Fha 203k Presentation_8.26

FHA 203k FHA 203k RENOVATION RENOVATION

LENDINGLENDINGTerry Cronin of The Kent Terry Cronin of The Kent

GroupGroup

Streamlined 203k LoanStreamlined 203k Loan

203k Streamline, (203k(s), 203k mini, 203k Streamline, (203k(s), 203k mini, etc)etc)

Up to $35,000 in Renovation AllowedUp to $35,000 in Renovation Allowed Self-Directed-Hire licensed contractors Self-Directed-Hire licensed contractors

Excluded Renovations- Structural, Excluded Renovations- Structural, Architectural & LandscapingArchitectural & Landscaping

2 Draws- initial within 30-45 days of 2 Draws- initial within 30-45 days of funding and the final draw after funding and the final draw after inspection.inspection.

Streamline Renovations Streamline Renovations AllowedAllowed

Bathroom RenovationBathroom Renovation Kitchen RenovationKitchen Renovation New Windows, SidingNew Windows, Siding FlooringFlooring AppliancesAppliances PaintingPainting Decks, Patios Decks, Patios

Full 203k Full 203k

Greater than $35,000 in Renovation CostsGreater than $35,000 in Renovation Costs Minimum of $5,000 in Renovation CostsMinimum of $5,000 in Renovation Costs Up to 4 draws with a final draw after Up to 4 draws with a final draw after

inspectioninspection Structural Renovations AllowedStructural Renovations Allowed Borrower may finance up to 6 months Borrower may finance up to 6 months

PITI payments if home is considered PITI payments if home is considered uninhabitableuninhabitable

Full 203k Full 203k FHA CONSULTANTFHA CONSULTANT

Requires an FHA Consultant to work Requires an FHA Consultant to work with all parties (loan officer, lender, with all parties (loan officer, lender, borrower and builder) to provide borrower and builder) to provide assistance with the loan process in assistance with the loan process in accordance to HUD regulations.accordance to HUD regulations.CONSULTANT FEES per HUDCONSULTANT FEES per HUD$5,000-$7,500 - $5,000-$7,500 - $400$400$7,500-$15,000 -$7,500-$15,000 - $500$500$15,001- $30,000 - $15,001- $30,000 - $600$600$30,001-$50,000 -$30,001-$50,000 - $700$700$50,001-$75,000 - $50,001-$75,000 - $800$800$75,001-$100,000 - $75,001-$100,000 - $900$900$100,001 +$100,001 + $1,000$1,000

https://entp.hud.gov/idapp/html/f17cnsltdata.cfm

Guidelines - PropertyGuidelines - Property

Owner Occupied Properties OnlyOwner Occupied Properties Only Single Family ResidenceSingle Family Residence Approved Condo’sApproved Condo’s PUD’sPUD’s 2-4 Unit Attached Properties2-4 Unit Attached Properties REO, Short Sale, Foreclosure Ok! REO, Short Sale, Foreclosure Ok!

(need minimum of 12 mo. Cert. of completion, no (need minimum of 12 mo. Cert. of completion, no

builder spec foreclosures)builder spec foreclosures)

Guidelines – Loan Guidelines – Loan AmountAmount

Purchase Price + Total Costs of Rehab Purchase Price + Total Costs of Rehab $100,000 P.P. + $35,000 Rehab = $135,000$100,000 P.P. + $35,000 Rehab = $135,000

OROR

100% of As Completed Value 100% of As Completed Value $150,000 Appraised Value$150,000 Appraised Value

WHICHEVER IS LESSWHICHEVER IS LESS

$135,000 - $4,725 (3.5% down payment)$135,000 - $4,725 (3.5% down payment)= $130,275 Loan Amount= $130,275 Loan Amount

Guidelines - CreditGuidelines - Credit 620 Minimum FICO620 Minimum FICO 31/43 DTI (for manual underwrite only)31/43 DTI (for manual underwrite only) 36/48 DTI (for AUS approvals-can go 36/48 DTI (for AUS approvals-can go

higher with compensating factors),higher with compensating factors), DU Approval on 203k loan (can use any DU Approval on 203k loan (can use any

lenders approval through DO)lenders approval through DO) BK and Foreclosure LeniencyBK and Foreclosure Leniency

