Friday, February 27, 2015

The FHA 203(k) Rehabilitation Mortgage Insurance Program - The "Fixer-Upper" Loan

Under Section 203(k) of the National Housing Act, the Federal Housing Administration (FHA) offers mortgage insurance on loans issued by approved FHA lenders to help borrowers purchase and rehabilitate a home. The home should be one that the borrower plans to use as their primary residence. This same insurance program also covers cash-out refinance mortgage loans whose proceeds will be used by the borrower to rehabilitate their current home.

Why the "Fuss" About FHA 203(k) Loans?

Trying to buy a "fixer-upper" home and rehabilitate it can be a very complicated process for borrowers. It typically requires taking out multiple short-term loans with high interest rates. These loans often require a balloon payment when they become due.

The FHA created Section 203(k)-insured loans to address the needs of such borrowers wanting to rehabilitate new or existing homes. This program makes the process of buying and fixing up a new home much simpler by providing the borrower with one long-term mortgage loan that covers everything.

How Do Section 203(k) Loans Work?

There are several basic requirements for a home loan to be covered under Section 203(k). The home must be at least one year old, and the planned rehabilitation must cost a minimum of $5000. The property value of the home must fall within the FHA loan limits for that area of the country. FHA maximum loan limits differ for each county, borough, or county in the state where the property is located..

When a 203(k) loan is closed, some of the money goes to pay for the purchase or refinancing of the home. The remaining money is placed in an escrow account to pay for the work on the home. Funds from the escrow account are paid out as rehabilitation work is completed.

Work Covered By Section 203(k)

Many types of improvements can be covered under this program. They include but are not limited to:

  • modernization of the home
  • correcting health or safety hazards
  • repairing or replacing plumbing
  • repairing or replacing electrical
  • repairing or replacing roofing
  • repairing or replacing floors and floor treatments
  • landscaping and other work to improve the appearance of the property
  • energy efficiency improvements

Other types of home improvements are covered. You will want to consult your lender to find out if your particular rehabilitation needs can be covered under the program.

Who Can Apply?

Anyone can apply for an FHA 203(k)-insured mortgage as long as they can afford the monthly house payment based on their debt-to-income (DTI) ratio. To apply simply contact and FHA-approved lender. Many services are available online where you can fill out a single form and get referred to multiple lenders allowing you to compare multiple rates and loan offers.

J Hodson operates, an online resource for borrowers seeking information about FHA loans. There you can find more information on FHA 203(k) loans including the specific FHA maximum loan limits that apply to the particular county, borough, or parish where your property is located.
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Tuesday, February 24, 2015

I'm an Inspector - Why Should I Know & Understand the 203k? Columbia


There are several good answers to that. Every home inspector has been accused of “killing the deal” at one time or another and it just isn’t true. The home inspector is hired to discover whatever they can to “inform the borrower” so they go into the transaction with their eyes wide open. In any case they never kill a deal, the deal just becomes a 203k loan.

I did an inspection for a 203k loan refinance and room addition in which I discovered some foundation issues and when I pointed them out to the borrower who had purchased the home about a year ago. He had a home inspection and when we looked at it found that the inspector had called the foundation “typical” and it clearly wasn’t “typical” it had failed. Did that inspector do a service to the client, absolutely not, but he didn’t kill the deal, did he? In fact when questioned admitted that he didn’t want to kill the deal. What did he think his job was? He failed at the home inspection process and failed in his service to this buyer.

Buyers depend on us to “find any problems” and “report on those issues” There is pressure put on home inspectors every day but they must do their job. We need to train them in the ways of the FHA 203k loan program so they can find those issues and offer solutions to those problems by telling you who to call. The home inspector is not typically allowed to provide a quote on the repairs and certainly not to make the repairs for a fee. What they do is “recommend” other services, or “suggest” other trades be called in to evaluate the cost and expense to make repairs. There is nothing wrong with this process but it doesn’t get what you want done accomplished.

What is the answer to this problem then? Why not educate the home inspector to be a “referral partner” that is what we do. The other alternative might be to train the home inspector to be an FHA 203k consultant. If that home inspector can also do the 203k compliance inspection they are also able to pick up a second fee on that project. HUD makes a clear distinction between a 203k compliance report and a home inspection and suggest every home buyer understand that they may need both and it is okay to order both. If you have a “home inspection” or you are about to order one and you have a 203k consultant that consultant MUST review the home inspection, pest report, and any other reports such as well reports, septic system report, and any engineering reports that might exist up to an including the day of the COE (close of escrow).

