Monday, September 28, 2015

Where Did The 203k Come From? FHA 203k Renovation Loan History

A brief history lesson, by Josh Smith a 203k Renovation expert, explaining where the FHA 203k Renovation Loan originated from!

Friday, September 25, 2015

FHA 203(k) Loan Program Provides Money For Home Repairs and Renovations

Thinking about buying a fixer-upper, but worried about coming up with the money to pay for the construction costs? Or are you wanting to renovate your existing home but just don't have the available time or money? If so, the FHA may have a program to solve your problems. The section 203(k) program administered by the FHA provides funds to prospective and current homeowners to make repairs and/or do renovation work. A 203(k) loan combines a home's purchase price and cost of repairs into one FHA mortgage, with only a 3.5% down payment.

A growing number of people are taking advantage of this program, a reflection of the large housing inventory caused, in large part, by foreclosures resulting from the recent economic turmoil. The FHA reports that the number of 203(k) loans taken out in 2008 nearly doubled from the previous year, with 2009 experiencing a 40% year over year increase. Potential homebuyers, attracted by relatively low market prices on foreclosed properties, are often left to contemplate how (and when!) they are going to be able to pay for the repairs once they purchase the house. This is not an uncommon scenario as foreclosed homes, which are often left abandoned, typically need extensive repairs. The 203(k) loan program solves this problem by enabling homebuyers to finance the construction work and start repairs on the home immediately after a loan closing. All residential properties, not just foreclosed homes, are potential candidates for the 203(k) loan program.

What is the FHA 203(k) Program?

The FHA 203(k) program is a home rehabilitation and repair program, designed to revitalize neighborhoods and spur homeownership. It can be used by people who are looking to purchase a new home, or by existing homeowners wanting to do repair or renovation work on their current home. What consumers end up with is a single FHA insured mortgage - the loan amount consisting of the home's purchase price (or current loan balance in the case of an existing homeowner) plus the estimated costs of the construction work.

Normally, someone purchasing a home that is in need of repairs has to first obtain interim financing for the rehab repairs and then additional financing to purchase the home. In this scenario - once the repairs are complete the homeowner must then take out a new mortgage to combine the two loans. With the 203(k) program, on the other hand, a borrower need only obtain one mortgage, which covers the home purchase and the property rehab.

The 203(k) program comes in two flavors; a standard version and a streamlined version. With the standard program, the construction costs must be at least $35,000. The maximum construction costs are limited only by the estimated "as-improved" value of the house (i.e., the value an appraiser estimates the property will be after repairs/renovations are completed). All FHA mortgages, with or without a 203(k) loan, are subject to mortgage loan limits. The mortgage amount can range from $271,050 to $729,750, dependent on where the home buyer resides. The total mortgage amount, which would include any cost of repairs, cannot exceed 110% of the "as-improved" home value. The streamlined 203(k) program is used for situations where the construction costs are under $35,000.

To be eligible, properties must be one to four family structures that are at least one year old. Condominiums may qualify, though there are some added restrictions and limitations. Additionally, FHA allows "mixed use" properties (i.e., properties with both residential and commercial use) to be eligible for the program.

A partial list of what you could use a 203(k) loan for include; replace a roof, add a room, remodel kitchen or bathroom, landscaping, update appliances, repair termite or water damage, update electrical and/or HVAC systems. It's also important to keep in mind that the program requires certain repairs (if needed) to be made. These mandatory repairs deal specifically with bringing the energy efficiency of the property up to code.


The FHA 203(k) loan does not come without some added costs and other potentially negative factors. Consumers need to carefully weigh the pros and cons in order to decide if this program is right for them.

o Homebuyer will incur fees up and beyond the normal mortgage closing costs. A supplemental origination fee - which is the greater of $350 or 1.5% of the portion of the mortgage that is being used for rehab purposes - is required. Additionally, a fee consultant (who is HUD approved) must visit the site prior to the appraisal to ensure compliance with program requirements. Expect to pay $100-$200 for this service.

o Takes longer time to close on mortgage loan - up to 4 weeks longs than a normal conventional mortgage

o Have to use an FHA approved lender. Though many such lenders exist- not all lenders will participate in the 203(k) program.

o Some lenders may prefer to deal with a home buyer who is able to pay cash for a home (versus someone using the 203(k) program) due to getting a quicker loan closing turnaround.

o Expect more paperwork than a normal conventional or FHA loan


o Access to funds needed to complete repairs and/or renovations

o Convenience - homebuyer does not have to find separate financing for construction, plus construction begins immediately after loan closing

o Speed of construction - the process of completing construction work is typically quicker than if the homeowner were to conduct renovations on their own

o The 3.5% down payment - conventional mortgages typically call for 10-20% down payments.

o Ability to finance up to six monthly mortgage payments.

