What was I thinking, not having

as my Renovation Lender

Aaron Bacus (800)-282-1281 X 4961 ~ FHA 203Konnect ~ A Professional Real Estate Networking Blog

FHA 203K Renovation Tools forREO Real Estate Agents

FHA 203K Made Easy, We even do them with FICO

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Aaron Bacus, FHA203Konnect First

Guaranty Mortgage Corp Turning your hard to sale bank owned properties into

closed escrows (800)-282-1281 x 4961 

abacus@fgmc.com @FHA203K_Guru

Your AS IS Listing

Your Closed Escrow When Your Home Buyers use the

FHA 203K Renovation Loan

Aaron

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FHA203Konnect

The FHA 203K Renovation Tools ~ A core marketing strategy for REO Realtors

FHA 203K an Equity Builder! On average home buyers see about a 20% equity increase (amounts can differ and depend solely on the buyer’s abilities) in value when purchasing distressed homes and renovating. Great for First Time Home Buyers. Our approach to FHA 203K Lending is an orchestrated effort by our networked partners and a great referral source for you!

Did you ever have the wrong house, but right neighborhood? FHA 203K probably could of fixed that. FHA 203K can renovate a property even if all that’s left of the original structure is the foundation.

FHA allows your Home Buyers to FINANCE the cost of the repairs in their renovation loan. What does this mean and how does it work?

A recent client bought a house for $87,000 that needed $39,429 in repairs, making the total COST $126,429 and the After Improved Value came in at $146,000. We closed our Agent’s Listing with a base loan amount of $124,503, which covered the cost to purchase the home and repairs. Be sure to check out the exhibits to the right to learn more.

CRUCHING THE NUMBERS IN REAL TIME Negotiated Sales Price $87,000

Cost of Rehab $39,429 Sub Total $126,429 After Repairs Value $146,000 Initial Inv (3.5% Down Payment/Closing Cost and Escrow $4,895 Equity Appreciation after rehabilitation $19,574

Recognized Appreciation after repairs $14,680

Aaron Bacus (800)-282-1281 X 4961 FHA 203Konnect

~ First Guaranty Mortgage Corporation

The Hot Niche for Realtors

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 existing owner. With so many foreclosures 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 cash buyers limit you opportunity to close your sale! Not using the FHA 203K loan as your financing tool I believe is pure misunderstanding of the program and lenders haven’t properly educated agents on how to use this great financing tool to close the deal. Listed below are just a few things your client can include in their FHA 203K Streamline and so much more can be completed when using the FHA 203K Traditional Financing. 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 or they need an extra bathroom the cost can be included for these additions with the FHA 203K Standard Loan Financing Program, as long as the market supports these additions. Another big plus is your home buyers can include up to 6 months of house payments in their loan, so they can continue living in at their current residence and not worry about making a mortgage payment and rent! We’ll also including up to 15% in contingency reserves just in case your client has 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 to reduce the loan amount.

Aaron Bacus (800)-282-1281 X 4961 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation

FHA 203K Renovation Essentials for a Successful Closing

Step 1: Get your Client Pre-Qualified Immediately. Complete an easy Application.

Step 2: Once you have your home buyer pre-qualified we’ll reach out to you and your Home Buyer to discuss the renovation approval process.

Step 3: This step is as important as getting your home buyer pre-approved, it’s about the property. With the FHA 203K Renovation Loan the property your home buyer selects as important a getting pre-approved. We know that Location, Location, Location is our golden rule, but these days many home buyers are equally interested in Equity, Equity, Equity. Not giving them both can end up in a no sale. Generally, Bank Owned Properties can sell of 20 to 50 percent less that non foreclosed home in the same area and the right renovations can easily create additional equity appreciation.

When working with a Home Buyer of Distressed Homes one of the first questions they’ll have is “what’s the value I can expect to see when purchasing these homes and the cost to renovate. You’ll need to have an in-depth discussion with your Home Buyer and with information they provide and your experience, it shouldn’t be to difficult to come up with a projected BPO based on the homes needed repairs. Then get property inspection and recommend your Home Buyer get at least licensed contractors to provide bids for needed repairs based on the inspection and any other items they’re wanting to improve the property with.

