Sunday, March 29, 2015

Fastest Way to a Close on an FHA 203k is Using a TEAM


I received a call from a home buyer the other day. She asked for some assistance on her 203k loan in process. Turns out the lender was doing their first 203k and chose a consultant who was just getting started and had no clue as to what he was to provide, and of course the borrower was doing her first 203k.

What is wrong with this picture?

Should be pretty obvious to everyone by the title of this post. While everyone starts with their first step, the lender should have hooked up with a proven team since they were new. The consultant didn't want to turn work away but could have called a seasoned consultant and offered a portion of the fee to gain some OJT (On the Job Training). I know our team does that in the interest of serving the client and lender more efficiently.

The Mike Young Team has been around since 1994 helping clients and lenders get their 203k projects closed faster. We just opened our newest office in St Lucie County FL with our good friend Pete Campbell at the helm. Give him a shot, I think you will like the results.

We were able to assist and put the paperwork in order for this consultant and help get that loan closed and "no, we didn't take a fee". It isn't about us, it is about the client getting what they expected. Give us try. If you have a problem closing your 203k loan feel free to contact us and we'll see what we can do to help you get it back on track.

Thursday, March 26, 2015

The Benefits and Pitfalls of Buying a Foreclosed Property

A foreclosed property is a home that is owned by a bank. A foreclosure happens when the homeowner defaults on their mortgage loan. There are three stages of a foreclosure. The first is the pre-foreclosure stage. This is where the homeowner falls behind on their mortgage payments and they are issued a formal notice that their mortgage servicer has begun the foreclosure process. Prior to a foreclosure being completed, the homeowner can sell the property. If there is no equity in the property, the house could be sold as a short sale. The second stage of a foreclosure is when the home is sent to auction. At an auction, the highest bidder may purchase the house. The bank which holds the mortgage may also bid on the property. If the house is not sold at auction, the bank by default takes ownership of the home. The final stage of a foreclosure is when the bank that owns the property puts the house up for sale through a real estate agent, or the bank may try to sell the property directly to the public.

There are many benefits to purchasing a bank-owned property. The most obvious of these is the property may be offered at a lower price than other similar properties. The longer a bank holds onto a repossessed property, the more money they will lose. Due to this, a bank will want to try and sell any repossessed properties as quickly as possible. The bank's goal is to sell their properties as soon as possible to minimize their loss. Although bidding on a bank-owned property will require patience, it is often easier to negotiate with the bank, than an individual owner. This is because a bank has no emotional attachment to a property, were as a homeowner may have sentimental value attached to the house. Because of this, the bank will usually make decisions based strictly off of the home's value. Another benefit to purchasing a bank owned property is that they are vacant. When you buy a home from an individual, there is usually a waiting period after the closing date to take possession of the house. When purchasing a bank owned property, a buyer will likely obtain the keys to the property, the same day the house transfers into their name.

There are drawbacks to purchasing a bank-owned property. These include the time that may be required to close on the property and the fact that bank-owned properties are typically sold "as is". Patience is needed if you're going to purchase a bank-owned property, because the bank will not allow the property to transfer until the title has been cleared of all liens. Most real estate agents will tell perspective buyers of bank-owned properties, "buyer beware". What this means is some bank owned properties have been vacant for months or even years. Because of their vacancy, they may have unseen damage. The damage may include any and all functions of the house (plumbing, heating, electrical, gas), or possibly severe damage (structural). It is in your best interest to hire a general contractor or professional home inspector to inspect the property thoroughly, before entering into a purchase agreement.

Most bank-owned properties have been winterized because they have typically been vacant for long periods of time. Due to this fact, and that selling banks typically will not do repairs to their properties, potential homebuyers should either have cash or have been pre-approved for a rehabilitation loan. One of the most common rehabilitation loans is the FHA 203K. If you're looking to purchase a bank-owned property and cannot pay cash, contact a reputable lender who is knowledgeable with the FHA 203K loan product.

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Monday, March 23, 2015

Can I Do the Work on My FHA 203k Project?


Can I do the work on my FHA 203k project?

Many lenders will let you do the work on your project provided you are a licensed contractor in your state.

The real question is "Should you do the work on your FHA 203k project?" and the answer to that is NO. You wouldn't believe how many home owners think they can do just as good as a contractor. What usually happens like in one case we have right now is that the owner's are holding up the completion of their own project by not telling us what they had in mind.