The 203(k) Loan Process Step by Step

The 203(k) process has more paperwork and steps than one would experience in a conventional mortgage process. The steps are as follows:

  1. Borrower finds a home to purchase and repair/rehab (or seeks to repair/rehab current residence)
  2. Borrower and their real estate agent completes a preliminary feasibility analysis to determine the extent of work required, along with an approximate estimate of the cost and expected market value of the home once all work is completed
  3. Sales contract is executed
  4. borrower selects and works with a FHA-approved lender
  5. Borrower, contractor, and an FHA-approved consultant meet at the property to determine "required" vs. "desired" improvements
  6. The fee consultant prepares the write-up
  7. Home buyer enlists contractors to make bids - then selects a contractor
  8. Lender gives the construction plan to FHA-approved appraiser to determine "as-improved" value
  9. Lender determines maximum insurable mortgage amount for the property based on the "as-improved" property value
  10. Loan is underwritten by lender- if approved lender issues a "firm commitment" and a loan closing is scheduled
  11. Loan is closed. Funds are set aside in escrow accounts. The loan is FHA insured after loan closing
  12. The work begins. Contractors are paid in draws as FHA fee consultant approves each phase of completed work. Homeowner has six months in which to complete the entire work
  13. After work is completed - and the borrower states that all work has been completed to their satisfaction, a HUD inspector conducts a final inspection. If the inspection proves OK - the lender pays the remaining draw to the contractor. A final 10% may be held back for up to 35 days to ensure no liens are placed on the property

It should be apparent that the FHA 203(k) program offers a viable solution for some home buyers seeking funds for home repairs or renovation. Each individual needs to consider the pros and con's and apply it to their own unique situation. features an extensive article library covering a wide range of personal finance issues and topics, such as the article regarding FHA 203(k) Loan Programs. Sections focused on mortgage topics educate consumers on loan modification and tips on refinancing.
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Tuesday, September 22, 2015

Become Part Of A 203k Team

I've always looked at the 203k as a team sport, even when I first got involved with it. When we put out our audio tapes in 1998 we even discussed it.

You are only as good as your 'team' in any case. If your consultant can't write a good report, the lender won't have much to work with and on the other hand if the lender can't get the loan closed it doesn't matter how good the 203k consultant writes the report. T his is true of the rest of the team as well. Your teams each should have a Lender that can close an FHA loan, even a 203b quickly.

Our trained 203k consultants will provide 100% of the 203k portion so the lenders can take our MMW and use it to help them fill out their form... it is their responsibility but we try to make it easier for them.

If we all do our part of the project and then pass the baton to the next team member this frees us up to get the next project started.

Example: A 203k loan may begin anywhere by any one of the team members. We quite often get calls from our websites or the HUD website from a borrower... we immediately asses the situation and more than likely we'll send them to a lender to get that process started.

They may already have a property, that is okay, we still need to get that lender take on the borrower to be sure they are credit worthy. Not wanting to waste time or the borrower's money we need to verify they have the ability to get the 203k loan going.

If they don't have a property then we suggest a realtor or agent to help them find one in a neighborhood of their choosing.

We may actually start consulting to determine what type property they might want. There are several possibilities in this realm.

Once they locate a property suitable for their needs we set up a 203k consultation and inspect the property to create the 203k bid specifications.

Once those 203k specs are complete the borrower should look them over to be sure everything looks like they want it. Then they go to the lender.

The lender takes the 203k specs and provides that information to the appraiser and the appraisal is completed with an 'after improved' value. Once we reach this point the loan should close within a week or so typically.

Once the loan closes the borrower needs to get that information to the contractor so they can get that project in their schedule.

This is an important step as this is the only way the contractor has of learning the loan has closed.