The HUD guideline for the FHA 203k loan program doesn’t “require” a pest control report however it does “require” a pest control clearance at the end of the project. Therefore all of the lenders I’m aware of have a “supplemental requirement” calling for a pest report going into the project if it is a “full 203k loan”.

What about a Streamlined k? Do we need a pest report? Not necessarily. If you don’t have one you don’t need to respond to the repairs. If you have one and it is a streamlined k, you now have to clear it. The streamlined k is for "non structural" related repairs. So as you go through a home on your inspection and you find minor repairs are needed but NO STRUCTURAL issues exist you can offer this home as a "Streamlined k potential". That that means is that the borrower or buyer can get a low interest loan to make the repairs after it closes escrow. This is true of either type 203k loans. the work is always completed after it closes escrow and the borrower's expense. The agents and Brokers all get paid and then the work begins and the 203k Consultant will stay with the project until it is complete.

Call us in Columbia SC 704.451.1599 ask for David Sovde

Saturday, February 21, 2015

FHA Makes Owning Homes Possible for People With Bad Credit

Owning your own home is now possible despite the fact that you have bad credit.

If you are among those individuals wanting to own a home but have bad credit, you will be delighted to know that is now possible to achieve this. FHA home mortgages are now being given to people with blemished credit. The Federal Housing Administration is a government agency that insures the loan you are applying for from private lenders. Anytime you are unable to pay, they will partly do so on your behalf. With the government securing the loan, it definitely gives lending company the assurance they need. For this reason, even with a bruised credit score, you can apply for this loan and use it to buy or construct your own home.

After the economic recession and the downfall of the real estate business a few years back, construction business today is showing positive signs of getting back on its feet. Businesses are recovering. People are now finding financial stability bit by bit. If you desire to have your own home but you have a bad credit, then apply for the FHA housing loan today.

Some people without a financial background find it difficult to apply for a mortgage. Other people with blemished credit, who want to improve their credit score, use this loan product to repair their credit standing. An FHA mortgage loan requires only a small down payment-about 3% of the total loan amount which you can easily save up for when planning to buy a house. Depending on your purchase price, you can still maintain a fairly low monthly payment. Moreover, with interest rates for mortgages at an all-time low, you can get a huge break on the interest portion of your payment. This loan comes with a requirement for Private Mortgage Insurance, which will increase your monthly payment, but it will be removed once you pay down the loan amount to less than 80% of the purchase price. So, if you want to increase your credit score and you qualify for an FHA loan, now is the time to take advantage of low house prices and low interest rates.

Qualifying for a loan like being quite simple. Aside from being of legal age and a US citizen, you should also have a valid social security number. There is no minimum financial requirement but you need to prove that you have a steady job and you pay your bills regularly. Your income to debt ratio should show that 29% of your income goes to your home costs while 41% goes to your bills and other long term loans. The good news is a lot of people, when applying for an FHA mortgage, are getting approved and are now on their way into owning a house of their own.

When buying a home, don't overlook the importance of due diligence. Home inspection services are vital to ensure you are buying a home that is worth your investment dollars. But, not all home inspectors are created equally. Many states do not require home inspectors to be certified in anything and you can easily obtain a home inspection that isn't worth much in value. However, many qualified home inspectors are certified by the American Society of Home Inspectors (ASHI) and carry a coverted certification with this long-standing, professional organization. Moreover, home inspectors who are worth their salt further their certifications and increase their education in the home building industry. Many quality home inspectors have additional certifications in International Code Council (ICC) and/or specialize in specific testing like radon testing, home energy audits or pest infestations. Do you homework before selecting a mortgage lender for your home finances. But, most importantly, do your research before requesting the services for due diligence vendors. Select a home inspector who will give you a fair, honest and unbiased review of your potential home before you make the purchase. A certified home inspector is worth every dollar they request for their services. They will analyze the integrity of the home's structures and provide you with the knowledge to make a wise home investment decision.

Champia Real Estate Inspections provides commercial and residential home inspections in the Atlanta, GA, Tampa,FL and Orlando, FL areas with ASHI certified home inspectors. Our certified inspectors will deliver complete residential reports within 24 hours, with commercial inspection reports returned within 4 days.
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Wednesday, February 18, 2015

Why You Should Opt For FHA Loans

History of FHA

The Federal Housing Administration (FHA) was founded on 27th June, 1934. It was into oblivion for some time in 1990s but has become popular again since 2005 and is under the umbrella of The Department of Housing & Urban Development. It had strict guidelines for loan approvals and sellers didn't approve of them. But with the passage of time the FHA loans have become less stringent and have become quite poplar among a specific strata of society.

