But … if you have recently purchased your home or have very little equity then this loan may be just what you’re looking for! As it will pay off your current mortgage as well as lend you the extra cash needed to upgrade, remodel and repair your home – All in one loan!

So homeowners don’t delay anymore! You now have an option. You can finance your rehab project even with little equity. The FHA 203K rehab loan is a reliable way to finance and a great option unlike any other. Turn your current residence into the home it can be and start enjoying your new found gem with your family and friends.

Related posts:

1. FHA 203K Loan Information
2. Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds
3. FHA 203K Closing Costs

In case you weren’t sure about this, you are allowed to select your own Contactor and Cost Consultant(if needed) on a 203k loan. Below are some links to where you can find these licensed sources plus additional information to help you.

Get Contractor information here:
http://www.cslb.ca.gov/Consumers/HireAContractor/

Find an FHA Cost Consultant here
https://entp.hud.gov/idapp/html/f17cnsltdata.cfm

Get Termite Company or inspector information here
http://www.pestboard.ca.gov/about/consumer.shtml

Check the Better Business Bureau here
http://www.la.bbb.org/BusinessFind.aspx

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Related posts:

1. Beware! No Termite License Can Be a Terminator!
2. FHA 203K Tips – Contractors Bid and Work Write Ups
3. Interview with an FHA 203K Cost Consultant

Here is an approximation of what the loan breaks down to.

Rate difference between the FHA 203K and other loans:

The interest rate is approximately a half percent higher (.5%) so whatever the market is at the time of your shopping, figure that the 203k will be about .5 % higher. (Example instead of 5% it would be 5.5%)

Additional cost differences:

• If the total loan amount including improvements are equal to or less than $417,000 then calculate 1%

• If the total loan amount including improvements is over $417,000 then calculate about 2%.

• In addition calculate about 3.5% on the money needed for just the improvement

***These are approximations but should give you an idea of what to expect.***

Contingency Costs

A minimum 10% contingency reserve is required in the event of unexpected expenses,
A 15% to 20% contingency will be required if the utilities are turned off.  With that in mind contingency reserves as well as any additional fees connected to the improvement amount have to be taken into consideration and included into the grand total.  For instance the $35k limit on the Streamline 203K should be kept to $30k in actual improvements to leave the remaining balance for the contingency reserve and cost.

Recommendation to lower the money needed to close:
Keep in mind the 203k loan requires a minimum down payment based off of the sale price + the cost of improvements combined and that minimum down payment is 3.5%. If you’d like to minimize the money needed to close, you can request that the seller pay up to the allowable 6% of the sale price for all closing cost as this will lower the amount of money needed at closing.

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Related posts:

1. Rehab Loan Options for Homeowners
2. FHA 203K Loan Information
3. Interview with an FHA 203K Cost Consultant

This article  was originally posted on the RIS Media website read on:

Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds

By Eve Mitchell

RISMEDIA, March 27, 2010—(MCT)—The word “as-is” can indeed be one scary phrase. Especially when buying a home in today’s market where foreclosures and short sales that need fix-up work are plentiful.

But a little-known Federal Housing Administration (FHA) loan program that’s been around since 1978 can help take the sting out of “as-is.” Only 219 borrowers took advantage of the FHA’s 203k program in 2009. Not that many lending and real estate professionals are aware of the program, say observers.

Last year, Tom Meyer found a classic Oakland, Calif., home built in 1925 near Mills College he liked a lot. As a short sale it was priced right and about half the original asking price. Trouble was, the place needed some fix-up work—foundation improvements, dry rot work, a new roof over the garage and other improvements.

With the help of the FHA’s 203k renovation financing loan program, Meyer folded about $100,000 worth of repairs and improvements into his $422,000 mortgage. He had bought the home for $320,000. “I would not be able to pay a contractor $100,000 and buy a house at the same time,” said Meyer, who works in corporate media at Shaklee’s Pleasanton headquarters. “It had been essentially allowed to start falling apart over the last 20 years.”

