The FHA 203k is a great loan for someone making a purchase or refinancing, and these steps will provide you with a road-map to understanding the process.
1) The Buyer works with a realtor to find the right property for them, or the owner is ready for a renovation on their existing property.
2) Get pre-approved by lender for the price range and repair estimate.
3) Go to contract on the house noting that it is FHA 203k financing (for a purchase).
4) A meeting is scheduled with a HUD Consultant on site of the property to complete the work write up and the estimate of repairs.
5) The lender orders the appraisal for the property. The appraisal must contain the before and after renovation value of the home.
6) Closing of the property takes place and escrowing the funds for repairs and upgrades.
7) The contractor starts work on the property and draws down funds for repairs and upgrades.
8) Lastly, you move into your new home or settle into your new and improved home.
The FHA 203k inspection, work write-up and cost estimate are essential elements in processing the FHA 203k insured loan. Therefore, when a consultant is used for the project it is the responsibility of the consultant to assure that the specification of repairs are properly prepared.
These steps will help guide you through the FHA 203k mortgage process and get you into the home of your dreams.
Many are surprised to find out that you can use a FHA 203k loan to refinance or purchase a property and roll in the cost of rehabilitation and renovation. This is one of the great ideas behind the FHA 203k loan. Frequently, I receive calls from customers stating they don’t have enough equity in their home to get a line of credit or enough cash on hand to do the improvements that they would like to in their new home purchase. In a search for a company to meet their needs, they stumble onto my web-site. This is when they realize that they do have options, and the program that will fit their needs is the FHA 203k loan.
There are solutions to your home improvement problems. The answer is the FHA 203k Refinance.
Lately I’ve been asked, “what are some allowable improvements when we use the FHA 203k rehab mortgage”? I’d like to give you some basic information that you can use to help understand how the FHA 203k renovation mortgage works and what is eligible.
These are prime times for the FHA 203k program more than ever. There is a large inventory of homes on the market that fit the requirements for participation in the FHA 203k and it can be a simple process with the right professionals on board.
Contractors can offer their clients a new way to finance their remodeling projects with the FHA 203K Loan.
The extent of the rehabilitation under the FHA 203k may range from relatively minor (minimum of $5,000 in cost) to virtual reconstruction: a home that has been demolished or will be razed as part of rehabilitation is eligible, for example, provided that the existing foundation system remains in place. The types of improvements that borrowers may make using FHA 203k financing include:
Items that are not eligible for improvements include; swimming pools, tennis courts, basketball courts, hot tubs; simply, no luxury items
A full FHA 203k allows for complete renovations and rehabs of properties. Everything allowed in a streamline FHA 203k is eligible for a full FHA 203k. A full FHA 203k is used for all repairs and renovations over 35,000.
How come more Realtors and customers don’t use FHA 203k loans? It’s a great question!
The product really should be offered out to more people and recommended to pretty much all first-time homebuyers and really any other type of buyers, specifically because the inventory out there today, unless it’s new construction, really needs some sort of rehab or cosmetic repair work.
There are no homes out there, unless it’s new construction, that are move-in ready. There’s no home that people move into and look at everything and say, “Wow! That’s exactly what I want.” That’s why the FHA 203k loan should be considered in almost every purchase transaction. The reason it is not is because a lot of the in-house lenders that realtors use don’t offer the product. Or the lenders or Realtors believe that the loan is hard or time consuming and truth be told it can be if the people working on the loan do not have experience. Successful FHA 203k transactions happen when there are experienced lenders, FHA 203k consultants and contractors involved.
Make sure that your lender is offering this to you as an option, and if they’re not offering it to you as an option, ask them why. Ask them and say specifically what is it about the FHA 203k loan that is the reason that you’re not offering that to me as an option for me to buy this house? Then do me a favor, reach back to us and send us an e-mail telling us the responses that you’re getting from the in-house mortgage guy or from the guy you’re working with, as to why they’re not using the loan. I would love to personally hear those answers so that I can help to create educational programs for clients like you, your Realtors and contractors alike.
Renovating and Rebuilding America – One Home at a Time
We took a wonderful NJ couple and showed them the power of the NJ FHA 203k mortgage program. We showed the customer once again that by using this mortgage program that you can buy a home in NJ, PA, DE, or any of the 27 states that AnnieMac Home Mortgage is licensed in to create INSTANT EQUITY.
Everyday we watch the news and see that home values continue to drop, foreclosures are up and short sales are dominating the market. Yep- it’s true that all of this is a constant reminder of the mortgage meltdown and what is wrong with the banking industry but the FHA 203k renovation mortgage is a mortgage that is allowing us to help families to see that there is a light in the mortgage marketplace. By using this mortgage our customer created over $85,000 in equity…..you did read that right $85,000. Amazing isn’t it?
