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
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
As the Real Estate and financial markets continue to move up and down, mortgage rates can also be affected. Since mortgage rates are more closely tied to the bond markets, an up or down move in the stock market may not have the result in mortgage rates that one might expects. In fact, many times the resulting mortgage rate changes are counter-intuitive.
More importantly, rates change daily and they can change quickly. Some mortgage professionals have recently noted that their rate quotes have only had shelf lives of three to four hours before market changes have deemed them inaccurate.
How does a consumer navigate fast changing markets in order to refinance their existing loan or purchase a home with the most favorable terms possible?