Ch 7 allowed after 24 months Ch 7 allowed after 24 months Ch 13 or CCC allowed after 24 months provided performance Ch 13 or CCC allowed after 24 months provided performance

has been has been satisfactorysatisfactory Foreclosure allowed after 3 years provided the reason for FC Foreclosure allowed after 3 years provided the reason for FC

or Deed-or Deed- in-Lieu was due to extenuating circumstancesin-Lieu was due to extenuating circumstances

Guidelines - GeneralGuidelines - General 30 Year Fixed Rate Mortgages30 Year Fixed Rate Mortgages LTV cannot exceed 110% of “As LTV cannot exceed 110% of “As

Completed” valueCompleted” value No Declining Market IssuesNo Declining Market Issues One Closing-Entire Loan Amount Paid at One Closing-Entire Loan Amount Paid at

Closing. Closing. Rehab Amount is Paid into Interest Bearing Rehab Amount is Paid into Interest Bearing

Escrow Account at Closing.Escrow Account at Closing. Broker is paid in full and job is complete.Broker is paid in full and job is complete. BOTH UPMIP and MIP are charged on 203k BOTH UPMIP and MIP are charged on 203k

loans.loans.

Guidelines – IncomeGuidelines – Income Full documentation ONLYFull documentation ONLY Miscellaneous income acceptable including child Miscellaneous income acceptable including child

support, alimony or maintenance income and support, alimony or maintenance income and note income.note income.

Must show 12 month history and evidence that Must show 12 month history and evidence that income will continue for 3 years.income will continue for 3 years.

Self Employment income must be stable with 2 Self Employment income must be stable with 2 year history.year history.

Rental income ok with 2 year history on 1040.Rental income ok with 2 year history on 1040. Higher qualifying DTI ratios acceptable with Higher qualifying DTI ratios acceptable with

compensating factors.compensating factors. Non-Occupant Co-Borrower income used Non-Occupant Co-Borrower income used

(purchase, or refinance if they were on original (purchase, or refinance if they were on original note)note)

Guidelines – PurchaseGuidelines – Purchase

3.5% Minimum Down Payment3.5% Minimum Down Payment Down Payment can be 100% giftDown Payment can be 100% gift Can use cash on hand or mattress moneyCan use cash on hand or mattress money Proceeds can come from 401kProceeds can come from 401k Seller can contribute up to 6%Seller can contribute up to 6% Cash reserves not required for 1-2 UnitsCash reserves not required for 1-2 Units

(3 mo PITI reserves required for 3-4 (3 mo PITI reserves required for 3-4 Units) Units)

Guidelines – Mandatory Guidelines – Mandatory RepairsRepairs

Corrections to Code ViolationsCorrections to Code Violations Health and Safety RepairsHealth and Safety Repairs Correcting Structural DeficienciesCorrecting Structural Deficiencies Smoke DetectorsSmoke Detectors If Utilities are turned off at time of If Utilities are turned off at time of

inspection, a 15% contingency inspection, a 15% contingency reserve is requiredreserve is required

Guidelines – AppraisalGuidelines – Appraisal

Order an Appraisal from an Order an Appraisal from an approved FHA Appraiser.approved FHA Appraiser.

Appraised value to derive from plans Appraised value to derive from plans and specifications on renovation to and specifications on renovation to be completed, “As Completed be completed, “As Completed Value”.Value”.

Appraiser to complete final Appraiser to complete final inspection when project is inspection when project is completed.completed.

Guidelines – Fee Guidelines – Fee ScheduleSchedule

Due to the nature of the 203k program, Due to the nature of the 203k program, there are a number of fees which the there are a number of fees which the borrower will incur throughout the borrower will incur throughout the completion of the renovation. To save completion of the renovation. To save the borrower the immediate expense, the borrower the immediate expense, HUD has made provisions which allow HUD has made provisions which allow for various fees to be financed. for various fees to be financed. Guidelines have been established to Guidelines have been established to what fees can be charged.what fees can be charged.

Inspection FeesInspection Fees

For each draw request the lender is For each draw request the lender is required to obtain a compliance inspection required to obtain a compliance inspection stating that the work for that particular stating that the work for that particular draw has been satisfactorily completed. draw has been satisfactorily completed. The HUD Consultant is permitted to do The HUD Consultant is permitted to do these inspections. Max fees for these inspections. Max fees for compliance inspections on completed work compliance inspections on completed work will continue to be set by each will continue to be set by each Homeownership Center. (Use $100.00 per Homeownership Center. (Use $100.00 per inspection as a general figure).inspection as a general figure).