The working of FHA

To begin with, FHA doesn't guarantee your loans or gives you loans. It only insures the lender that if your loan goes into default. When someone lends you money as loan and you decide to put in less than 20% of the total loan value, FHA insures it and covers the risk the lender is facing by lending you money. Even if you don't get an approval from FHA the FHA approved lenders can accept your loan applications, process the application and underwrite and even finalize the loan.

Mortgage limits of FHA

One of the big advantages of FHA financing is that it has increased the maximum loan limits to keep. When I first started in the mortgage business, most homes in the Chicago area were priced under $100,000. Prices now, even after the down turn, are much higher. Since the cost keeps changing the FHA also keeps changing its mortgage limits. The FHA maximum mortgage changes based on the prices for housing in each area. In expensive areas, in 2009, it was 115 % of the average prices, subject to a maximum of $ 625,500. The loan limit is at $410,00 for a single family house in the Chicago area and the minimum nationwide is $270,000.

FHA loans for bad credit history

If you have had some problems with credit and you are looking at an FHA loan, you need not worry. You can get an FHA loan if we can show what happened with your credit and that it is not a current problem. FHA accepts FICO scores much lower than what is acceptable for a conventional mortgage. If you declared bankruptcy 2-3 years ago but have reestablished your credit, then you may be able to buy with an FHA loans. You may even be able to get an FHA loan within 2-3 years of your foreclosure.

FHA loans offer best rates and terms

The terms and conditions of FHA loans are simple to understand and calculate. FHA doesn't have the loan level price adjustments that are common with conventional loans, so the pricing is better for many borrowers. One of the great benefits of going with FHA is that you only need to have a 3.5% down payment, and all of this can come from a gift. FHA also allows the seller to pay the closing costs (it has to be negotiated into the contract when you buy) so you can often buy a home with out using any of your own money.

At one time, FHA was unpopular with Realtors and home sellers because their property standards were tough, and they required repairs before closing, often for little things. This isn't a real issue now, and though they still do require that the property meets their guidelines, the standards are much more practical and reasonable. They will require anything that is considered a health or safety issue to be fixed prior to closing, but in most cases conventional mortgages go with the same guidelines. There are no minimum income limit criteria for FHA loans. So if you are a first time buyer of a house are short of cash, this may be the best loan for you and a way to buy now.

Pete Thompson is a long time resident of the Chicago area, and has been a mortgage loan officer specializing in helping first time home buyers loans & Illinois FHA Loans since 1992.
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Sunday, February 15, 2015

Appraisals Come In Low From Time to Time

What can I do when my appraisal came in too low?

1) You may be paying too much for the property - renegotiate the purchase price.

2) If it is less than 10% low you might consider switching to an FHA 203k loan, even a streamlined k, or "limited 203k" which it is about to be called will gain you up to a 10% advantage on the appraised value and you get to use the appraised value as if the work is completed.

3) Reach a new "middle ground" on the selling price
Any of these are a possible solution to your problem.

What happens if the seller won't budge on their selling price?

That is a real problem. You can't negotiate with idiots.

1) They have no sense of the reality of their situation... their agent or Broker failed to school them on the real value of the property.

2) They weren't aware of the issues that surrounded their property. Many times the seller knows exactly what is wrong with their property, They have ignored and deferred maintenance for twenty or more years and now expect that some buyer will come in an buy it at full price. This is NOT a savvy seller. They are responsible for the condition of the property unless they inherited it but in any case they need to deliver the property in a safe condition or adjust the price to make it a safe condition.

3) If they weren't aware of the issues, they are now and they should be sharing them (disclosing them) with future potential buyers. I've actaully seen some sellers Agents tell us that they don't want any reports... that is so they don't think they need to disclose the findings. Beware, you seller's agents, just because it isn't in writing doesn't mean you don't need to disclose the issues that are apparent. In fact when push comes to shove and it should go to court... the judge may not like the idea that YOU told the buyer's you didn't want any written reports. Sounds like you knew the issues and just didn't want to disclose them.

We have a new office in St Lucie County FL and Pete Campbell is ready and willing to help you with issues that come up and help get your 203k closed quickly. In case you think a 203k takes longer to close than a standard FHA loan (203b), you would be wrong. They can close in the same length of time. All depends on getting the "TEAM" working for you and your client. The Mike Young Team has been doing just that for over twenty years now. Lets us be part of your team.

Thursday, February 12, 2015

From Scary to Sensational

Chip and Joanna turn a creepy farmhouse into a modern country home.

Monday, February 9, 2015

How to Get FHA 203K Rehabilitation Loans to Buy That Fixer Upper You Keep Driving By!