What started out to be a simple project was delayed over and over again when the borrower's decided to remove all of the drywall in one of the units.

Now what? You guessed it, the owner is all upset with the contractor because the contractor said this project would be complete in three months and we are now at six months and it still isn't finished.
They are not taking any responsibility for all this new work they created or the fact they were in the contractor's way the entire time.

If you want your project to go smoothly, be honest, don't provide changes in the scope after close of escrow. Stay out of the contractor's way, don't move all your stuff into the house if we have to provide floor coverings.

Most 203k projects go very smoothly, it is just when these type of surprises come about that delays will happen. We have another one where the borrower moved all their furniture into the garage. That seemed fine but the roof was then removed to the skip sheathing and lots of debris fell all over the stored items that no one thought to cover up.

If you are planning a renovation project, plan to be out of the home till the work is completed if at all possible. If not, the cover your stored items with plastic to protect it and store it where it mostly likely doesn't have to be moved during the course of construction.

If you need help contact our local office here in Fort Pierce where Pete Campbell is waiting to help you

Friday, March 20, 2015

FHA Loans, What and Why Are They?

Federal Housing Administration (FHA) home loans are a great option for many homebuyers and homeowners looking to purchase or refinance. FHA home loans are specifically useful to borrowers who cannot make a big down payment, who want low monthly payments, whose credit is not great and qualifying for a conventional loan is difficult for them.

Congress created the FHA in 1934 and it became part of the Department of Housing and Urban Development (HUD) in 1965. The FHA is not a lender. The FHA is the largest insurer of mortgages in the world. Lenders are insured by the FHA against losses as a result of a homeowner defaulting on their mortgage loan. It insures single and multifamily homes including manufactured homes and hospitals. The FHA is the only government agency that does not cost the taxpayers anything operating entirely from the proceeds from its mortgage insurance which is initially part of the mortgage payment.

This program allows a first time home buyer, who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA who insures the loan. With the recent subprime lending collapse, the FHA home loans have become cool again, as mortgage lenders and brokers are flocking to the latest FHA loan programs. FHA has been around for decades, and there are many innovative programs to help different segments of the population to realize the dream of home ownership. A common misconception is that FHA home loans are for first time homebuyers. The fact is you can only have one FHA loan at a time whether it's your second home or fifth. The mortgage limits for FHA home loans are set on an area-by-area or county-by-county basis.

This type of insurance is an attractive benefit for FHA approved and authorized lenders. If the homeowner defaults, the lender gets its money from the FHA. The lender or broker works with prospects to qualify their loan application to FHA guidelines for approval for this insurance for the loan.

FHA loan guidelines also provide attractive benefits to home buyers as qualification is usually less stringent than conventional loans. Plus, all FHA home loans are FULLY assumable, adding one more layer of protection for you and your family. Having an assumable loan at a good interest rate would be part of a good plan for selling your house in the future especially if the interest rates have gone up.
If refinancing a home, the current loan DOES NOT have to be an FHA loan. Refinancing an existing FHA home loan is actually called a streamline refinance. FHA loans are for all homeowners that are buying, or refinancing their home. FHA mortgage loans assist existing homeowners to convert their ARM to a reduced rate refinance loan that ensures a set fixed payment every month until the mortgage is paid off. With FHA refinancing, homeowners can count on market-low mortgage rates to pull cash out up to 85%, and in some cases 95% loan to value. FHA loans are for all homeowners that are buying, or refinancing their home.

Each type of FHA loan is unique and must be applied for individually. Attention is given to one's ability to make payments and handle life's expenses. Less attention is given to FICO scores when applying for an FHA loan than with a conventional loan. Qualifying for an FHA home loan is done by using a set of debt-to-income ratios that are a bit more in your favor than those used for conventional home loans.

The following two FHA loan requirements are important for qualifying: Housing expenses should not exceed 29% of your gross income; total indebtedness should not exceed 41% of your income. FHA home loans require a smaller down payment as well. Down payments for FHA home loans are low, generally 5% or even as low as 3.5%. The finance package in a nutshell is: FHA insurance + lender financing = FHA loan. Ask your lender for assistance in learning which FHA mortgage is right for you.

FHA home loans are available in rural and urban areas. FHA home loans are not loans granted by the government, but FHA home loans are mortgage loans that are guaranteed by the Federal Government. FHA home loans are generally offered at reasonable interest rates, and guarantee the mortgage company that the loan will be paid. So whether you are refinancing, buying your first home or your fifth, try out FHA.

