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FHA 203k & 203k Streamline Loans 101
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FHA 203k & 203k Streamline Loans 101

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When a homebuyer wants to purchase or refinance a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do......

When a homebuyer wants to purchase or refinance a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.

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Transcript

  • 1. How to Buy a Home and Finance Repairs 

  • 2. 203K & 203K StreamlineHow to Buy a Home and Finance Repairs 

  • 3. Focus on FHA
  • 4. Focus on FHA• FHA
market
share
dropped
from
19%
in
1996
to
under
6%
in
 2006

  • 5. Focus on FHA• FHA
market
share
dropped
from
19%
in
1996
to
under
6%
in
 2006

  • 6. Focus on FHA• FHA
market
share
dropped
from
19%
in
1996
to
under
6%
in
 2006
• Mid‐2007
saw
FHA
loan
applications
soar
nearly
50%
  • 7. Focus on FHA• FHA
market
share
dropped
from
19%
in
1996
to
under
6%
in
 2006
• Mid‐2007
saw
FHA
loan
applications
soar
nearly
50%
  • 8. Focus on FHA• FHA
market
share
dropped
from
19%
in
1996
to
under
6%
in
 2006
• Mid‐2007
saw
FHA
loan
applications
soar
nearly
50%• NOW
‐
203K
Makes
a
big
comeback
due
to
the
market
supply
 of
REO
properties!
  • 9. • Flexible
enough
for
your
first‐time
home
buyers• Streamlined
property
standards
and
paperwork• Renovation
option
through
the
“k”
or
streamline
“k”• Innovative
ways
for
a
seller
to
market
to
buyers
  • 10. For The Agent• Flexible
enough
for
your
first‐time
home
buyers• Streamlined
property
standards
and
paperwork• Renovation
option
through
the
“k”
or
streamline
“k”• Innovative
ways
for
a
seller
to
market
to
buyers
  • 11. For The Agent• Flexible
enough
for
your
first‐time
home
buyers
  • 12. For The Agent• Flexible
enough
for
your
first‐time
home
buyers
  • 13. For The Agent• Flexible
enough
for
your
first‐time
home
buyers• Streamlined
property
standards
and
paperwork
  • 14. For The Agent• Flexible
enough
for
your
first‐time
home
buyers• Streamlined
property
standards
and
paperwork
  • 15. For The Agent• Flexible
enough
for
your
first‐time
home
buyers• Streamlined
property
standards
and
paperwork• Renovation
option
through
the
“k”
or
streamline
“k”
  • 16. For The Agent• Flexible
enough
for
your
first‐time
home
buyers• Streamlined
property
standards
and
paperwork• Renovation
option
through
the
“k”
or
streamline
“k”
  • 17. For The Agent• Flexible
enough
for
your
first‐time
home
buyers• Streamlined
property
standards
and
paperwork• Renovation
option
through
the
“k”
or
streamline
“k”• Innovative
ways
for
a
seller
to
market
to
buyers
  • 18. • Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves• No
limitations
on
income• Sellers
can
help
up
to
6%• Always
assumable

  • 19. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves• No
limitations
on
income• Sellers
can
help
up
to
6%• Always
assumable

  • 20. For The Buyer• Flexibility
on
credit
and
bankruptcy
  • 21. For The Buyer• Flexibility
on
credit
and
bankruptcy
  • 22. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves
  • 23. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves
  • 24. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves• No
limitations
on
income
  • 25. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves• No
limitations
on
income
  • 26. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves• No
limitations
on
income• Sellers
can
help
up
to
6%
  • 27. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves• No
limitations
on
income• Sellers
can
help
up
to
6%
  • 28. For The Buyer• Flexibility
on
credit
and
bankruptcy• Flexibility
on
down
payment,
and
no
reserves• No
limitations
on
income• Sellers
can
help
up
to
6%• Always
assumable

  • 29. 203(k) Interesting Facts• According
to
the
National
Association
of
Home
Builders
 Americans
spent
an
estimated
$215
billion
on
residential
 remodeling
in
2005. – “1
out
of
every
2
existing
homebuyers
do
major
 improvements
within
24
months
of
purchase.”