They have up to 30 days to get their first draw inspection but in most cases they will have someone start long before that. In many cases they will start within a few days of your closing the loan.

Go to the "Procedure Link" at the left side of this page near the top to see where to go from here or to place an order go to or order here

Mike Young, 203k Consultant

PMB 168, 5055 Business Center Drive, Ste 108. Fairfield, CA 94533


Cell phone 1.704.451.1599

Be part of our network of consultant partners, maybe we should talk about it.

We look forward to helping you build your 203k business.

Know that this is much more than just 203k, you will be trained in all renovation loan products that you can also consult on.

You will have access to our marketing materials and power point presentations to increase your "Referral Partner" Base too.

We have referral partners that provide a considerable amount of work for us in the FHA 203k loan program.

We'll show you a way to finance 80% of the pool repairs or even add a swimming pool to a home that doesn't have one.

Saturday, September 19, 2015

Best Mortgage Deals: 203(K) Renovation Loans From FHA

Want to add value to a home? Some of the best bargains are properties in need of repair. The FHA 203(k) mortgage includes the cost to purchase or refinance and make repairs in one loan. This allows home buyers to borrower more than the sales price in order to make repairs if value increases. Borrowers are guided in the process by a certified consultant.

Since the mortgage is government backed, credit terms are more flexible and loans are allowed up to just over 95% of the property's after-improved value. These loans offer competitive interest rates.

FHA Lending

The Federal Housing Administration (FHA) guarantees mortgage loans. Borrowers not eligible for non-government, also called conventional, financing may be eligible under FHA's more flexible underwriting guidelines. FHA also allows the seller to pay a part of they buyer's costs, allows down payment assistance from family, close friends or nonprofits, and has competitive interest rates.

The minimum borrower investment of 3.5% is a welcome contrast to the up to 20% some conventional loans require. The loan can also be used to refinance owner-occupied properties. The 203(k) loan is no longer available for investors.

The 203(k)

The FHA 203(k) offers the following advantages:

- Repairs are included in determining the after-improved value. The maximum mortgage is based on the home's value after improvements are done;

- HUD Certified Consultants oversee home improvement from cost estimating to inspections. Contractors sign a written agreement to comply with 203(k) requirements. Changes to approved work, if any, must be deemed necessary by the HUD Consultant and approved;

- The lender's escrow department disburses funds only after work is completed and inspected;

- Borrowers can finance up to six mortgage payments if the property is uninhabitable during renovation;

- The escrow department will ensure there are no mechanic's liens before final payment is made to the home improvement contractor.

- FHA loans charge mortgage insurance upfront in addition to a monthly premium;

- Contractors are paid after each stage of work is finished, usually in three to five installments, so they must have their own funds to get the work started in most cases;

- Underwriting can take longer due to the need for coordination between homebuyer, contractors, the Consultant, and special renovation lending teams;

- An extra appraisal and a HUD Consultant fee must be paid upfront. That is an $800 to $1,500 additional expense.

Finding a Lender

Since so much is involved, be certain your lender is familiar with 203(k) requirements. Ask your Mortgage Loan Officer for details. You can visit HUD's website,, and search "find a lender." Be sure the 203K box is checked on the Lender List page.

Kenneth Bossard, MBA helped hundreds gain loan approval and find cash to buy homes. His twenty years mortgage finance experience includes work as a mortgage lender, nonprofit housing counselor and licensed Realtor. Ken's techniques are revealed in an eBook available at []
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Wednesday, September 16, 2015

How to Become a 203k Consultant - HUD

If you are wondering what you could do to enhance your existing home inspection or contracting business or start one from scratch, this may be just what the doctor ordered.

Home Inspectors, contractors, and architects are already there. You already have the knowledge base in your arsenal.

We fill in the gaps by offering you 203k consultant training. You may have the construction background to qualify even if you don't have one of these credentials.

Our 203k training package takes you to the next level. We have trained hundreds of 203k consultants nationally since 1995 and continue to do so today.

We not only teach you about the 203k loan program but "how to" conduct the 203k consultation.

We show you how to make the bid specifications so all the contractors who may bid on your project are bidding apples to apples.

A poorly written specification results in a lot of headaches during the process. While a well written specification takes the drudgery out of it and makes it easy to provide the draw inspections.