He had rented in San Francisco for 25 years before moving into his new digs last September with his girlfriend, Cathy Keating. “We like old houses, and a great benefit of this program is that it helped us keep a beautiful but deteriorating house from deteriorating further. With the work we did, we expect it to still be standing and beautiful 80 years from now,” he said.

Renovation financing through the 203k program allows the costs of needed repairs and improvements to be included in the FHA federally-insured loan amount instead of having the buyer come up with cash or a separate loan to do the work.

“This is a perfect loan for an as-is situation,” said Kristine Marr, a loan officer with Prospect Mortgage in Lafayette, Calif. “It’s not a new loan program, although I think it’s going to have a lot more use today because we have so many foreclosures and bank-owned properties. You go into lots of homes and see people have yanked out stoves and ovens and fixtures and sinks.”

The work has to be done within six months after escrow closes. Borrowers have the option of putting up to six months of mortgage payments on the end of the loan if they don’t want to live in the house while the work is being done.

“Renovation financing is a program that allows you to not only finance the purchase of a home but finance any repairs and/or improvements. It provides buyers with a responsible way to purchase a fixer-upper property,” said Luis C. Munoz, who helped Meyer with the loan and is a renovation loan specialist with the Oakland branch of Mason-McDuffie Mortgage Corp. Munoz also gives presentations about the program at monthly home ownership workshops sponsored by the Unity Council, an Oakland-based nonprofit.

At a time when equity loans are hard to get, the program can also be used as a refinancing vehicle for borrowers who want to do repairs and improvements, provided the value of the home is greater than the value of the loan. “At the same time as you refinance, you pop in the extra dollars you need for whatever you want to do,” Marr said.

FHA home loans require certain health and safety standards be met and that needed repairs identified during the inspection process be completed before escrow closes. However, minor repairs and improvements costing between $5,000 and $15,000 can be done after escrow closes for borrowers who opt for a streamlined repair program.

A 203k loan can help buyers finance both minor and major repairs and improvements. It can also help buyers compete with investors when bidding for short sales and foreclosures, said Sheri Powers, director of the Homeownership Center at Unity Council.

The loans can also be used to pay for improvements such as new appliances, second-story additions, remodeled kitchens and bathrooms, and skylights, just to name a few examples. “Property repairs cost money and they want to make sure people using their loan program are going to be in the home in long run and not just the short run,” Powers said.

The loans have become more popular since home prices started falling and FHA lending limits were raised a couple years ago but are still a tiny sliver of overall FHA loan volume. Last year, 203k loans accounted for 219 mortgages in the Bay Area, compared to 35 in 2008, one in 2007 and none in 2005 and 2006, according to Department of Housing and Urban Development statistics. “It’s making a comeback,” said Powers.

Marr said that 203k financing is not for everyone. A buyer will have to work with contractors and may have to wait several months before moving in, she said. And there is no guarantee they won’t be outbid by an investor for the property. “A lot of listing agents are preferring the investors, because the investors tend to be all cash or 50% cash. That’s always hard to compete with,” she said.

(c) 2010, Contra Costa Times (Walnut Creek, Calif.).

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

There you go, the FHA 203K in a nutshell. This article is nicely written I couldn’t have said it better myself. If you have questions or would like to discuss this article feel free to post your comments below or contact me directly.

- Marvin
Marvin@203KMortgageLender.com
(888) 788-9398 x 203

Related posts:

1. Can You Afford to Say No to FHA Borrowers?
2. FHA 203K News Straight from the Dept. of Treasury
3. Rehab Loan Options for Homeowners

No termite license can terminate the deal!

Recently a costly mistake happened that I thought would be a good idea to share with R.E agents, Sellers and Buyers.  As an FHA 203k loan originator I am use to dealing with lots of moving parts and working with all those involved in the transaction.  Recently though, to my surprise a transaction fell through that was already approved and over 30 days into the deal. So why did this deal crash?  Because it was found out that the person who did the termite inspection was not licensed at the time of the inspection.

Wow!!! That was a first for me but never the less an easy solution.  These were my options:

Option #1 - Have another person from that company sign the inspection who was licensed

or

Option 2 –  Get another company to go out and do a new inspection and estimate.