Feasibility StudyFeasibility Study

An FHA Consultant can provide a An FHA Consultant can provide a feasibility study at the request of the feasibility study at the request of the borrower prior to submitting an borrower prior to submitting an offer to a seller. An additional fee of offer to a seller. An additional fee of $100.00 can be included in the $100.00 can be included in the mortgage for this service.mortgage for this service.

Title Update FeesTitle Update Fees

In order to ensure that the mortgage In order to ensure that the mortgage position remains intact on title, a title position remains intact on title, a title update or lien waiver is required prior to update or lien waiver is required prior to any draw releases. The amount allowed any draw releases. The amount allowed to be financed for any of these title to be financed for any of these title updates is updates is $50.00$50.00 per draw, and any per draw, and any unused moneys will be used to pay down unused moneys will be used to pay down the mortgage amount at the completion the mortgage amount at the completion of the project. (Fees can be higher, use of the project. (Fees can be higher, use $50.00 as an estimate).$50.00 as an estimate).

Other FeesOther Fees

Contingency Reserve Contingency Reserve (10% - 20% of total rehab costs)(10% - 20% of total rehab costs)

Supplemental Origination FeeSupplemental Origination Fee1.5% of the rehab portion of the loan 1.5% of the rehab portion of the loan

amount onlyamount only

Presidents First Commitment FeePresidents First Commitment FeeInitial Fee $1195.00Initial Fee $1195.00Reduced fees based on volumeReduced fees based on volume

Steps for SuccessSteps for Success

The 203k LoanThe 203k Loan

STEP #1: Borrower Finds a PropertySTEP #1: Borrower Finds a Property

Preliminary Feasibility Preliminary Feasibility StudyStudy

After the property is located, the homebuyer After the property is located, the homebuyer and real estate agent or (HUD Consultant) and real estate agent or (HUD Consultant) should make a marketability analysis prior to should make a marketability analysis prior to signing the sales contract. The following signing the sales contract. The following should be determined.should be determined. The extent of the rehab work to be completedThe extent of the rehab work to be completed Rough cost estimate of the work andRough cost estimate of the work and The expected market value of the property after The expected market value of the property after

completion of the work. NOTE: the borrower completion of the work. NOTE: the borrower does not want to spend money for appraisals and does not want to spend money for appraisals and specs, then discover that the value of the property specs, then discover that the value of the property will be less than the purchase price plus the cost will be less than the purchase price plus the cost of improvementsof improvements

Review the Purchase Review the Purchase ContractContract

Contract should be contingent upon approvalContract should be contingent upon approval Seller should allow inspectors, contractors, or Seller should allow inspectors, contractors, or

HUD consultant access to the property for HUD consultant access to the property for estimatesestimates

Within 7-10 days of the agreement, the buyer Within 7-10 days of the agreement, the buyer should obtain an inspection of the property should obtain an inspection of the property by a professional home inspector and termite by a professional home inspector and termite company.company.

If the borrower is purchasing a HUD-REO, it If the borrower is purchasing a HUD-REO, it should be stated in the sales contract what should be stated in the sales contract what portion of the closing costs HUD is going to portion of the closing costs HUD is going to pay, and any incentive programs HUD is pay, and any incentive programs HUD is willing to offer at the time.willing to offer at the time.

Borrowers and Consultant Borrowers and Consultant Meet at the PropertyMeet at the Property

HUD Consultant conducts an HUD Consultant conducts an inspection of the property and inspection of the property and determines what repairs are needed determines what repairs are needed to meet HUD minimum property to meet HUD minimum property requirements. requirements.

Borrower will also indicate any work Borrower will also indicate any work they wish to have done at this time.they wish to have done at this time.

Obtain the Plans and Obtain the Plans and SpecsSpecs

You should receive a copy of the work to You should receive a copy of the work to be completed (specifications of repairs). be completed (specifications of repairs). From the HUD Consultant that includes From the HUD Consultant that includes the consultants cost estimates for the the consultants cost estimates for the completion of the project.completion of the project.

The plans, specs and contractor The plans, specs and contractor

estimates should match up dollar for estimates should match up dollar for dollar prior to underwriting submission.dollar prior to underwriting submission.

