Presentation Transcript

1. John McKibbon FHA 203K Renovation Lender (225) 612-0019 Direct John@bbclpctr.com www.bbclpctr.com Contact me to complete an easy Prequalification Application and Learn How This house is an excellent FHA 203K candidate for Home Financing Once you’re Pre-Approved I’ll work with you and your Agent to help you avoid the simple mistakes many buyers make early in the FHA 203K process. How to Close on Schedule When Using FHA 203K Financing Are: Consider having your Real Estate Agent include up to 6% in Seller Concessions when submitting your bid. This can assist you in closing cost and setting up your escrow prepaid account. Ask for at least 60 days from time of acceptance to close your loan. Of course we will work hard to have your loan ready to close before the closing date, but many things have to happen before closing an FHA 203K loan. Not only does you have to get credit approved, but you are going to need to get renovation estimates and we can’t order the appraisal until the estimate are in. Begin interviewing Home Improvement Contractors immediately and inform any contractors you select that we will be asking them to provide a Contractor’s Estimate of Repairs once you have made your selected. Call me with their contact information so I can secure an list of exhibit they need to provide. This by far is were closings get delayed! Often contractors simply aren’t prepared to complete the paper work according to FHA and I can help resolve this. Don’t purchase any materials prior to closing; otherwise the cost of these materials cannot be included in the loan. Have your Real Estate Agent call me before your offer has been accepted to start the application process early. Whether or not the seller accepts your offer, you will be well on their way to loan approval and if your offer is not accepted I can easily transfer your documents to a new purchase agreement. Get Prequalified Early Call Me At (225) 612-0019 ed Next we need to call John at Broker’s Best Mortgage (225) 612- 0019 FH203K Loans A Made Easy
2. Okay, maybe not, but I want to attempt to make it as simple as possible and hope you will take the time to read on. For many of us in the business who are "in the know" we forget the need to go back to basics and spell it out in simple terms for others to understand. So I've compiled some information based on my most recent commonly asked questions. FHA loans have become the driving force behind residential purchases over the past few years because of the increased FHA Maximum Mortgage limits and now that the limits have been increased and prices have decreased, FHA loans have become the most utilized loan in recent months! HOWEVER, because it was not a popular loan, you would be amazed at how many of us in the real estate profession do not know what we are doing, especially when it comes to the 203k loan. I spoke to a client the other day that was given such miss-information and it made me cringe. Apparently a Lender told the Real Estate Agent that an FHA 203k loans could not be secured on a property she was marketing because the ingress and egress accessed a gravel road! Luckily she called me later and I let her no such rule existed. Don’t forget to ask me how to go Green with a 203K John McKibbon FHA 203K Lender (225) 612-0019 DirectJohn@bbclpctr.com www.bbclpctr.com FHA 203K MADE SIMPLE So what is an FHA 203K Loan and why use one? When a buyer wants to buy a home that needs repairs utilizing most Conventional or FHA financing, normally the repairs would have to be completed prior to the closing of escrow and the repairs would fall on the responsibility of the owner. With so many bank owned properties in today's market, many times these houses in need of repair are listed "as is", which in the past required a cash buyer and a typical home buyer seldom has the cash, little alone fund to renovate!Not using the FHA 203K loan as your financing tool I believe is pure ignorance of the program and lenders haven’t properly prepare agents and their clients on how to use this great financing tool to close the deal. Listed below are just a few things you can include in the FHA 203K Streamline. Repair Replace of the Roofs, Gutters and Downspouts Repair Replace/Upgrade Existing HVAC Systems Repair Replace/Upgrade Plumbing & Electrical Repair Replace Flooring Updating Kitchens and Bathrooms Painting both Interior and Exterior Weatherization including storm window and doors, insulation, weather stripping, etc. Purchase and installation of built in and freestanding appliances Accessibility Improvement for the physically challenged Lead Paint Stabilization Repair Replace existing/add exterior decks, patios & porches Basement and Attic Finishing & Remodeling Septic System and Well repair or replacement   . If the property is in the right neighborhood, but doesn’t have the right number of bedrooms; has structural issues to repair; or needs an extra bathroom you can include the cost of these additions or repairs with the FHA 203K Traditional Loan Financing Program, as long as the market supports these additions. BIG PLUS I almost forget to mention, when you use the FHA 203K Traditional Financing we can include up to 6 months of house payments in the loan so you can continue living in at your current home and not worry about making a mortgage payment and rent! We’ll also including up to 15% in contingency reserves in your mortgage request just in case you have some additional cost. Once all the repairs are complete any money left over in reserves or built in house payments will be applied to the principle of the loan
