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FHA 203k Inspections

FHA 203k Inspections. or in this case- While the Market is NOT!. Strike while the iron is HOT…. FHA 203k Inspections. Changing climate in home buying markets : Mortgage qualifying harder then ever More people buying foreclosed/distressed properties Appraisals stricter

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FHA 203k Inspections

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  1. FHA 203k Inspections or in this case- While the Market is NOT! Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  2. FHA 203k Inspections • Changing climate in home buying markets: • Mortgage qualifying harder then ever • More people buying foreclosed/distressed properties • Appraisals stricter • Lower valuations of properties • Increase in appraisal required repairs • More people turning to FHA insured loans as conventional loans become harder to get qualified Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  3. FHA 203k Inspections • Overview of FHA products • Term “FHA” mortgage usually refers to the 203B loan. • Most banks and lending institutions offer this insured loan to clients who don’t meet qualifications for “conventional” loan. • The FHA does not actually loan money; it insures loans that are provided by a partner bank or mortgage brokerage firm that works in partnership with the FHA. • 203B loans – Benefits • NO credit score requirement- less than perfect credit o.k. • Only 3% required down payment (OPM allowed) • Seller – Assist allowed up to 6% of purchase price • “Gift-ing” allowed to help with settlement and down payment • Grant money from government programs Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  4. FHA 203k Inspections The CY2009 basic standard mortgage limits for FHA insured loans are:     One-family  Two-family  Three-family  Four-family   FHA  $271,050.00 $347,000.00  $419,425.00  $521,250.00 High cost area limits are subject to a ceiling based on a percentage of the Freddie Mac Loan limits The ceilings for CY2009 are:   One-family  Two-family  Three-family  Four-family   FHA $625,500.00 $800,775.00  $967,950.00  $1,202,925.00  Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  5. FHA 203k Inspections • 203 B Loan – Challenges • Lender can (and usually does) impose their own minimum credit score requirement • Interest rates are generally slightly higher than market rates • House must pass an FHA appraisal –HUD's Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1) • (all failed items must be corrected prior to settlement) Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  6. FHA 203k Inspections • 203k Rehabilitation Mortgage • Same benefits as 203B with one important difference… • FHA required repairs are corrected AFTER settlement and the cost to complete repairs are escrowed as part of the mortgage. Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  7. FHA 203k Inspections • STREAMLINED (k) • •Benefits • Minor Repairs and Improvements (upgrades) • Repair costs up to $35,000 (value permitting) • No minimum repair cost threshold • Repairs are completed after closing with loan proceeds • Same down payment requirement for purchases • No inspection required (If less than $15,000) Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  8. FHA 203k Inspections • STREAMLINED (k) • •Benefits (con’t) • No 203 (k) Consultant • No General Contractor • Any FHA approved lender may originate a streamlined 203(k) mortgage Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  9. FHA 203k Inspections STREAMLINED (k) What can be included? •Total cost of rehab •Inspection fees •Building and other permits •Title update costs Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  10. FHA 203k Inspections • STREAMLINED (k) (Same as FULL 203k) • Eligible Work Items • Repair/Replace/upgrade roofs, gutters and downspouts • Existing HVAC systems, plumbing, and electrical systems • Existing flooring • Minor remodeling (non-structural) repairs • Exterior and interior painting • Weatherization • Appliances (including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves) • Improvements for accessibility for persons with disabilities Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  11. FHA 203k Inspections • STREAMLINED (k) • Eligible Work Items (con’t) • Environmental mitigation (radon, asbestos) • Modifications involving disturbance of pre-1978 paint surfaces • Lead based paint abatement • Repair/Replace/add exterior decks, patios, porches • Basement finishing and remodeling (non-structural repairs) • Basement water proofing • Window and door replacements & exterior wallre-siding • Septic system and/or well repair or replacement Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  12. FHA 203k Inspections • STREAMLINED (k) • IneligibleWork Items • Major rehabilitation or remodeling ( i.e. relocation of a load-bearing wall) • New construction (including room additions) • Repair of structural damage • Repairs requiring detailed drawings or architectural exhibits • Landscaping or similar site amenity improvements • Any repair or improvements requiring more than 6 months to complete • Rehabilitation activities that require more than two (2) payments per specialized contractor Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  13. FHA 203k Inspections FULL 203(k) VS. 203(k) Streamline • 203(k) • Repairs/Improvements Must be at least $5,000 • FHA Consultant Required • Architectural Exhibits required (if necessary) • Borrower can do repairs/ improvements if qualified • 203(k) Streamline • Only for uncomplicated repairs/improvements • No Consultant required • No Architect required • Borrower can do repairs/improvements if qualified • Repairs only up to $35,000 Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  14. FHA 203k Inspections • Contractors and Rehabilitation Criteria • Borrower must use licensed and bonded contractors • –“Self-help” is discouraged but acceptable IF the borrower can sufficiently demonstrate to the lender that he/she has the necessary expertise and experience to competently perform the work • Eligible Properties: • HUD REO Properties, Condominiums • Refinance of existing Properties, 1-4 units • –Mortgagee Letter 2005-50 Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  15. FHA 203k Inspections • What is an FHA Certified 203k • Independent Consultant? • An unbiased advocate for the buyer (usually first-time homebuyer • The eyes and ears of the lender/HUD • Mediator/facilitator/quality controller Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  16. FHA 203k Inspections • What does an FHA Certified 203k • Independent Consultant do? • Assists borrower in determining the feasibility of the renovation on the prospective home (including estimates for the repairs) • Works with the borrower to identify improvements/upgrades to home • Completes the work write-up documents used by the borrower/contractor (using forms that are approved by HUD and the lenders underwriting departments) • Conduct draw inspections as work progresses to ensure quality and timeliness of renovations Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  17. FHA 203k Inspections • The Process of Getting a 203k Mortgage • Lender meets with borrower • Identify the want a 203k mortgage • Complete the consultant request form • Borrower schedules a feasibility analysis • Establishes whether property will meet minimum property standards • Consultant helps borrower decide on repairs/improvements to be done • Borrower gets contractors to bid- finalizes work to be done in a Specification of Repairs report • Go to closing • Work begins and consultant performs draw inspections throughout work Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  18. FHA 203k Inspections Sample projects.. Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