Now Option #1 is the easiest as this would not change any work that needs to get done and the report would remain the same.  But keep in mind that Option #2 may have a completely different outcome as now you will be using a different company who will be giving you a new inspection and report that may result in a new list of items to attend to.

In my case, Option #2 had to be exercised which revealed a lot more issues than the original termite report that was already on file.  Because not only was the person who did the inspection (apparently sole owner and only operator) not licensed at the time of inspection but he was still not licensed when the issue was investigated.

Typically, the Listing Agent or the Seller will select the termite company and most termite companies will offer a free inspection along with an estimate.  What typically isn’t done and often overlooked is checking to see if  the termite company is currently licensed. So Sellers, Buyers and R.E agents beware of these type of surprises and avoid unnecessary delays by making sure those that need to be licensed are.  Also keep in mind that a termite inspection is optional on FHA and Conventional loans as long as it stated in the purchase contract or a waiver is signed.

Check here for termite licensing status
http://www.pestboard.ca.gov/license.shtml

Check here for contractor license status
https://www2.cslb.ca.gov/OnlineServices/CheckLicense/LicenseRequest.asp

Related posts:

1. 203K Contractors and Cost Consultants
2. FHA 203K Loan Information
3. FHA 203K News Straight from the Dept. of Treasury

When you’re getting bids from contractors make sure the bid has a good description of the work to be done and a cost breakdown of the materials and labor involved.

If you receive a bid that is vague (lacking work details, labor and material breakdown) it will delay your loan so a clearly written out estimate would avoid any misunderstandings on what is expected and what is involved.

Here a sample of what you should be looking for when receiving a Bid from Contractor.

FHA 203K Sample Cost Break down

Cost Consultant 203K Work Write Up

The work write up is summary of all the work to be done. You may have more than one contractor working on a different project so the write up will include all the work provided by each contractor as well as the cost of each project.

Here is a sample of a Work Write Up:

FHA 203K SAMPLE Work Write Up

For more detailed information about  Work Write ups & Cost Breakdown check out the FHA 203K Web Cast: Interview with  an FHA Cost Consultant and Sign up to listen to whole series. ( Part 3 of the interview goes into detail about Write ups and Breakdowns )

Related posts:

1. Interview with an FHA 203K Cost Consultant
2. 203K Contractors and Cost Consultants
3. Rehab Loan Options for Homeowners

The 203K Cost Consultant plays a significant part of the 203K and is required on all 203K Standard loans.
In this interview I talk to a Hud Certified Cost Consultant. This 7 part series will cover:

The role of the 203K Cost Consultant	What to expect at the inspections
How to avoid mistakes	How to prepare for the 203k process
As well as other insider tips to help you get your loan closed with less stress

Part One:  What is a 203K Cost Consultant?

Topics discussed:

• The role of the Cost Consultant
• What a home buyer/owner can expect from the Cost Consultant
• The First Inspection and what to expect|

Sign up here to listen to the entire 7 part series

203K Mortgage Lender Webcast Series Part 1 of 7: FHA 203K Cost Consultant Interview Duration 7:09 minutes

Don’t forget to Sign Up for the rest of the series!

Here is an Outline of all the Topics Covered:

Part Two: The First Meeting and What to Expect
Topics discussed:

• Things to consider when buying a home with the 203K
• Selecting Contractors
• Bids and Write-ups

Part Three: Work write-ups and Breakdowns
Topics discussed:

• More about work write-ups in detail
• More about Contractors, tips on how to select one
• Cost Breakdowns in detail

Part Four: Contingency Reserves

Topics discussed:

• Why it’s necessary
• How much is needed

Part Five: Common Mistakes
Topics discussed:

• Avoiding common mistakes
• Preferred order of process

Part Six: Disbursement Process

Topics Discussed:

• Payment of Contractor
• Draws
• Extensions

Part Seven: Consultant Fees

Topics Discussed:

• Improvement budget
• Cost Consultant fees
• Streamline 203K

Don’t forget to Sign Up for the rest of the series!