OK- so how did this person get such an amazing deal in NJ? Well they found a bank owned property- not all that hard in this environment. All you need is a good NJ Realtor and they should be able to help you find good properties for this program (and if not email me- I have a list of good Realtors all over the 27 states we are licensed in). Then they got a FHA 203k Consultant to do a work writeup on what work was needed to get the property up to FHA minimum property standards. The Realtor had already worked up comparable’s of what the property would be worth once the work was all complete:Property Purchase Price $90,000 Repair Work $31,000 Costs, Escrows, Etc $14,000 Total $135,000 After Work Completed Value Per Appraisal $220,000 INSTANT EQUITY $85,000
Well now that the home has been bought and the closing is complete the contractor starts his work and within 6 months the borrower will be moving into there new dream house. The great part about this is- besides the incredible equity that we built- 6 months of mortgage payments were escrowed so that the client could live in there current apartment and not have to make 2 payments out of there pocket.
So contact me or one of my team and we will work with you to show you the power of the FHA 203k Renovation Mortgage in NJ, PA or any other state that AnnieMac Home Mortgage is licensed in.
If you are either looking to purchase a home or possible rehab your existing home, it is important to know the repairs you can do with an FHA 203k loan. It is not breaking news to hear that the market is flooded with homes that need work. The difficulty that potential home buyers are having is looking past the existing state of the property. Knowing the eligible repairs before you go out to see the homes will help you visualize the home in its future state. Also there are a lot of existing home owners who lost equity in their home over the past few years and by knowing the repairs that be be financed in with an FHA 203K loan will help them re-gain their lost equity.
FHA 203K Streamline Eligible repairs ( $35,000 in total repair cost )
Here are some examples of Ineligible Improvements with FHA 203K
There are very few notable economic events taking place this week on the Economic Calendar that might affect rates this week. Fortunately, it looks like rates will continue to sustain their current levels based on the disappointing economic data that was released last week. This provides yet another great window for being able to take advantage of the low rates that exist today but not existing in the short term future.
The big news last week affecting mortgage rates was a disappointing employment report. Analysts had expected 150,000 new jobs to be created, while data came in showing that only 54,000 new jobs were actually created. There was also a higher than expected number of jobless claims, which was yet the latest in a series of reports indicating that the overall economy is weaker than had been hoped.
While the disappointing economic data continues to paint a picture of long term weakness in the overall economy, it bodes well for help mortgage rates to sustain their existing levels and even set new lows. While there has been concern that low mortgage rates could not continue at their existing levels for much longer, the data of last week has bought more time for on the fence home buyers and homeowners considering refinancing their existing mortgage.
Economic Calendar for Week of June 6, 2011
One of the biggest concerns of first time home buyers when they’re looking at getting their first mortgage is just how much money they’re going to require. Qualifying for a mortgage is the first step in the process, but it is important to understand if you will need cash for your purchase and if so, how much.
Understanding what you’ll be responsible for paying for in cash is good information to have before you even submit a mortgage application. The specific costs can vary depending upon the state that you live in, the cost of your home and to other factors, but here are some basic things to consider that should be considered.
In order to qualify for a mortgage, you will likely have to produce a down payment unless you are using a VA (Veterans Administration) or USDA Rural Housing Loan . The specific amount required for a down payment depends upon state guidelines as well as the type of loan. FHA mortgage loans offer the competitive down payment options for those who qualify, requiring 3.5% of the purchase price down.
In addition to requiring money for your mortgage down payment, you’ll need to save money for closing costs. This is something that you may be able to get paid by the seller of your new home, but as this is not something that is guaranteed, it is wise to have some money on hand to pay for all of the costs of purchasing a home that cannot be rolled into your mortgage. If you present a mortgage lender an offer that does not include closing costs covered by the seller, often as a first time home buyer, you are required to prove that you have the money to cover them. Depending on your local market environment and location, 1.5% to 3% of the purchase price may be a fair estimate for your closing costs, and somewhere in this range is what a mortgage lender will typically need to confirm.
Since the location, cost and your unique financial and credit attributes can affect what you will need to put down when you purchase a home, we can help you better understand the estimated amount that you’ll need to pay when buying a home. More importantly, we can help you understand and target the home purchase price that suits your specific needs an finances so you can be prepared in advance to make your first home purchase!
If you are thinking about purchasing a new home, don’t wait until you find the perfect home to get pre-qualified! Make sure your credit is healthy and find out how much you can qualify for before you find the home of your dreams. This helps insure that you not only choose a home in the right price range, but help avoid falling in love with a home that you can’t afford!
Another great reason to get qualified as early in the process as possible is to insure the fastest closing possible. If there are multiple offers going in on a home, you may be at a disadvantage if you are not able to secure financing quickly. Don’t wait until the last minute!