  19. HOW TO BUY A HOME THAT IS NOT READY TO BE SOLD...

  20. And get it fixed up the way YOU want it…

  21. 203(k) Renovation Mortgage... what is it and how do I get one? This is an FHA guaranteed loan that allows buyers to purchase homes that are in need of immediate repairs. Purchaser pays a mortgage for the cost of the home + the cost of the repairs. • Homes needing at least $5000 in repairs • Property values are higher than sale price • Homebuyer qualifies for cost of house + repairs

  22. #1 Identify a qualified 203(k) lender/broker • Able to offer a variety of loan options (conventional and FHA) • Caring and understanding • Readily accessible • Knowledgeable/Experienced • Excited about your goals

  23. #2 Carefully evaluate the home... • Look for problems and conditions you would change. • Ask yourself the question: Would I buy the home if ________ was new? (fill in the blank) • Find out what the homes in area are selling for. • Is there room for you to add the cost of repairs to the asking price and still be at or below market value? • Get understanding of seller’s intentions if repairs are needed. • Will the seller lower his price to allow you room to add repair cost?

  24. #3 Get a home inspection! A qualified inspector can determine if you may benefit from a 203(k) loan for the home being inspected.

  25. #4 Items that are eligible for renovation • Roofing, siding • Plumbing repairs, heating-including replacement, electrical • Interior repairs- windows, doors, flooring (carpeting, tile, etc) • Kitchen and bathroom upgrade (complete remodeling) • Major renovation- additions, re-design, complete remodeling

  26. #5 Ask Questions... The only dumb question is?…

  27. #6 Review all details • Carefully review all costs/fees with your real estate agent, consultant and lender before closing. • Take your time selecting a contractor – consultants may provide recommendations • Check with insurance company about coverage during renovation process.

  28. Why Value Home Inspections? • Professional Service • Full Time Experienced 203(k) consultant • All necessary reports provided for loan • Fully staffed office • Monday to Friday 7am-7pm • Going the extra step is our policy

  29. #7 Remove doubts • Ask Questions…Get Answers • Take time to do a pre-settlement walkthrough • Work closely with your real estate and mortgage professionals

  30. #8 Be open to the possibilities for your new home...

  31. Examples of completed projects...

  32. Thank you and good luck!

  33. FHA 203k Inspections Thank you! Any questions??? Strike while the iron is HOT… VALUE HOME INSPECTIONS, INC.

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