We have completed thousands of projects and our software for consultants is designed to keep you and your lender out of trouble.

The contracts we provide are HUD recommended and come as part of our 203k software or 203k consulting software, whichever you may choose to call it.

We typically call it 203k software as we have designed it to handle several other similar products as well. If you are doing a Home Style loan by FannieMae you just click on a button and all the forms will be populated with their name instead of 203k pertinent data.

Similarly Wells Fargo has their own rehab program, just a click of a button and your forms are populated with their information.

In addition some of the lenders have forms unique to them which are added this same easy way... just a click and you have it.

Now the kicker - 15 CE Credit for our course with ASHI and CREIA

203k Lenders will love that you use our 203k software and have take our 203k training as our software will provide the lender with 100% of everything they need to add to their 203b paperwork to make it a 203k.

This includes a MMW (Maximum Mortgage Worksheet). While the MMW is a form that the lender is required to fill out, all they have to do it take your numbers and insert them on their form and it is done for them.

If you have a lender who takes our "203k training" we will extend your 203k consulting software to them as well and unlock it on your behalf so they can take the file electronically and then they can adjust the numbers if needed before they print the MMW for themselves.

We enjoy assisting you as you take off on this 203k journey and are happy to take your emails and answer any questions that we can to help make your business more profitable and enjoyable for you.

You can always reach us at

Sunday, September 13, 2015

Bring New Life to a Home With a Home Renovation Loan

You have your heart and mind set on a mid to late century split level with a large lot not far from the interstate and downtown. But your friends and family feel a new home is a much better deal as they warn you about termites, faulty wiring and leaky pipes. You could go with a brand new home, but the 30 to 40 minute commute overwhelms you. Don't give up on your plans; you can make an old home feel new again! With a home renovation loan you can purchase and fix up your new home with one loan. Now you can have it all: the nice home, the awesome neighborhood and the short commute to downtown.

First, you need to know your loan options.

There are 4 types of home renovation loans:

Streamline FHA 203K

This loan is for primary residencies that need limited repairs of less than $35,000. The 203K requires as little as 3.5% downpayment of your acquisition cost. So if you get a $200,000 loan, your downpayment after the contract price and repairs is $7,000. The Streamline 203K is great for folks who have a lower credit score of 640. There's no consultant to manage the repairs-this loan is for "streamlined," and it can be occupied immediately after closing. You can have up to three contractors that need to be licensed for any specialty work. The contractor will receive one draw in the amount of 50% of the total contract and then the final payment balance upon work completion.

Consultant FHA 203K

This loan is typically used for homes with repairs of over $35,000 or that require structural repairs for the foundation, well or swimming pool. There should only be one general contractor (GC), but there can be up to three contractors. The main difference between this loan and the Streamline is you need to hire a HUD-approved consultant to work with the GC to protect the buyer's and lender's interest and makes a draw schedule so that the renovation funds are disbursed properly. Contractors get no money up front, and their fee is based on work completed. The HUD consultant will know what money to draw out to the contractors based on the amount of work completed.

Homestyle Renovation Loan

This is a conventional Fannie Mae loan requiring as little as 5% down for primary residences, 10% down for a second home and 20% down for an investment property. If you put 20% down, you do not need to have mortgage insurance. This loan works like the 203K and has a streamline and consultant category.

Homepath Renovation Loan

This loan is for foreclosures owned by Fannie Mae and it can be for a primary residence, a second home or an investment property. You can put 3% down for primary residences with no mortgage loan, but for investment properties you'll need 15% down.

Most people don't know these loans even exist, but now you do! The best part of these home renovation loans is that you're working with a team and you don't have to renovate a home on your own dollar.
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Thursday, September 10, 2015

Home Inspectors Conference in Las Vegas

Get your CE Credits and have fun doing it

Well, in October it will be time for one of the most attended conferences in the Home Inspection World of events. This one should be no different in that regard. If you are planning to go to this converence or have a home inspector you know that may want to go, I have 8 more FREE passes for the full conference education and unlimited 20% discounts codes available for anyone who would like to attend. That will go a long way towards paying for your hotel or travel to get there. 

Hope to see you there - check it out

We will be introducing our new mobile application for doing your FHA 203k inspections. Our training and software is still considered the best in the business and it is about to get better.