Request a HUD Case Request a HUD Case NumberNumber

Order an Appraisal – Order an Appraisal – Obtain BidsObtain Bids

Make two copies of the plans and specsMake two copies of the plans and specs Send one copy to the appraiser to Send one copy to the appraiser to

order the “as completed” appraisal.order the “as completed” appraisal. The second copy should go to the The second copy should go to the

borrower to obtain a contractor.borrower to obtain a contractor. The borrower consults with a The borrower consults with a

contractor to provide a detailed written contractor to provide a detailed written estimate for the work they will estimate for the work they will complete.complete.

Builders AgreementBuilders Agreement

Once the borrower receive the copy of Once the borrower receive the copy of the specifications of repairs, they will the specifications of repairs, they will select the contractor they wish to use select the contractor they wish to use and obtain their insurance, license and and obtain their insurance, license and a copy of the builders application.a copy of the builders application.

Disclosing FeesDisclosing Fees

All renovation-related costs must be All renovation-related costs must be disclosed. The following costs are disclosed. The following costs are disclosed on the Maximum Mortgage disclosed on the Maximum Mortgage Worksheet:Worksheet: Contingency Reserve Contingency Reserve Consultant FeeConsultant Fee Architecture FeesArchitecture Fees Draw FeesDraw Fees Supplemental Origination FeeSupplemental Origination Fee PermitsPermits Presidents First Commitment FeePresidents First Commitment Fee

Maximum Mortgage Maximum Mortgage WorksheetWorksheet

Is used for mortgage calculation Is used for mortgage calculation purposes to determine the maximum purposes to determine the maximum insurable mortgage amount (loan insurable mortgage amount (loan amount).amount).

http://www.hud.gov/offices/adm/hudclips/forms/files/92700.pdf

Information from the MMWS is Information from the MMWS is transferred to the Mortgage Credit transferred to the Mortgage Credit Analysis Worksheet following directions Analysis Worksheet following directions on the reverse of the MMWS.on the reverse of the MMWS.


Basic Information Section

Be sure to include FHA case number


Section ASection A

A1. A1. Contract Sales Price or Existing DebtContract Sales Price or Existing DebtThe contract sales price of the sales The contract sales price of the sales

property property should be filled in this box. If should be filled in this box. If the mortgage is a the mortgage is a refinance, then insert refinance, then insert the existing debt on the the existing debt on the property and the property and the box for existing debt is checked.box for existing debt is checked.

$170,000 A1$170,000 A1


A2.A2. “As-Is” Value“As-Is” ValueThis value will be derived from the sales price in most cases. If the This value will be derived from the sales price in most cases. If the underwriter feels that an “as is” appraisal is necessary (HUD Homes), underwriter feels that an “as is” appraisal is necessary (HUD Homes), then that value will be entered here. This is the value of the then that value will be entered here. This is the value of the property property prior to any renovation being done. You must use the lesser of A2 or prior to any renovation being done. You must use the lesser of A2 or the Original Acquisition Cost plus Debts incurred for renovation since the Original Acquisition Cost plus Debts incurred for renovation since acquisition if the property has been owned for less than 1 year on a acquisition if the property has been owned for less than 1 year on a refinance.refinance.$170,000 A2$170,000 A2

A3.A3. “After-Improved” Value“After-Improved” ValueThis value will come from the 203k appraisal. This appraisal is the This value will come from the 203k appraisal. This appraisal is the appraisers estimate of the property value after completing the proposed appraisers estimate of the property value after completing the proposed renovations. This value is determined by the use of comparisons in the renovations. This value is determined by the use of comparisons in the immediate area around the subject property in similar condition to the immediate area around the subject property in similar condition to the condition anticipated for the improved property.condition anticipated for the improved property.$220,000 A3$220,000 A3


A4.A4. 110% After-Improved Value 110% After-Improved ValueThis is simply the After-Improved value This is simply the After-Improved value multiplied by 110% ($220,000 x 110%).multiplied by 110% ($220,000 x 110%).$242,000 A4$242,000 A4

A5.A5. Borrower’s Estimated Closing CostsBorrower’s Estimated Closing CostsThese costs should include FHA allowable These costs should include FHA allowable closing costs such as the origination fee, credit closing costs such as the origination fee, credit report, appraisal fees, mortgage tax, title search, report, appraisal fees, mortgage tax, title search, insurance premiums, and re-cert fees.insurance premiums, and re-cert fees.$0 A5$0 A5


