FHA 203K Renovation Tools for    REO Real Estate Agents                                                             FHA 20...
Mike Tozzolo, FHA203Konnect       First Guaranty Mortgage Corp  Learn about the FHA 203K RenovationTool for Realtors and s...
The Hot Niche for                        Realtors                                                                   FHA203...
So what is an FHA 203K Loan                        and why use one?                                      When a buyer want...
FHA 203K Renovation Essentials                                 for a Successful ClosingStep 1: Get your Client Pre-Qualifi...
Details please......                                               Down payment is based on the sale price PLUS the final ...
Details Continued                                                After closing/funding your Home Buyers can               ...
FHA            203K                                            Eligible PropertyOne to Four Family UnitsTo be eligible, th...
Eligible Properties Continued                                                               The minimum mortgage amount ca...
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Mid Atlantic Fha 203 K Renovation Tools For Realtors


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Mid Atlantic Fha 203 K Renovation Tools For Realtors

  1. 1. FHA 203K Renovation Tools for REO Real Estate Agents FHA 203K Made Easy, We even do them with FICO Scores down to 580!Mike Tozzolo ~ (888) 295-7899 x 3370 FHA 203Konnect ~ A Distressed Home Marketing Tool for Realtors
  2. 2. Mike Tozzolo, FHA203Konnect First Guaranty Mortgage Corp Learn about the FHA 203K RenovationTool for Realtors and show Home Shoppers how they can get in the distressed home property game with this great Niche. (888)-295-7899 x 3370 mtozzolo@fgmc.com @FHA203K_Guru Mike
  3. 3. The Hot Niche for Realtors FHA203KonnectThe FHA 203K Renovation Tools ~ A core marketing strategy for REO RealtorsFHA 203K an Equity Builder! On average home buyers seeabout a 20% equity increase (amounts can differ anddepend solely on the buyer’s abilities) in value whenpurchasing distressed homes and renovating. Great for FirstTime Home Buyers. Our approach to FHA 203K Lending is anorchestrated effort by our networked partners and a greatreferral source for you!Did you ever have the wrong house, but rightneighborhood? FHA 203K probably could of fixed that. FHA203K can renovate a property even if all that’s left of theoriginal structure is the foundation.FHA allows your Home Buyers to FINANCE the cost of therepairs in their renovation loan. What does this mean andhow does it work?A recent client bought a house for $87,000 that needed$39,429 in repairs, making the total COST $126,429 and theAfter Improved Value came in at $146,000. We closed ourAgent’s Listing with a base loan amount of $124,503, whichcovered the cost to purchase the home and repairs. Be sureto check out the exhibits to the right to learn more.CRUCHING THE NUMBERS IN REAL TIMENegotiated Sales Price $87,000Cost of Rehab $39,429Sub Total $126,429After Repairs Value $146,000Initial Inv (3.5% Down Payment/Closing Cost and Escrow $4,895Equity Appreciation after rehabilitation $19,574Recognized Appreciation after repairs $14,680 Mike Tozzolo X (888) 295-7899 ~FHA 203Konnect ~ First Guaranty Mortgage Corporation
  4. 4. So what is an FHA 203K Loan and why use one? When a buyer wants to buy a home that needs repairs utilizing most Conventional or FHA financing, normally the repairs would have to be completed prior to the closing of escrow and the repairs would fall on the responsibility of the existing owner. With so many foreclosures in todays market, many times these houses in need of repair are listed "as is", which in the past required a cash buyer and cash buyers limit you opportunity to close your sale! Not using the FHA 203K loan as your financing tool I believe is pure misunderstanding of the program and lenders haven’t properly educated agents on how to use this great financing tool to close the deal. Listed below are just a few things your client can include in their FHA 203K Streamline and so much more can be completed when using the FHA 203K Traditional Financing.  Repair Replace of the Roofs, Gutters and Downspouts  Repair Replace/Upgrade Existing HVAC Systems  Repair Replace/Upgrade Plumbing & Electrical  Repair Replace Flooring  Updating Kitchens and Bathrooms  Painting both Interior and Exterior  Weatherization including storm window and doors, insulation, weather stripping, etc.  Purchase and installation of built in and freestanding appliances  Accessibility Improvement for the physically challenged  Lead Paint Stabilization  Repair Replace existing/add exterior decks, patios & porches  Basement and Attic Finishing & Remodeling  Septic System and Well repair or replacement If the property is in the right neighborhood, but doesn’t have the right number of bedrooms or they need an extra bathroom the cost can be included for these additions with the FHA 203K Standard Loan Financing Program, as long as the market supports these additions. Another big plus is your home buyers can include up to 6 months of house payments in their loan, so they can continue living in at their current residence and not worry about making a mortgage payment and rent! We’ll also including up to 15% in contingency reserves just in case your client has some additional cost. Once all the repairs are complete any money left over in reserves or built in house payments will be applied to the principle to reduce the loan amount.Mike Tozzolo (888)-295-7899 X 3370 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation
  5. 5. FHA 203K Renovation Essentials for a Successful ClosingStep 1: Get your Client Pre-Qualified Immediately. Complete an easy Application.Step 2: Once you have your home buyer pre-qualified we’ll reach out to you and your Home Buyer to discuss the renovation approval process.Step 3: This step is as important as getting your home buyer pre-approved, it’s about the property. With the FHA 203K Renovation Loan the property yourhome buyer selects as important a getting pre-approved. We know that Location, Location, Location is our golden rule, but these days many homebuyers are equally interested in Equity, Equity, Equity. Not giving them both can end up in a no sale. Generally, Bank Owned Properties can sell of 20 to 50percent less that non foreclosed home in the same area and the right renovations can easily create additional equity appreciation.When working with a Home Buyer of Distressed Homes one of the first questions they’ll have is “what’s the value I can expect to see when purchasingthese homes and the cost to renovate. You’ll need to have an in-depth discussion with your Home Buyer and with information they provide and yourexperience, it shouldn’t be to difficult to come up with a projected BPO based on the homes needed repairs. Then get property inspection andrecommend your Home Buyer get at least licensed contractors to provide bids for needed repairs based on the inspection and any other items they’rewanting to improve the property with.This by far is the one factors that can make your closing day a pass or fail date. Many Contractors simply aren’t qualified to complete the work your HomeBuyer expects or might not be properly licensing to meet FHA requirements, I’ll review your contractor qualifications, but make sure your home buyercovers FHA’s contractor qualifications. FHA 203K Contractor Checklist FHA 203K Homeowner/Contractor Agreement FHA 20K National Consultant RosterIf you’re using and FH203K Consultant you’ll want to provide a copy of all the above mentioned documents to them for review and utilize their expertise.FHA 230K Consultants are required for all 203K Loans, but when they are, you’ll find them to be a valuable resource for both your and the Home Buyers.FHA 203K Consultants review your Home Buyer’s Contractors paperwork to insure it meets HUD guidelines as well as works with your Home Buyer and theContractors to insure all work is completed to the satisfaction of your Home Buyers and HUD. Some items to consider when using FHA 203K financing:  Structure you offer to include up to 6% in Seller Concessions when possible. This is very common for FHA loans, and these concessions can significantly improve your borrower financing option, pre-paid escrow s and buyer’s closing cost.  Ask for at least 60 days from time of acceptance to close your loan. Of course we’ll work hard to have your loan ready to close before the closing date, but many things have to happen before closing an FHA 203K loan. Not only does your borrower have to get credit approved, the appraisal and repair estimates must be reviewed and approved and escrow disbursement accounts have to be set up, so 60 days gives you some extra cushion and sellers seldom turn their nose up to a 60 day contract for a distressed home.  Advise your client NOT to purchase any materials prior to closing, otherwise the cost of these materials cannot be included in the loan.  If bid is not accepted we can easily transfer your client’s credit documents to a new purchase agreement. Mike Tozzolo (888) 295-7899 X 3370 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation
  6. 6. Details please...... Down payment is based on the sale price PLUS the final cost of the repairs x 3.5% and closing costs are separate as usual. Home Buyers are required to hire an HUD approved FHA 203k Consultant on FHA 203K Traditional Loans. They’ll work with your Home Buyers Contractors, recommends modification and stays a part of the renovation process from early in the process until the final draw has been requested to insure a successful renovation. An FHA 203K consultants frees are between $400 and $1000, depending on the work to be complete and can be financed in the loan. This fee must be paid upfront, however with proof of payment we’ll apply the upfront fee as a credit to the down payment at closing. Buyer should obtain estimates from several licensed contractors. We recommend at least three estimates, but not required. The Home Buyer. If your Home Buyer is using an FHA 203K Consultant they’ll determine the "required" repairs versus the "wish list of repairs“ and discuss with your Home Buyers their options. Your client must start with the required repairs as outlined by this property inspector and then move to their wish list when coming up with a renovation plan. This is an important step, so that your client doesn’t over improve the home and exceed the comparable properties in the area. Of course, once your Home Buyer have provided us with all his bids, well request an FHA 203K Appraisal be completed to insure this doesn’t happen.Mike Tozzolo (888)-295-7899 X 3370 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation
  7. 7. Details Continued After closing/funding your Home Buyers can purchase materials from the Title Company check, they get at closing to cover the purchase of materials and getting their renovation project started. Of course we’ll give them reasonable time to start and complete their renovations. As a rule, FHA requires all renovation to begin no later than 30 days from closing and completed within six months. FHA understands that renovating and daily living don’t always go well together. Therefore, FHA allows up to six month of Principle, Interest, Taxes and Insurance, This allows your home buyer from be over burden with two housing payments renovation. Disbursements are made throughout the following six months (maximum) and will be withdrawn from a preset escrow account. Once we have a clear final inspection we’ll make the last disbursement. Now your Home Buyers have their dream home! Simple as 1 2 3 - okay maybe not, but thats why having an experienced FHA 203K Renovation Lender on your side is crucial!Mike Tozzolo (888)-295-7899 X 3370 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation
  8. 8. FHA 203K Eligible PropertyOne to Four Family UnitsTo be eligible, the property must be or converted to a one tofour family dwelling that will be owner occupied and has beencompleted for at least one year. The number of units on the sitemust be acceptable according to the provisions of local zoningrequirements. All newly constructed units must be attached tothe existing dwelling. Cooperative units are not eligible.Homes that have been demolished, or will be razed as part ofthe rehabilitation work, are eligible provided some of the existingfoundation system remains in place.In addition to typical home rehabilitation projects, the FHA 203KProgram can be used to convert a one-family dwelling to a two,three, or four family dwelling. An existing multi-unit dwelling couldbe decreased to a one to four family unit, so keep this in mindwhen being faced with selling a five or more unit property.Existing Homes being moved on site or Modular HomesAn existing house (or modular unit) on another site can bemoved onto the mortgaged property; however, release of loanproceeds for the existing structure on the non-mortgagedproperty is not allowed until the new foundation has beenproperly inspected and the dwelling has been properly placedand secured to the new foundation.Manufactured HomesYes we offer the FHA 203K on Manufactured home less than 15years old and a minimum loan amount of $45,000. These homesmust meet the same building requirements for FHAManufactured Housing requirements established by FHA.Mixed Used PropertiesAn FHA 203K mortgage may be originated on a "mixed use"residential property provided: (1) The property has no greaterthan 25 percent (for a one story building); 33 percent (for a threestory building); and 49 percent (for a two story building) of itsfloor area used for commercial (storefront) purposes; (2) thecommercial use will not affect the health and safety of theoccupants of the residential property; and (3) the rehabilitationfunds will only be used for the residential functions of thedwelling and areas used to access the residential part of theproperty. Mike Tozzolo (888) 295-7899 X 3370 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation
  9. 9. Eligible Properties Continued The minimum mortgage amount cannot exceed 100% of the after improved value. After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, FHA 203K loans can only be used to rehabilitate units in one- to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached.Condominium UnitFHA 203K mortgages can be used for individual units in Example: A project might consist of six buildingscondominium projects that have been approved by each containing four units, for a total of 24 units inFHA, the Department of Veterans Affairs, or are the project and, thus, be eligible for an FHA 203Kacceptable to FNMA under the guidelines listed below. loan. Likewise, a project could contain a row of more than four attached townhouses and be eligible for an FHA 203K loan because HUDCondominium rehabilitation is subject to the following considers each townhouse as one structure,conditions; Occupant and qualified non-profit provided each unit is separated by a 1 1/2 hourborrowers only; no investors; Rehabilitation is limited to firewall (from foundation up to the roof).the interior of the unit. Mortgage proceeds are not tobe used for the rehabilitation of the exterior or other Similar to a project with a condominium unit with aareas which are the responsibility of the condominiumassociation, except for the installation in the attic of the mortgage insured under Section 234(c) of the National Housing Act, the condominium projectunit; The lesser of five units per condominiumassociation, or 25% of the total number of units can be must be approved by HUD prior to the closing ofunder rehabilitation at any one time; any individual mortgages on the condominium units. Mike Tozzolo (888) 295-7899 X 3370 ~ FHA 203Konnect ~ First Guaranty Mortgage Corporation
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