This is a great place to get your continuing education credits at a discount and enjoy Las Vegas at the same time.

Be sure to share the discount with your favorite home inspectors

Monday, September 7, 2015

Friday, September 4, 2015

Menlo Park Renovation Not Necessarily a 203k

Menlo Park, Redwood City, Palo Alto, East Palo Alto or anywhere else in the country for that matter.

There are serveral options for your next renovation project or remodel project.

FHA - The FHA 203k loan has been around since 1961 and stil is one of the best options for the masses. It is the easiest loan to qualify your buyers, recent bankruptcy can be explained in many cases, low down payment of 3.5% on a purchase, sometimes nothing down on a refinance if there is equity.  Work in progress is okay.

This loan program is good for any single family home [Loan amounts up to $625,500] or 2-4 small income units [Loan amounts up to $1,202,925 for a 4 unit property]. I had a client call last week about 4 houses on one lot. Yes, that would be considered 4 units for the purposes of this loan program.

These are low interest fixed rate loans that have a low down payment requirement of 3.5%. There is PMI [private mortgage insurance] that is required under this program.

If you are a Native American Indian we have another FHA program called the FHA 184 that you can get a 2.5% down payment and the construction money. Your client can also build from the ground up on virgin land if they so desire.

Conventional - Fannie Mae has a program called the "HomeStyle® Renovation Mortgage". A buyer under this program that puts down less than 20% will have PMI but can get in with as little as 5-10% down, investors can purchase or refinance and get money too but the down payment requirement is a little higher. Work in progress is okay.

Non-conventional - There is another renovation loan ONLY for single family homes that has a maximum loan amount of $3,000,000. NO work under construction with this loan program.

Last week we were talking to several clients who asked about their purchase of homes in the $750-900,000  range with $200,000-400,000 in renovation or remodeling. That would be perfect for this loan program. Your credit must be over 750 as I understand it and this is ONLY for single family homes with NO construction in progress.

Tuesday, September 1, 2015

Real Estate Buying Tips First Time Buyers Don't Usually Hear

If you're beginning to think about buying real estate for the first time, you've probably realized that there's a lot you don't know about the loan process, home values, down payments, and mortgage insurance. Here are four little-known tips for first time homebuyers that may make the process easier and less stressful.

1. Make sure you have enough money to cover closing costs. The closing is the actual purchase of the real estate, the day that it becomes yours. The money you'll need to have in order to cover closing costs is more than just the down payment. It also includes title insurance, attorney's fees, recording fees, the pro-rated taxes for the year, and everything that goes into escrow if you decided to use it, including around 15 months of your homeowner's insurance, around seven months of your taxes, and your mortgage insurance premium if you put down less than 20%.

2. Pre-qualify for a loan before you start looking at houses. Sitting down and talking with a mortgage broker before you step foot in any real estate on the market will give you a realistic idea of how much house you can afford. Remember, you're paying homeowner's insurance, taxes, and sometimes other costs on top of your principle and interest every month. The broker will be able to give you an idea as to how much your interest rate will be and can show you different purchasing scenarios.

3. Putting more money down than is required by your loan is never a bad idea. If you're looking to put less than 20% down, you'll have to pay mortgage insurance every month, which is calculated by taking a percentage on what you still owe on the loan. This is money that you pay that you won't get back in investment value. In fact, you can't remove this cost until you owe less than 80% of the selling price of the house. The more you can put towards this number, the more money you'll save in the long run.

4. Real estate investments aren't recession proof. As many people learned during the recent housing bust, home prices aren't guaranteed to go up. In fact, it's possible that they can fall so much that buyers can wind up owing more than their "investments" are worth. Predicting future value is really difficult because it depends so much on human whims. However, if you're looking for the stability of owning your own piece of property, and you're emotionally and financially ready, it's the right time to buy for you.

Purchasing real estate is part of the American dream, and it's a goal held by many people. We've all heard advice about buying when the market is low, looking in neighborhoods with good schools, reading carefully through the inspection reports, and making sure you completely understand all the loan documents. However, these four tips are advice that many newcomers aren't given.

Staten Island residents contact Our Island Real Estate when they're ready to purchase their dream home. Learn more at
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