A6.A6. Allowable Energy ImprovementsAllowable Energy ImprovementsThe Allowable Energy Improvements will The Allowable Energy Improvements will be determined by the energy audit (HERS be determined by the energy audit (HERS Report) and will consist of those items that Report) and will consist of those items that will return a measurable savings in energy will return a measurable savings in energy costs over the life of the improvements. costs over the life of the improvements. Mortgagee Letters 93-13, 95-46 and 98-02 Mortgagee Letters 93-13, 95-46 and 98-02 discuss the alternatives for testing and discuss the alternatives for testing and criteria for the improvements.criteria for the improvements.$0 A6$0 A6

Maximum Mortgage Maximum Mortgage WorksheetWorksheetSection B:Section B:

Rehabilitation and Other Allowable CostsRehabilitation and Other Allowable Costs

B1.B1.Total Cost of Repairs (Line 36, HUD – 9746-A (8/95))Total Cost of Repairs (Line 36, HUD – 9746-A (8/95))On a Full 203k, once the signed specifications of repairs has been reviewed or On a Full 203k, once the signed specifications of repairs has been reviewed or completed by the HUD Consultant, the Consultant signs a template draw request completed by the HUD Consultant, the Consultant signs a template draw request form (HUD 9746-A) which lists the agreed upon total of the specifications of repairs. form (HUD 9746-A) which lists the agreed upon total of the specifications of repairs. The total on the Draw Request form (line 36) is entered on this line. Your borrower The total on the Draw Request form (line 36) is entered on this line. Your borrower might not have met with the HUD Consultant yet, if that is the case, this will be a might not have met with the HUD Consultant yet, if that is the case, this will be a “best guess”. This form can be updated later in the transaction.“best guess”. This form can be updated later in the transaction.$37,000 B1$37,000 B1


B2.B2. Contingency Reserve on Repair CostsContingency Reserve on Repair CostsThis amount should be between 10% and 20% of the renovation amount, This amount should be between 10% and 20% of the renovation amount, and is determined by the underwriter after considering the and is determined by the underwriter after considering the recommendation of the consultant. The contingency reserve can be paid recommendation of the consultant. The contingency reserve can be paid in cash. If the contingency reserve is paid in cash enter a “0” in this in cash. If the contingency reserve is paid in cash enter a “0” in this section. Make a note in the remarks section that the contingency has section. Make a note in the remarks section that the contingency has been paid in cash and note the amount. That amount must be placed in been paid in cash and note the amount. That amount must be placed in the repair escrow account at closing. If the contingency reserve comes the repair escrow account at closing. If the contingency reserve comes from someone other than the borrower, document the file with the donors from someone other than the borrower, document the file with the donors name. If the contingency reserve is not used in the case, the funds will be name. If the contingency reserve is not used in the case, the funds will be returned to the donor.returned to the donor.$3,700 B2$3,700 B2


B3.B3. Inspection and Title Update Fees Inspection and Title Update FeesInspection Fees:Inspection Fees:Maximum fees for compliance inspection on completed work will continue to be set by Maximum fees for compliance inspection on completed work will continue to be set by each HUD Office. The number of inspection allowed on a project is case by case, and each HUD Office. The number of inspection allowed on a project is case by case, and depends on the complexity of the work. The lender is responsible to ensure that depends on the complexity of the work. The lender is responsible to ensure that payment is made to the inspector even though the fees are paid my the mortgagor so payment is made to the inspector even though the fees are paid my the mortgagor so having the fees readily available in the escrow account is desirable.having the fees readily available in the escrow account is desirable.# of Inspections 4 x $100 = $400# of Inspections 4 x $100 = $400Title Update Fees:Title Update Fees:To protect the lenders first lien mortgage position from mechanics liens on the To protect the lenders first lien mortgage position from mechanics liens on the property, reasonable fees charged by a title company may be included as an allowable property, reasonable fees charged by a title company may be included as an allowable cost of rehabilitation. Where the mortgage position is protected and is not in jeopardy, cost of rehabilitation. Where the mortgage position is protected and is not in jeopardy, this fee may not apply.this fee may not apply.# Title Updates 4 s $75 = $300# Title Updates 4 s $75 = $300Sum of Inspection Fees & Title Update FeesSum of Inspection Fees & Title Update Fees$700 B3$700 B3