Got more questions? Contact an FHA Loan Specialist [] today. []
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Tuesday, March 17, 2015

How Do I Choose a Consultant for My 203k Project?


Believe it or not, it astounds me to see the criteria people use to make that choice.

#1. The lender is responsible for choosing the consultant. Even though we work for the borrower it is the lender's responsibility to choose the consultant.

#2. Quite often the lender will provide a list of 2-3 consultants that they have approved so the borrower has a choice.

#3. In many cases a borrower will find a consultant on line and request they be chosen by the lender. This is more than likely how you will find your consultant in reality

#4. What questions you might ask of a prospective consultant.
    A. How long have you been consulting?
    B. How many projects have you completed?
    C. Can I see a sample of a finished report so I can see what I'm going to be receiving?
   D. Do you have the capacity to get my consultation and paperwork to me in a reasonable length of time?
  E. What is a typical turn around for a $XX,XXX project? Realize the larger the project is, the longer it might take to prepare the bid specifications. We typically tell the client 4-5 days from the time of the inspection for most projects.

It is important to know what you are going to get for your money as all consultants don't provide the same level of service. Some do the bare minimum to get by, while there are others like us that provide the entire package ready to submit to underwriting.

You may also get a "bait and switch" operator, beware of those who quote you a fee only for you to find out later that fee was a "show up fee" and then they charge the entire consultation fee later and bill it to escrow so you are less apt to find it.

In any case whatever you pay the consultant up to the HUD guideline amounts is reimbursable in the loan and counts as money you put in the transaction.

Saturday, March 14, 2015

How to Qualify the Perfect House For Renovation

How do you know if the older home you have your eye on is not going to be a big disappointment? Simple. Your Realtor will qualify the candidates in the older neighborhood so we'll find the right home for you.

First, he'll make sure that the money you're going to invest in your project is supported by the neighborhood. Are the neighbors keeping up with their properties and with their landscaping? Have they added new windows, additions or garages? Is the neighborhood in a convenient location to shopping, major roads, hospitals, restaurants, movie theaters, and other services such as doctors, dentists, salons, etc? And lastly, is the neighborhood quiet, while still being 10 minutes away from everything?

Second, after he has identified your ideal property, he'll prepare a purchase contract with the loan terms stating it will be a FHA 203K Renovation loan (either Streamline or Consultant). The clock starts ticking after the seller agrees to the terms and then you need to get with your contractor and/or the HUD consultant to finalize the estimate and the scope of the work. A knowledgeable inspection will minimize your risk. Where he will need help is through the renegotiation process so you set the fee for the renovation loan if you need to repair the roof, fix termite damage or update the HVAC system.

Third, he works with reputable and established contractors who provide specific documentation that they are specialized in plumbing, electrical, HVAC, carpentry work, etc. For a $25,000 Streamline FHA 203K loan, he would help facilitate the complete contract package so everyone would be properly and evenly reimbursed. For instance, he would pay the roofer $5,000 with a two-party check (out of $10,000) to get started, order materials and the same thing would happen for the GC/handyman carpenter/painter, who would receive $7,500 (out of $15,000). Within two to three weeks of closing, each contractor would receive their balance. Once all work is complete, the appraiser will then go back out to the property, and verify that the work was officially done according to the bid.

I suggest having a contingency of 10-20% of the contract fee, so your renovation loan would be $30,000, instead of maxing out at $35,000 as your upper limit for a Streamline FHA 203K loan. This contingency of $3-6,000 will help fix any safety, hazardous, mold, or termite issues. And if you come in under your repair price, you can reduce the time on the loan.

Sure there's a lot of fear of the unknown when you want an older home, but with a good realtor as your guide, you can focus on your move and not on anything scary behind your walls.

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Wednesday, March 11, 2015

What is the Maximum Number of Draws on a 203k Project?


I have had a major lender turn down a loan when our contractor requested 10 draws @$30,000 for a $300,000 construction amount.

I set in on a Denver HOC webcast as I thought we would get some new input or insite. Sadly they were merely reading from the 1994 manual, and mis-reading this portion as so many do.

4240.4 Rev-2 states "Intermediate draws (four maximum) [and one final draw] are inspected by the HUD assigned fee (or DE staff, where applicable) inspector (see paragraph 4-9)."