3. Details please......... 203K Loans for Dummies Down payment is based on the sale price PLUS the final cost of the repairs x 3.5% and closing costs are separate as usual, but can be paid by the seller when negotiating the sales contract price up to 6% of the final sale price. Buyer often will hire (I can recommend one to you) a HUD approved FHA 203k Consultant to go to the property with you to determine the required repairs and your wish list. The fee charged by the consultant can be included in the mortgage! The fee can range anywhere from $ 400 to $1000 depending on the repairs required. Please check with the consultant prior to scheduling your appointment. You should obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs. Three estimates are recommended for each contractor, but not necessary. The buyer can act as their own general contractor in many purchases if experienced (FHA says experienced, but most investors require the buyer to be licensed). You must provide documentation to be approved by the lender prior to doing a Self Improvement FHA 203K loan. Often times clients have someone in their family or workplace that works in the construction who can act as the General Contractor and oversee the work being preformed that can reduce the cost or repairs and increase your equity by thousands! The consultant will determine the "required" repairs versus the "wish list repairs". You must start with the required repairs and then move on from there to your wish list. This is an important step for you to follow, so that you doesn’t over improve the home and exceed the comparable properties in the area. The FHA 203K loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser) What does this mean? Let’s say you buy a house for $170,000 that requires $50,000 in repairs and closing cost. The Subject To Value is estimated at $200,000, we can offer financing on that home in the amount of $212,300 or 3.5% of the after improved value. Of course in this market most bank owned properties are being sold at significantly reduce values and your savvy Realtor probably can negotiator a great deal for you, so lets take that same home with a purchases price of $130,000; homes in the area with similar square footage and curb appeal are selling for $200,000 and we still have $50,000 in repairs and closing cost. We can offer financing up to $173,700 or 3.5% of the purchase price plus the cost of repairs and closing cost. After the improvements are done you begin home ownership with over 13% equity built in once the final disbursement has been made. which translating into $19,300 of equity for a $6,300 investment in six months or less! Too good to be true? NOPE. That's it in a nutshell.... John McKibbon FHA 203K Guru (225) 612-0019 Direct John@bbclpctr.com www.bbclpctr.com m And, don’t forget to ask me about the Energy Efficient Mtg Add On that will help reduce utility cost By $100 a month.
4. Eligible Property One to Four Family Units To be eligible, the property must be a one to four family dwelling that will be owner occupied and has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible. Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place. In addition to typical home rehabilitation projects, the FHA 203K Program can be used to convert a one-family dwelling to a two, three, or four family dwelling. An existing multi-unit dwelling could be decreased to a one to four family unit, so keep this in mind when being faced with selling a five or more unit property.   Existing Homes being moved on site or Modular Homes An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation. Manufactured Homes We offer the FHA 203K on Manufactured Home less than 15 years old and a minimum loan amount of $45,000. These homes must meet the same building requirements for FHA Manufactured Housing requirements established by FHA. Mixed Used Properties An FHA 203K mortgage may be originated on a "mixed use" residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property. Condominium Unit FHA 203K mortgages can be used for individual units in condominium projects that have been approved by FHA, the Department of Veterans Affairs, or are acceptable to FNMA under the guidelines listed below. Condominium rehabilitation is subject to the following conditions; Occupant and qualified non-profit borrowers only; no investors; Rehabilitation is limited to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of the exterior or other areas which are the responsibility of the condominium association, except for the installation in the attic of the unit; The lesser of five units per condominium association, or 25% of the total number of units can be under rehabilitation at any one time; The minimum mortgage amount cannot exceed 100% of the after improved value. After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, FHA 203K loans can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached. Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for an FHA 203K loan. Likewise, a project could contain a row of more than four attached townhouses and be eligible for an FHA 203K loan because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof). Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units. Once the consultant completes their report of required and wish list repairs, we forward it to the appraiser for an "After Improved Value". This is where you may run into problems with OVER improving the property based on current values, so it is imperative that you listen closely to your Realtor and keep a close eye on your wish list. Between your Realtor, the consultant, appraiser, and you - the FINAL report will be tweaked to come up with a final report that the contractors will be hired to do.  So now the file is submitted to underwriting and approved (you need to qualify at the full amount you are borrowing of course and the normal steps for closing will occur. Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you borrowing the money - however, if we included the 6 months mortgage payments; the payment will be deducted from escrow starting when their first payment is due) . Disbursements are made throughout the following 6 months from the escrow account (normally up to 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed. Remember you paid the seller for the price of the home, and then you borrowed an additional amount of “X” which is sitting in an escrow account to pay the contractors (your total loan is the total amount you borrowed). Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT........you are done! Simple as 1 2 3 - okay maybe not, but that's why having an experienced lender on your side is crucial! John McKibbon FHA 203K Lender(225) 612-0019 DirectJohn@bbclpctr.com www.bbclpctr.com