B4.B4. Mortgage PaymentsMortgage PaymentsThe borrower is permitted to finance in the escrow account up to 6 months The borrower is permitted to finance in the escrow account up to 6 months mortgage payments on a 203k. This is allowed ONLY when the property is mortgage payments on a 203k. This is allowed ONLY when the property is uninhabitable. If the renovation is complete prior to the 6 months, the uninhabitable. If the renovation is complete prior to the 6 months, the remaining mortgage payments will be used to pay down the principal at the remaining mortgage payments will be used to pay down the principal at the Final Release. They cannot be used to make monthly mortgage payments Final Release. They cannot be used to make monthly mortgage payments while living in the subject property. PITI and monthly MIP payment are to while living in the subject property. PITI and monthly MIP payment are to be used in the calculation of the mortgage payment.be used in the calculation of the mortgage payment.# Mortgage Payments x $ = $0 B4# Mortgage Payments x $ = $0 B4

B5.B5. Subtotoal for Rehabilitation Escrow Account (sum of B1 through Subtotoal for Rehabilitation Escrow Account (sum of B1 through B4)B4)$41,400 B5$41,400 B5


B6. Architectural and Engineering FeesB6. Architectural and Engineering FeesThe borrower may finance the fees charged by an The borrower may finance the fees charged by an architect to do the necessary drawings of the architect to do the necessary drawings of the plans for the Appraiser to review.plans for the Appraiser to review.$800 B6$800 B6


B7. HUD Consultant FeesB7. HUD Consultant FeesNot necessary for 203k Streamlined but, in cases where the rehabilitation project is Not necessary for 203k Streamlined but, in cases where the rehabilitation project is large, less than $35,000 in total rehabilitation cost or there are structural changes, large, less than $35,000 in total rehabilitation cost or there are structural changes, you must have an HUD Consultant. The most current schedule of maximum are you must have an HUD Consultant. The most current schedule of maximum are listed below. An additional fee of $100 can be financed if the borrower requests a listed below. An additional fee of $100 can be financed if the borrower requests a feasibility study prior to submitting a sales contract to a seller. The amount entered feasibility study prior to submitting a sales contract to a seller. The amount entered here must also be contained in the written agreement between the consultant and here must also be contained in the written agreement between the consultant and borrower.borrower.$700 B7$700 B7

CONSULTANT FEES per HUDCONSULTANT FEES per HUD$5,000-$7,500 - $5,000-$7,500 - $400$400$7,500-$15,000 -$7,500-$15,000 - $500$500$15,001- $30,000 - $15,001- $30,000 - $600$600$30,001-$50,000 -$30,001-$50,000 - $700$700$50,001-$75,000 - $50,001-$75,000 - $800$800$75,001-$100,000 - $75,001-$100,000 - $900$900$100,001 +$100,001 + $1,000$1,000


B8.B8. Permits PermitsBuilding permits can be financed and should be shown on Building permits can be financed and should be shown on this line. Permits must be in place prior to the first release this line. Permits must be in place prior to the first release of funds.of funds.$700 B8$700 B8

B9.B9. Other Fees (explain in remarks) Other Fees (explain in remarks)$0 B9$0 B9

B10.B10. Subtotal B5-B9 Subtotal B5-B9$43,600 B10$43,600 B10


B11.B11. Supplemental Origination Fee Supplemental Origination Fee1.5% of the rehabilitation amount or 1.5% of the rehabilitation amount or $350.00 (whichever is greater). This fee $350.00 (whichever is greater). This fee goes to the lender.goes to the lender.$654.00 B11$654.00 B11


B12.B12. Discount Points on the Repair Costs and Fees Discount Points on the Repair Costs and FeesThe discount points on the portion of the mortgage amount allotted to rehabilitation The discount points on the portion of the mortgage amount allotted to rehabilitation can be financed on the 203k. This is based off of multiplying the discount by line 10 can be financed on the 203k. This is based off of multiplying the discount by line 10 and the product should be shown on this line. The borrower can choose not to and the product should be shown on this line. The borrower can choose not to finance this portion. The number of discount points being charged on the finance this portion. The number of discount points being charged on the rehabilitation costs cannot exceed those being charged on the total mortgage rehabilitation costs cannot exceed those being charged on the total mortgage amount and is a portion of the total discount charged, not in addition to.amount and is a portion of the total discount charged, not in addition to.