It goes on to state "If the cost of rehabilitation exceeds $10,000, then additional draw inspections are authorized provided the lender and borrower agree in writing, and the number of draw inspections are shown on Form HUD 92700, 203(k) Maximum Mortgage worksheet."

That is pretty clear to me that more than 5 draws are allowed as long as everyone agrees.

Sunday, March 8, 2015

FHA Loans Help First Time Home Buyers

Being a first time home buyer is both an exciting and frightening time. You cannot wait to find the house of your dreams, yet you worry about finding a lender, the interest rates and the final monthly payment. These concerns double if you have ever filed bankruptcy or have blemishes on your credit. This is why so many first time home buyers turn to FHA (Federal Housing Authority) loans. Since 1934 the FHA has been helping first time buyers like you make their housing dreams become a reality.

Why FHA?

FHA loans offers many benefits that conventional lenders do not. They are much more lenient in a variety of ways; ways that would normally get you a big fat "NO" on other home loan applications. Let's take a few moments to explore these benefits and why you should apply for an FHA loan when purchasing your first home.

Your Credit Score

Traditional lenders require a credit score of at least 720 before they will even consider approving you for a home loan. FHA, however, will approve you with a credit score of 620. Have you filed bankruptcy? No problem. Yes, you have to wait a bit, but with FHA the time is much shorter--two years after filing they will approve your application. If you haven't filed bankruptcy, but have collections or late payments, they tend to overlook these provided you are now making payments on time. Liens, however, are not forgiven.

Down Payments and Interest Rates

With an FHA loan, your down payment is only 3 percent, versus the typical 20 percent required by most other lenders. They also permit the seller to pay up to 6 percent of the closing costs to make the process even easier on you. Although your FHA interest rate is variable (there may be some fixed rate FHA Loans), their rates are so low you actually pay less over the life of your loan than a person with a 30-year fixed mortgage rate.

Application Process

It is actually fairly easy to get approved for an FHA loan, as they are lenient about who they lend to. You must have steady employment and meet the credit requirements, which we talked about earlier. They do expect a reasonable explanation for late payments, such as the loss of a job or a serious illness.

Importance of Debt to Income Ratio

Your debt to income ratio plays a vital role in any lender's decision. They take into consideration all your current debt (i.e. car and credit card payments, school loans, etc.), and will add in your potential mortgage payment. FHA loans are much more lenient about this as well. They allow a 50 percent debt to income ratio, which is extremely high in the lending world.

Now that you have read this article, it is my hope that your hope is rejuvenated and your mind at ease, at least a little. Although your credit life may not be perfect, you still have a fighting chance at buying the home of your dreams, thanks to the Federal Housing Authority. During a time and economy that is making it difficult for first time home buyers to obtain a mortgage, FHA loans are giving you back your dream. Run with it.

Charles F. Butler is a Real Estate Professional in Carson, Ca, specializing in First Time Home Buyer Programs, Distressed Sales, REO Residential and Commercial properties. Charles helps homeowners develop a second income stream so they can save their homes from foreclosure. Follow My Blog: Http://  Develop A Second Income Stream  3 Weird Tricks To  Earning 100% Commissions  Commission Loop Holes
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Thursday, March 5, 2015

Can I Take a Non Residential Use Property & Convert it with the 203k?


That has been a question for years that keeps cropping up.

This past year I had one lender who kept finding these properties where the foundation is all that remained. In one case there was a barn they people wanted to convert to a living area. Some of these old barns never had a foundation which makes things a little difficult for sure.

In another casee he found a foundation where the house had burned to the ground years ago and no one had purchased the site to rebuild. If we use that existing foundation, even if we add to it, we will likely be okay to move ahead.

This house is located off Felter Road in Milpitas/San Jose area. Clearly is a 203k prospect. This one actually conforms to the standard guideline that everyone is familiar with.

If you are looking to convert a non residential use to a residential use and you would like to read it in HUD's own writing here it is just for you. Here you will find the guideline clearly depicts a non residential land use converting to a residential property.

That should open your eyes to some possibilities in nearly every older community where the land uses have changed over a longer period of time and now you can see some jewels in the rough.

Have you been trying to sell that commercial building for years and it just sits there? How about a 203k with only 3.5% down payment and do it as a mixed use building?

Monday, March 2, 2015

Craftsman Regeneration - Fixer Upper

The Gaineses transform a classic for a client who tragically lost her home.