Category Archive Home Purchase

The FHA 203K Mortgage Process

 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.

  • The FHA 203(K) is a loan that allows the buyer to purchase a home without a CO at closing.
  • Can be used with short sales, REO and foreclosures.
  • It can also be used to refinance your current mortgage to upgrade your home.
  • 30 Year fixed rate loan.
  • Creates equity fast.
  • Convert commercial 5-6 units to HUD limits of 1-4 family.
  • Convert single family homes to 4 family homes.
  • Mixed use properties with no more than 25% commercial space is eligible.
  • Buyer can borrow up to 110% of the appraised completed value.
  • Project must start within 30 days of closing and be completed within 6 months of closing.


There are solutions to your home improvement problems.  The answer is the FHA 203k Refinance.

Eligible Improvements Using the FHA 203K Loan

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:

  • Structural alterations and reconstructionPutting on a new roof
  • Repair or replacing well and/or septic system
  • Roofing, siding and gutters
  • Landscape work and site improvements
  • Enhancing accessibility for a disabled person
  • Additions
  • Kitchen and Bathroom renovations
  • Replace/Upgrade existing HVAC systems
  • Replacement windows and doors
  • Finish Basements and Waterproofing
  • Plumbing and Electrical upgrade
  • Appliances, Floor and Wall covering

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 people don’t use FHA 203k loans?

Knowledge & Experience Needed!

How come more Realtors and customers don’t use FHA 203k loans?  It’s a great question!

  1. The answer really lies in the fact that most lenders (in house mortgage companies for the Realtors) don’t do the FHA 203k loan, or just don’t do it well.
  2. Secondly, Realtors have fear about the FHA 203k loan because of past experiences with using the loan with inexperienced teams of people around them trying to secure the financing.

This is a great loan for today’s market.

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.

Feedback is always appreciated!

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

NJ FHA 203k Success Story- Yep we did it again!

Its starting to sound like a bad Britney Spears song (sorry to all you Britney fans out there) but …We Did It Again.

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.

Amazing Isn’t It?

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… did read that right $85,000. Amazing isn’t it?

The Details

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

Equity Built- Now What?

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.

What repairs are eligible to be completed with a FHA 203K Loan?

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 )

  • Repair/Replacement of roofs, gutters and downspouts
  • Repair/Replacement/upgrade of existing HVAC systems
  • Repair/Replacement/upgrade of plumbing and electrical systems
  • Repair/Replacement of flooring
  • Minor renovation, such as kitchens & baths, which do not involve structural repairs
  • Painting, both exterior and interior
  • Weatherization, including storms windows and doors, insulation, weather stripping, etc…
  • Purchase and installation of appliances, including free-standing ranges, refrigerators and microwave ovens
  • Septic system and/or well repair or replacement
  • Accessibility improvements for persons with disabilities
  • Lead-based paint stabilization or abatement of lead-based paint hazards
  • Repair/replace/add exterior decks,patios, porches
  • Basement finishing and renovation that does not involve structural repairs
  • Basement waterproofing
  • Window and door replacements and exterior wall re-siding

Here are some examples of Ineligible Improvements with FHA 203K

  • Renovation involving structural changes, like moving a loan-bearing wall, or new construction, like adding rooms
  • Landscaping or fencing
  • Work that will not start within 30 days of loan closing or will cause the borrower to be displaced from the home for more than 30 days or renovations that will take more than 6 months to complete
  • Luxury items like swimming pools, hot tubs, tennis courts, etc.

The second type of FHA 203K is referred to as the FHA 203K Standard. ( $35,000 and above ) Below is a list if of improvements that borrowers are able to complete:

  • All of the improvements listed in the eligible improvements for a streamlines 203(k)
  • Structural alterations and reconstruction, like room additions, repair of termite damage, major remodeling of kitchens and bathrooms, finishing an attic or basement, adding a second story to a home, etc
  • Major landscaping and site improvement including correction of grading and drainage problems, tree removal and repair of sidewalks and driveway, if they are safety hazard to the property



Weekly Mortgage Outlook for June 6, 20011

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.

Disappointing Economic Data is Good For Mortgage Rates

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

  1. Monday: Fischer and Plosser from the Fed speak
  2. Tuesday: Lockhart from the Fed speaks, Consumer Credit
  3. Wednesday: Fed Beige Book, Hoenig from the Fed speaks
  4. Thursday: Plosser from the Fed speaks, Initial Jobless Claims
  5. Friday: Dudley from the Fed speaks

How Much Money Do You Need to Buy a Home?

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 responHome Purchase Down Paymentsible 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.

Down Payment Required for a Mortgage

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.

Mortgage Closing Costs

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.

Target Purchase Price and Other Considerations

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!

FHA 203k Mortgage-The Quarterback (QB)- Part 1

FHA 203k Mortgage Quarterback

Peyton Manning?  Are you serious?

Yep- I am.  I am personally a Philadelphia Eagles fan but for the purposes of this blog and what I am going to be showing you during my next few blogs I need you to understand my point.
Peyton Manning is the true general on the football field.  There are others in the league who might be better but no one at his peak can command an offense of 11 players.  If your a Pats fan or Saints fan lets leave that aside and let me explain how this fits in with FHA mortgages and more specifically FHA 203k Renovation mortgages– we can argue about the best QB later 🙂
When I or one of my team members works with you as your mortgage banker we act as a quarterback.   This is the analogy that I always use with my customers.  The reason is really simple- the FHA 203k mortgage has many moving parts- for example- lender (QB), realtors (WR’s), clients (RB), contractors (OT / OG), FHA 203k consultant (Center), appraiser (TE), etc. etc… If you do not have a good quaterback to act as a general on the transaction, just as Peyton Manning acts on the football field,  you will become one of the many customers who calls me upset becuase they have been working on there loan with XYZ lender who told them they would get there loan done in no time.  Next thing they know, 6 months have gone by and they are no further along then when they started.
This is not unusual- I get this scenario all the time.  Customers work with lenders who really do not know what they are doing with these loans and thus I get a lot of frustrated consumers looking for help.  The QB mentality is what I take with my borrowers because our team wants you to have a smooth transaction and have you close it in a timely fashion.
As your FHA mortgage quarterback- my team and I will make sure that the players are doing there part and in the right position.  This means coordinating with contractors, setting expectations of the realtors, explaining the draw process and getting the right FHA 203k consultant for the job.
To be continued……Part 2- Setting the Expectations

Home Purchase Loan Tips

boyIf 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!

We have home purchase specialists standing by that can give you FREE home purchase finance advice. Feel free to request a FREE Rate Quote or to Contact Us directly.