  • 30. Benefits to Buyers!• Purchase
an
existing
property
and
finance
the
costs
of
 improvements
to
the
property
in
one
mortgage.• Move
an
existing
dwelling
to
a
new
location.• Demolish
an
existing
structure
and
rebuild.• Refinance
an
existing
mortgage
and
build
in
costs
to
make
 improvements.• Borrower
has
up
to
six
(6)
months
to
complete
the
repairs.
  • 31. Features of the FHA 203(k)• Fixed
Rate
mortgages
for
15
and
30
year
term. – ARM
mortgages
available
for
30
year
term.
• Eligible
properties
are
1‐4
unit
primary
residences. – Condominiums,
PUDs,
manufactured
housing,
leaseholds,
 and
mixed‐use
properties.• FHA
area
loan
limits
apply.
• Maximum
LTV
is
based
on
the
cost
to
acquire
the
property
 plus
rehab
or
110%
of
the
“as
improved”
value
whichever
is
 less.• Fully
assumable
mortgage.
  • 32. What does a full 203(k) loan include?• The
mortgage
amount
includes: • The
cost
of
rehabilitation
 – A
minimum
of
$5,000
in
eligible
repairs
is
required. • Up
to
six
(6)
mortgage
payments
during
completion
of
construction
 • Upfront
Mortgage
Insurance
Premium • 203(k)
Consultant
Fee • Cost
of
Inspections,
title
updates
and
permit
fees – Money
is
released
to
contractor
in
draws
as
work
is
satisfactorily
completed.
 – Escrow
is
set
up
for
the
estimate
of
cost
of
materials
and
labor
to
complete
 the
rehabilitation,
plus
a
10%
‐
20%
contingency
reserve.
 • Escrow
for
repairs
earns
interest,
payable
to
borrower
  • 33. Potential 203(k) Buyers• Buyers
intending
to
purchase
a
fixer‐upper.• Buyers
who
wants
to
make
improvements.• Buyers
rebuilding
a
home
damaged
by
fire
or
storm.• Buyers
that
have
a
loan
in
process
with
repair
issues
that
 must
be
corrected,
but
the
seller
is
unwilling
to
fix.• Buyers
presently
owning
a
home
and
want
to
refinance
 current
mortgage
in
order
to
do
upgrades,
home
 improvements,
or
new
appliances.
  • 34. Streamline 203(k)• No
minimum
amount
of
rehabilitation
is
required
(per
FHA
 guidelines)
 

‐‐

investor
guidelines
require
minimum
of
$5,000 – up
to
a
maximum
of
$35,000
of
eligible
work
items.• Contractor
estimates
only.• A
203(k)
Consultant
is
not
required.• 2
Draws
–
1
at
time
of
servicing
setup
and
final
when
all
work
 is
complete
  • 35. Streamline 203(k) – Eligible Improvements• Roofs• Gutters• Downspouts• Existing
HVAC
systems• Plumbing
and
electrical
systems• Existing
flooring
  • 36. Streamline 203(k) – Eligible Improvements• Minor
remodeling
such
as
kitchens• Weatherization,
including
storm
doors,
windows,
insulation,
 weather
stripping• Appliances
when
at
least
$3,000
of
basic
home
repairs
are
 involved
  • 37. Streamline 203(k) – Eligible Improvements• Repair/Replacement/Upgrades
which
include: – Improvements
for
accessibility
for
persons
with
disabilities• Note:• As
long
as
the
mortgagor
uses
the
services
of
one
or
more
 contractors
to
complete
the
repairs,
this
limited
repair
 program
does
not
require
a
general
contractor.
  • 38. 203(k) & Streamline Comparison FHA
203(k) Streamline
203(k)• A
minimum
of
$5,000
in
 • Minimum
amount
of
$5,000
 eligible
repairs
is
required. rehabilitation
is
required.• General
Contractor
required
&
 • Contractor
estimates
only. 203(k)
consultant
utilized • 2
Draws• Money
is
released
to
 contractor
in
draws
as
work
is
 • A
203(k)
Consultant
is
not
 satisfactorily
completed
–
max
 required. of
5 • No
Mortgage
Payments
• 6
months
PITI
may
be
included
 allowed in
the
loan • No
structural
alterations
or
• Structural
repairs
allowed landscaping
  • 39. 203(k) – Eligible Property• Owner‐occupied
only• 1
‐
4
units• Must
be
12
months
old• Condominiums,
PUDs,
leaseholds,
mixed‐use
properties
 acceptable.• Condominium
improvements
limited
to
the
interior
of
the
 unit.
  • 40. Partner Focus
  • 41. Partner Focus• Academy
Mortgage
is
a
locally‐owned
company
providing
 affordable
financing
and
quality
customer
service
 exclusively
for
buyers
of
Colorado
real
estate.
Established
 in
1995,
we
offer
competitive
rates,
a
broad
selection
of
 mortgage
products,
and
out‐front,
first‐class
service.
  • 42. Partner Focus• Academy
Mortgage
is
a
locally‐owned
company
providing
 affordable
financing
and
quality
customer
service
 exclusively
for
buyers
of
Colorado
real
estate.
Established
 in
1995,
we
offer
competitive
rates,
a
broad
selection
of
 mortgage
products,
and
out‐front,
first‐class
service.• #1 Private Lender in the United States
  • 43. Partner Focus• Academy
Mortgage
is
a
locally‐owned
company
providing
 affordable
financing
and
quality
customer
service
 exclusively
for
buyers
of
Colorado
real
estate.
Established
 in
1995,
we
offer
competitive
rates,
a
broad
selection
of
 mortgage
products,
and
out‐front,
first‐class
service. • #1 Private Lender in the United States







  • 44. Learn more about the benefits of the 203k program by visiting our website at http://www.yourrehabloan.com/