The total discount should be shown on the Firm CommitmentThe total discount should be shown on the Firm Commitment The cash discount should be shown on the Mortgage Credit Analysis The cash discount should be shown on the Mortgage Credit Analysis

Worksheet, MCAWWorksheet, MCAW The financed discount should be shown on the Line B12 of the The financed discount should be shown on the Line B12 of the

Maximum Mortgage Worksheet, Maximum Mortgage Worksheet, MMWS.MMWS.$0 B12$0 B12


B13.B13. Subtotal for Release at Closing Subtotal for Release at ClosingThe costs financed in items on lines B6 through B9 & B9, The costs financed in items on lines B6 through B9 & B9, B11 and B12 may be released at closing provided that paid B11 and B12 may be released at closing provided that paid receipts or contractual agreements requiring payment are receipts or contractual agreements requiring payment are obtained.obtained.Sum of B6 through B9 $2,200Sum of B6 through B9 $2,200Sum of B11 and B12 $654Sum of B11 and B12 $654Total =$2,854 B13Total =$2,854 B13


B14.B14. Total Rehabilitation Cost Total Rehabilitation CostThe numbers in B14 are carried forward to the mortgage The numbers in B14 are carried forward to the mortgage calculation. You must remember to subtract A6, the EEM calculation. You must remember to subtract A6, the EEM amount.amount.$41,400 Subtotal (B1->B4)$41,400 Subtotal (B1->B4)+$2,854 Subtotal (B6->B9+B11+B12)+$2,854 Subtotal (B6->B9+B11+B12)-$0 Allowable Energy Improvements-$0 Allowable Energy Improvements=$44,254 B14=$44,254 B14

Maximum Mortgage Maximum Mortgage WorksheetWorksheetSECTION C: Mortgage Calculation for SECTION C: Mortgage Calculation for

Purchase TransactionsPurchase Transactions

C1.C1. The Lesser of the Sales Price (A1) or The Lesser of the Sales Price (A1) or As Is Value (A2)As Is Value (A2)$170,000 C1$170,000 C1

C2.C2. Total Rehabilitation Cost (B14) Total Rehabilitation Cost (B14)$44,254 C2$44,254 C2


C3.C3. The Lesser of the sum of (C1=C2) or 110% of The Lesser of the sum of (C1=C2) or 110% of the After Improved Value (A4)the After Improved Value (A4)$170,000 Lesser of the sales price or As-Is value $170,000 Lesser of the sales price or As-Is value (C1)(C1)+ $44,254 Total rehab cost (C2)+ $44,254 Total rehab cost (C2)= $214,254 Total= $214,254 TotalOR $242,000 110% of the After-Improved Value OR $242,000 110% of the After-Improved Value (A4)-whichever is less(A4)-whichever is less$214,254 C3$214,254 C3


C4.C4. Mortgage Amount Mortgage AmountThis is the sum of C3 +/- Required Adjustments (ie. sales This is the sum of C3 +/- Required Adjustments (ie. sales concession in excess of 6% of the sales price or HUD incentives). concession in excess of 6% of the sales price or HUD incentives). You then multiply that by the LTV Factor of Less Allowable down You then multiply that by the LTV Factor of Less Allowable down payment/HUD-Owned Properties. From time to time HUD has payment/HUD-Owned Properties. From time to time HUD has sales incentives which allows borrowers to purchase a home with a sales incentives which allows borrowers to purchase a home with a minimum down payment of $100 instead of 3.5%.minimum down payment of $100 instead of 3.5%.$207,826.37 C4$207,826.37 C4

C5.C5. Statutory Investment Required Statutory Investment RequiredTake the value from C3 and multiply by 3%. If this is the HUD Take the value from C3 and multiply by 3%. If this is the HUD $100 Down Payment Incentive Program, then $100$100 Down Payment Incentive Program, then $100$6427.62 C5$6427.62 C5


C6C6. Actual Cash Investment Required. Actual Cash Investment RequiredTo calculate the actual cash investment the To calculate the actual cash investment the borrower has contrinuted, you must take the sum of borrower has contrinuted, you must take the sum of C3 and A5, then subtract C4 ($6427.62). This figure C3 and A5, then subtract C4 ($6427.62). This figure must be equal to or greater than C5. If this is less, must be equal to or greater than C5. If this is less, then you must make an adjustment to C4 to make then you must make an adjustment to C4 to make sure the borrower has a 3% investment.sure the borrower has a 3% investment.

