k Feasibility Report for a Buyer

What is a 203k feasbility report?

A buyer is looking at a home that needs substantial work... how much will it cost to make those repairs? That is the big question. If it costs $50,000 then we have a deal, but if it costs $150,000 this isn't the property for this buyer.

Solution: Have a contractor provide a cost to make those repairs, an estimate. What do you do with that estimate? Use it to make your offer.

Why would you use a "consultant" to do that same estimate? Simply this, a contractor might miss the obvious additional repairs and only provide you with a bid to cover the major issues. The minor issues can also add up to your demise. The second reason is the consultant will provide the bid overnight while the contractor, in most cases, may take a week or more.

Learn to use the right tool in your toolbox, the contractor and the consultant are just tools at your disposal, use the right one that fits your situation.

Friday, December 5, 2014

203k versus HomeStyle Renovation Mortgage

These two loan programs each have their place in your business. When do you know which one is the best for your client?

FHA 203k typically is for lower credit scores or clients with smaller down payments or both. Loan limits in many Bay Area Counties is up to $625,500 for a SFR and over $1.2MM for a fourplex. That should work on a four-plex in Marin County.

Where can you get financing for a "mixed use building"? Easy, the FHA 203k comes to the rescue. These are all 3.5% down... mixed use loan with 96.5% financing. That is fantastic. This is an "owner occupied" loan program.

Why would you use a HomeStyle Renovaton Mortgage?

A little higher down payment, about 5% instead of 3.5%. The big difference is there is no PMI, private mortgage insurance.

This product can be used for second homes and investor properties. You already own a rental and it was trashed after the last tenant moved out... this might be the loan program for you.

My client is buying a fixer for $1,250,000 or more... 

I am dealing with a home that has a purchase price of $1,250,000 and it needs lots of work. My client is putting allot of cash into the home.  This is perfect for a 203k or HomeStyle Renovation loan to get up to $625,500 to make the repairs.

The HomeStyle Renovation Mortgage is for people with good credit that need money for their renovation project. Some use it to purchase and renovate their home others use it to refinance and renovate their home. If you have sold a home in the past few months that needs repairs, you could be the hero and let that client know if they need financing to make those repairs we have some low interest money fixed rate for thirty years to solve that problem.

There are some other products out there that secured by a second mortgage if you need up to $75,000 to complete a project and ran short of funds.  I just heard about an unsecured loan product that will provide $40,000 to complete a project. Lots of stuff coming up in the new year.

Tuesday, December 2, 2014

Can the Owner Supply Materials for the Contractor to Install on a 203k

Not really, in the case of the owner providing a washer and dryer and the contractor installing the plumbing hook up that isn't an issue but the washer and dryer don't affect the value of the property anyhow so it just wouldn't be mentioned in the scope of work at all.
One home owner we know wants to provide all of the materials to keep his loan amount down. The way to do that is to increase the down payment to cover those items but he is also trying to keep from paying a contractor markup on those items he was willing to go pick up and deliver to the site for the contractor. 
This shouldn't be done. As a consultant, what if the borrower/owner doesn't fulfill their part of the bargain, HUD says we have to have enough money in the project funds to get that done without relying on the owner's participation. We have to be able to get the work done regardless and this scenario doesn't allow that if the owner's circumstances change and they are unable to provide those materials. 

Therefore the answer is a big "NO" regarding "owners to provide" as the owner's can't provide anything in the scope for the contractor to install. The appraiser gives no value to an item provided by the owner... which in the case of a washer and dryer wouldn't have an affect but if the owner was providing all the kitchen cabinets and counter-tops, the appraiser would have to ignore the value for those items and the property might not appraise high enough to get the loan. There are just too many reasons this doesn't work.