This by far is the one factors that can make your closing day a pass or fail date. Many Contractors simply aren’t qualified to complete the work your Home Buyer expects or might not be properly licensing to meet FHA requirements, I’ll review your contractor qualifications, but make sure your home buyer covers FHA’s contractor qualifications.

FHA 203K Contractor Checklist

FHA 203K Homeowner/Contractor Agreement

FHA 20K National Consultant Roster

If you’re using and FH203K Consultant you’ll want to provide a copy of all the above mentioned documents to them for review and utilize their expertise. FHA 230K Consultants are required for all 203K Loans, but when they are, you’ll find them to be a valuable resource for both your and the Home Buyers. FHA 203K Consultants review your Home Buyer’s Contractors paperwork to insure it meets HUD guidelines as well as works with your Home Buyer and the Contractors to insure all work is completed to the satisfaction of your Home Buyers and HUD.

Some items to consider when using FHA 203K financing:

Structure you offer to include up to 6% in Seller Concessions when possible. This is very common for FHA loans, and these concessions can significantly improve your borrower financing option, pre-paid escrow s and buyer’s closing cost.

Ask for at least 60 days from time of acceptance to close your loan. Of course we’ll 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 your borrower have to get credit approved, the appraisal and repair estimates must be reviewed and approved and escrow disbursement accounts have to be set up, so 60 days gives you some extra cushion and sellers seldom turn their nose up to a 60 day contract for a distressed home.

Advise your client NOT to purchase any materials prior to closing, otherwise the cost of these materials cannot be included in the loan. If bid is not accepted we can easily transfer your client’s credit documents to a new purchase agreement.

Aaron Bacus (800)-282-1281 X 4961 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation

Details please......

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.

Home Buyers are required to hire an HUD approved FHA 203k Consultant on FHA 203K Traditional Loans. They’ll work with your Home Buyers Contractors, recommends modification and stays a part of the renovation process from early in the process until the final draw has been requested to insure a successful renovation.

An FHA 203K consultants frees are between $400 and $1000, depending on the work to be complete and can be financed in the loan. This fee must be paid upfront, however with proof of payment we’ll apply the upfront fee as a credit to the down payment at closing.

Buyer should obtain estimates from several licensed contractors. We recommend at least three estimates, but not required. The Home Buyer.

If your Home Buyer is using an FHA 203K Consultant they’ll determine the "required" repairs versus the "wish list of repairs“ and discuss with your Home Buyers their options.

Your client must start with the required repairs as outlined by this property inspector and then move to their wish list when coming up with a renovation plan. This is an important step, so that your client doesn’t over improve the home and exceed the comparable properties in the area. Of course, once your Home Buyer have provided us with all his bids, well request an FHA 203K Appraisal be completed to insure this doesn’t happen.

 

Aaron Bacus (800)-282-1281 X 4961 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation

Details Continued

After closing/funding your Home Buyers can purchase materials from the Title Company check, they get at closing to cover the purchase of materials and getting their renovation project started. Of course we’ll give them reasonable time to start and complete their renovations. As a rule, FHA requires all renovation to begin no later than 30 days from closing and completed within six months.

FHA understands that renovating and daily living don’t always go well together. Therefore, FHA allows up to six month of Principle, Interest, Taxes and Insurance, This allows your home buyer from be over burden with two housing payments renovation. Disbursements are made throughout the following six months (maximum) and will be withdrawn from a preset escrow account.

Once we have a clear final inspection we’ll make the last disbursement. Now your Home Buyers have their dream home! Simple as 1 2 3 - okay maybe not, but that's why having an experienced FHA 203K Renovation Lender on your side is crucial!

 

Aaron Bacus (800)-282-1281 X 4961 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation

Eligible Property 

One to Four Family UnitsTo be eligible, the property must be or converted to 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 HomesAn 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 HomesYes 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 PropertiesAn 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.

FHA 203K

Aaron Bacus (800)-282-1281 X 4961 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation

Eligible Properties Continued 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.

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;

Aaron Bacus (800)-282-1281 X 4961 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation