Redbud Mortgage 203 k powerpoint

When it comes to selling a home…

Redbud Mortgage Group 203K Experts

Choosing a 203K Loan
• Looking to purchase that requires repairs
• Owns a home requiring repairs but cannot afford
the repairs
• Wants to gain equity in a home purchase using
the 3.5% down payment benefit of FHA financing.

Repair

Remodel

Renovate

One Single Loan

Outdated Kitchen

Outdated Bathroom

Remodel or Renovate

Borrower Chooses
What to Renovate

Myth #1
Takes too long to
close the loan
Some people have claimed that
with the inspections, repairs
and follow up inspections that it
took their mortgage loan over 7
months to close. However, with
an experienced mortgage
lender and a reputable
contractor you should be able
to close on the loan within 45 to
60 days

Myth #2
There is too much paperwork
Granted, an FHA loan has more
paperwork than a conventional
loan. However, in essence you
are doing two loans in one; you
are buying a home and you are
taking out a loan to do some
major renovation to the house.
Normally, two mortgages would
be a ton of paperwork. So,
borrowers have to be
reasonable on this point.

Myth #3
It does not make sense to borrow
money for paint, carpet, etc. and
then pay for 30 years on it
If you choose a good property in the
right neighborhood, you will actually
be building your equity from the
beginning. For instance, if you find a
home that can be bought for $95,000
and needs approximately $25,000 in
repairs then you are borrowing
$120,000 in total. If your home is
worth $130,000 or more as soon as
the repairs are made then you have
built up $10,000 in instant equity.

Myth #4
Dealing with repair bids is too
troublesome
This is why you should work
with a contractor that has
experience with FHA guidelines.
Our General Contractors
understand what is allowed by
FHA and what is off limits. They
can inspect the home and give
you a bid that should meet the
rules of the FHA and get passed
by the FHA appraiser when the
work is finished.

203K Contractor
• The general contractor will
carry over all of the sub-
contractor’s bids onto his/her
own bid. The general
contractor will be responsible
for overseeing that all repairs
are done in a professional and
timely manner.
• The general contractor will
also be responsible for
disbursing all funds to the
sub-contractors when funds
are released from escrow.

203K Contractor continued…
• The general contractor must
carry sufficient insurance
equal to the total amount of
the rehab amount through a
valid and current E&O or
liability insurance declarations
page.
• The contractor must provide a
detailed work write up or bid
itemizing all repairs that are to
be completed with cost and
note if permits are required.

203K Streamline limitations
• Total rehab escrow under $35,000
• 10% contingency required (part of the $35,000)
• Deduct any mortgage payments required
• Usually results in rehab loan of $30,000 or less
• Specification are determined by contractor
• No independent third party to review feasibility study

203K Appraisal Process
• General Contractor prepares
all bids based on conversation
with borrowers. Bids are
presented to lender so
appraisal can be ordered.
• Appraisal is ordered as FHA
203k appraisal and all bids
are forwarded to appraiser for
consideration while
performing appraisal.

203K Appraiser Process
• Appraiser does the appraisal
“subject to” completion of the
repairs/improvements and
provides an “after improved
value” based upon the list of
repairs.
• Purchase transactions require
only the “after improved”
value
• Refinance transactions
require both values.

203K Eligible Property Types
• Owner Occupies
Properties only
• Single Family
Residences
• 2 - 4 Unit Properties
• FHA approved condo’s
• REO, Short Sales,
Foreclosures!

203K Improvements Allowed
• Roofs, gutters and downspouts
• Mild mold remediation
• HVAC, windows
• Plumbing and Electrical
• Flooring
• Painting - Interior and Exterior
• Kitchen and Bath remodeling
• Septic or Water Well repair or
replacement
• Repair or add exterior decks or porches

203K Improvements Allowed
• Storm doors, insulation,
weather stripping
• Exterior siding replacement
• Appliances including
refrigerator, free standing
ranges, washers, dryers,
dishwashers and microwaves.
• Improvements for people with
disabilities
• Lead based paint abatement

203K Improvement Not Allowed
• Major structural repairs/major
rehabilitation
• Moving or repairing a load bearing wall
• New construction (adding a room)
• Repairs requiring detailed plans and
specs
• Any repair taking longer than 3 months
• Repairs requiring more than 2 draws
• Luxury items
• Swimming pools, landscaping, hot tubs, tennis
courts, gazebos, bar-b-que pits,

203K Contractor Payment
• Contractor receives deposit at time of closing
• 35% to 50%
• Requires signature by contractor
• Balance is paid after 100% completion of work
• Appraiser re-inspects finished work
• Final draw following appraiser re-inspection.

Serve More Home Sellers!

Serve More Buyers!

203K Experts
405-990-4042
redbudmortgage.com

Redbud Mortgage 203 k powerpoint

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