Share and Enjoy:

Related posts:

1. FHA 203K Tips – Contractors Bid and Work Write Ups
2. 203K Contractors and Cost Consultants
3. FHA 203K Loan Information

So check them out.

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Related posts:

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Videos - This is a sample version of the FHA 203K: 10 Steps from Offer to Closing video. You can see the complete version at the 203k Mortgage Lender website

Articles and Ebooks: In addition to the video we also have the Print Version of the 10 Steps from Offer to Closing. This can be a useful resource when you’re meeting with your Real Estate Agent in the event they aren’t familiar with the 203K program.

Here is an excerpt:

… Currently there are many Home Buyers who are interested in purchasing a home with the FHA 203K but unfortunately there aren’t many Real Estate Agents that are aware of the program or feel comfortable doing the transaction, and most Mortgage Lenders either can’t,won’t, or are just not familiar enough to do them.  So today I’m going to cover an overview on the 10 Step Application process from beginning to end, when using a 203k Loan to purchase a property in California.

Knowing what to expect and what is required will help you keep your Agent on track and help you prepare in advance for the steps to be taken to efficiently process your transaction and limit delays. You might also want to refer your Real Estate agent to this guide to help them get a better idea of the 203K transaction if they’re not familiar with the program.

Before we get into the 10 steps you must know there are two types of 203k loans that you can use to buy & fix up a property.  There is the Standard 203K and then there is the 203K Streamline.  So what’s the difference?

A 203k Streamline – can be used for rehab & repairs up to $35k and a Contractors bid is all that’s required.

A Standard 203k – can be used for major improvements over $35k and a “Cost Consultant” is required along with a Contractor’s bid.

For more information about the Standard and Streamline 203k loans you can download the FHA 203K Buyer’s Guide at the 203K Mortgage Lender website . Now let’s go over the 10 steps.

Step #1 Selecting a Property (Home Buyer)

The property can be a Single Family Residence, 2 to 4 units, Condo or PUD.  There are different maximum loan limits that apply and will vary depending on what county the property is located and whether it’s 1 to 4 units.  To find out what the maximum loan limits are in your area you can go to my blog to download the FHA 203K  County Loan Limits list here.

Step #2 Making the Offer (Home Buyer and Real Estate Agent)

This is where You and your Real Estate Agent take out a pencil and paper or calculator and figure out the purchase price that you are offering the seller while taking into consideration the amount of money needed for repairs which will be added to the purchase price.

If you have a chance to meet with your contractor before putting in the offer that would be helpful, unless you have a pretty good idea of how much money will be needed to bring the property up to an acceptable standard or beyond.  Keep in mind of what the future value will be after repairs and that the new loan amount will be based off of the purchase price plus repairs or 110% of the after improved value whichever is less.  The offer you make to the seller is the “As Is” price that means you are making an offer on the property in its present condition and that is the only price that concerns the seller.

Step #3 The Offer is Submitted (Real Estate Agent)

What should be in the offer:

This step is your Real Estate Agent’s responsibility but it’s good for you to know so you can review your offer and know what to look for before your Agent submits it to the Seller  … Read More >>

To download the complete video & article FHA 203K Loan: 10 Steps From Offer to Closing as well as receive the FHA 203K Buyer’s Guide  go the 203K Mortgage Lender website and sign up.  Once you sign up you’ll get updates on the 203K Loan program, and additional resources as I’ll be updating the website on a regular basis.  And as always if you would like to contact me give me a call (888) 788-9398 or email me at Marvin@203kMortgageLender.com

Related posts:

1. Find FHA 203K Loan Limits in Your Area
2. Rehab Loan Options for Homeowners
3. Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds

FHA 203K loan limits differ from County to County.  So knowing what the Maximum loan amount FHA offers in your area will help you determine the price range of your purchase.    This document comes directly from the HUD website.

Related posts:

1. FHA 203K Loan Information
2. Beware! No Termite License Can Be a Terminator!
3. Rehab Loan Options for Homeowners