Some might say, "Why buy a fixer upper with a rehab loan?"

1) Have you found a beautiful home in a great neighborhood, however, you did not have the needed funds to repair it?

2) It gives you the chance to find a great property when inventory levels are tight.

3) You now have the chance to work on a rehab project.

4) Investors/Contractors finally have a flexible and workable program for them to purchase now to save a lot of cash being tied up for the long run.

5) Low interest rates for construction type financing.

6) Most of the homes for sale are distressed and this will allow financing.

FHA is the ticket to housing success either way you look at it today! The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved. These lenders fund the loans which the Department insures. FHA and HUD do not make direct loans to help people buy homes. It allows the money to be insured so that the Lender can now sell it to the secondary mortgage market which is FNMA and other quasi-government entities.

Lenders have successfully used the FHA 203k loan program in partnership with state and local housing agencies and nonprofit organizations to rehabilitate properties. These lenders, along with Federal, State and Local government agencies, have found ways to combine the FHA 203k loan with other financial resources, such as HUD's HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers. If you really want to see other means of using this program, remember that several well known state housing finance agencies have designed programs tailored specifically for use with FHA 203k loans. Buyer's will also be able to draw on the expertise of local housing agencies and nonprofit organizations to help manage the rehabilitation processing.

Here's a quick rundown of how FHA 203K loan can be used:

This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:

- To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.

- To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.

- To refinance existing indebtedness and rehabilitate a dwelling;

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.

Professional realtor Jonathan Fleming is an expert helping clients in buying, selling and acquiring residential, commercial and income properties. He provides consultation to investors, commercial property investors and residential investors of all types. He is author of homeowners tips at [].
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Friday, February 6, 2015

Is an FHA Mortgage the Right Fit for You?

Before you decide which house to purchase, you first must figure out which financing option is best for you. There are three main different types of mortgages with subcategories to each one. The three main types of mortgages are FHA, VA, and conventional. This article will explain exactly what an FHA mortgage is, and will lay out all of its benefits and negatives.

An FHA mortgage has several benefits for consumers. The largest benefit for most people is the low down payment requirement. A conventional mortgage usually requires a down payment minimum of twenty percent of the purchase price. The FHA loan requires only 3.5 percent comparatively. This can amount to a much smaller down payment. For example, a conventional mortgage of $200,000 would require a down-payment of $40,000. With an FHA loan, you would only have to put down $7,000. That is a rather large savings.

Another benefit of an FHA loan is that they have lower credit standards than a conventional mortgage. With a conventional mortgage the credit requirements are usually quite high. Normally, they want a minimum score of 720. Occasionally, they will write for as low as a 680, but there are usually extenuating circumstances. Conversely, an FHA loan can be written with scores as low as 580 (most lenders will require a 640). With the more lenient credit requirements, many more people can qualify for a FHA mortgage, then with a conventional.

Another benefit is that closing costs are usually lower than with a conventional loan. Lower closing costs allow many home buyers to afford more home, or even to lower their total amount being put down. With less money needed for closing, many home buyers are able to invest that same money into their new home.

One of the drawbacks of an FHA mortgage is that it must be your primary residence. It cannot be a second home, or an investment property. If you are purchasing for either of these reasons, you must go with a conventional mortgage.

Another downside is that an FHA loan will include FHA mortgage insurance premium (MIP) on the loan. This mortgage insurance is usually half of a percent each year of the total loan amount. This is paid monthly and is included in your mortgage payment.

If you have great credit, a large down payment, or are purchasing a second home, an FHA mortgage is not for you. In these cases, a conventional mortgage will be the best option. An FHA mortgage is the right choice for many home buyers and is most definitely a great loan program.

Visit Pleasant Valley Home Mortgage [] for all of your mortgage needs. They are a "Top 25 Tech Savvy Lender" and are America's #1 Discount Mortgage Lender.
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Tuesday, February 3, 2015

203k Loan Limits Don't Go High Enough for My Neighborhood

Home Inspector with, covering California & most other states S0289

I'm afraid that is the harsh reality in many neighborhoods. What then, is the answer where the homes in my area are selling in the $1MM to $3MM or more. All is good with another renovation product that is available and our group consultants for that as well. This is just another reason that you should chose a "team" to close your loans faster.

The parameters for the loan I'm referring to will be disclosed mid February but you can start inquiring right now. This lender loans in all fifty states and the permanent loan includes renovation money. The maximum loan amount is $3,000,000 and of course there is a higher LTV required so you could be buying a home in the $4-5MM range including renovation costs and with your down payment your loan amount would top out at $3MM.

Get your renovation loans with one of our Team Members.