C7.C7. Adjusted Maximum Mortgage Amount (if required Adjusted Maximum Mortgage Amount (if required in C6)in C6)$0 C7$0 C7


Section D is not needed on a Section D is not needed on a

Purchase TransactionPurchase Transaction


E1E1. Energy Efficient Mortgage Amount. Energy Efficient Mortgage AmountTake the Maximum Mortgage Amount from Take the Maximum Mortgage Amount from Section C (either C4 or C7) and add in A6. The Section C (either C4 or C7) and add in A6. The Maximum County Limit be exceeded by A6, up to Maximum County Limit be exceeded by A6, up to $8,000. Mortgagee Letters 93-13, 95-46 and 98-$8,000. Mortgagee Letters 93-13, 95-46 and 98-02 discuss the alternatives for testing and 02 discuss the alternatives for testing and criteria for the improvements.criteria for the improvements.$0 E1$0 E1

Maximum Mortgage Maximum Mortgage WorksheetWorksheetRemarks SectionRemarks Section

It is in the remarks section that you will make It is in the remarks section that you will make notations notations about Cash Contingency Reserves about Cash Contingency Reserves

and and Other Fees. Other Fees. Note: UFMIP is added in Note: UFMIP is added in this section.this section.

Also, it is recommended that the 203k Also, it is recommended that the 203k Maximum Maximum Mortgage Worksheet is signed prior to Mortgage Worksheet is signed prior to submission submission to to underwriting. Many Lenders underwriting. Many Lenders require it.require it.

Submit to UnderwritingSubmit to Underwriting

By the time that the borrower selects By the time that the borrower selects their contractor and signs the necessary their contractor and signs the necessary contract, the appraisal should be contract, the appraisal should be completed.completed.

Upon receipt of the appraisal, you should Upon receipt of the appraisal, you should have all of the figures needed to have all of the figures needed to complete the final Maximum Mortgage complete the final Maximum Mortgage Worksheet.Worksheet.5252

All permits must be in place prior to the All permits must be in place prior to the first draw release.first draw release.

At ClosingAt Closing

Seller or remaining balance (refinance) Seller or remaining balance (refinance) on the current mortgage is paid off.on the current mortgage is paid off.

Remaining Funds are put into an Remaining Funds are put into an interest bearing escrow account.interest bearing escrow account.

11stst disbursement to pay consultant, disbursement to pay consultant, appraisal, permits etc. appraisal, permits etc.

Borrower begins to make mortgage Borrower begins to make mortgage payments on the entire principal of the payments on the entire principal of the loan, including the escrowed amount loan, including the escrowed amount not yet disbursed.not yet disbursed.

Renovation PeriodRenovation Period Renovation should begin within 30 days Renovation should begin within 30 days

of closing.of closing. Borrowers will make their regular PITI Borrowers will make their regular PITI

mortgage payments throughout, unless mortgage payments throughout, unless the home is inhabitable.the home is inhabitable.

Escrowed funds are released to the Escrowed funds are released to the borrower/contractor through draw borrower/contractor through draw requests, less 10% contingency which is requests, less 10% contingency which is paid at final draw.paid at final draw.

Maximum renovation period is 6 months.Maximum renovation period is 6 months.

Final Inspection - Final Inspection - CompletionCompletion

Final inspection will require the Final inspection will require the appraiser to inspect the property to appraiser to inspect the property to ensure that all required renovations ensure that all required renovations were completed. Appraiser will issue were completed. Appraiser will issue final inspection certificate.final inspection certificate.

Title will issue all applicable lien waiversTitle will issue all applicable lien waivers All contingency hold-backs will be paidAll contingency hold-backs will be paid Final draw will be paidFinal draw will be paid Any overage will be used to make a Any overage will be used to make a

principle reduction paymentprinciple reduction payment

Contact TerryContact Terry

Terry Cronin, Senior Mortgage Terry Cronin, Senior Mortgage Consultant Consultant

& Reverse Mortgage Specialist& Reverse Mortgage Specialist

C: 630-207-1524C: 630-207-1524

O: 630-396-7800O: 630-396-7800

[email protected]@terrycronin.com

Education

Fha 203k Presentation_8.26