FHA 203k Rehab Loan

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Are you finding great foreclosure deals in disrepair? This loan is perfect for them.

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FHA 203k Rehab Loan

  1. 1. FHA 203 (k) FHA Rehabilitation Loan 203(k) March 22nd 2008
  2. 2. FHA 203 (k) FHA Rehabilitation Loan 203(k)  With FHA 203(k) mortgage insurance program, borrowers can purchase or refinance their home and include the costs to rehabilitate and repair it in the same loan.  FHA 203(k) can help you:  Increase sales  Expand your market reach  Help borrowers find affordable financing and realize the dream of homeownership March 22nd 2008
  3. 3. FHA 203 (k) 203(k) Streamline Allows borrowers to easily finance an additional $35,000 into their mortgage to make improvements. Cover improvements identified by home inspector or FHA appraiser. Available for purchase and refinance transactions. Allowed on limited improvement types, including:-  Roofs, gutters, downspouts heating and air conditioning  Upgrade/repair plumbing, septic, well, and electrical systems  Replacement of flooring, windows, doors, siding,  Weatherization, painting, basement waterproofing  Minor remodels that don’t involve structural  Handicapped accessibility improvements Same guidelines as 203(k) March 22nd 2008
  4. 4. FHA 203 (k) Opportunity There are borrowers who: Are interested in purchasing a property that needs repairs Are existing homeowners who need funds to rehabilitate their property Want to save time and money by financing the purchase or refinance with the cost of the repairs May not qualify for a conventional loan Have low-to-moderate incomes Are first-time homebuyers Have credit blemishes or low credit scores Have limited cash for down payment or closing costs March 22nd 2008
  5. 5. FHA 203 (k) Program Highlights  L&G handles draws  Up to five releases allowed (two releases allowed for Streamline)  Work can be completed by contractor or borrower  Borrower must be qualified and approved to do the work Work must be completed within agreed upon timeframe (no more than six months after closing)  Contingency reserve required  Up to six months PITI can be included in the mortgage if the property is not occupied during construction  Loan is fully assumable to qualified borrowers with no money down March 22nd 2008
  6. 6. FHA 203 (k) Program Eligibility Types of mortgages 30-year fixed-rate mortgage 1-year adjustable-rate mortgage Optional temporary 2/1 buydown Purchase and refinance of owner-occupied, primary residence Attached and detached single family residences, condos, and PUDs 2-4 unit properties REO properties Eligible borrowers U.S. citizens Permanent and non-permanent resident aliens Inter vivos revocable trusts Non-occupant co-borrowers March 22nd 2008
  7. 7. FHA 203 (k) Eligible Improvements Virtually any kind of improvement is eligible provided it becomes a permanent part of the real property and adds value, for instance: Additions to the structure Kitchen or bath remodels Finished basement or attic Patios, decks, or terraces Roofing and landscaping Safety, energy efficiency, and electrical upgrades Handicapped accessibility improvements Luxury items are not eligible: Swimming pools, hot tubs, tennis courts, gazebos, barbecue pits, saunas, or alterations to support commercial use March 22nd 2008
  8. 8. FHA 203 (k) Credit Borrower eligibility determined by HUD - no minimum credit score required Bankruptcy (BK) and foreclosure Chapter 7 allowed after 24 months since the discharge date and good credit has been reestablished Less than 24 months (but not less than 12 months) may be allowed provided the reason for the BK was due to extenuating circumstances Chapter 13 allowed after 12 months of the pay-out period provided performance has been satisfactory and borrower receives court approval to enter into the mortgage transaction Foreclosure or deed-in-lieu allowed after three years Court ordered judgments and tax liens must be paid Tax liens may be included in the refinance March 22nd 2008
  9. 9. FHA 203 (k) Income  Full documentation only Miscellaneous income is acceptable, including child support, alimony or maintenance payments, and Note income Must show a 12-month history and evidence that the income will continue for three years Self-employed income must be stable  Two-year history required  Rental income acceptable with two-year history  Ratios exceeding benchmarks (31%/43%) may be acceptable with strong compensating factors (not acceptable on manual underwrites) March 22nd 2008
  10. 10. FHA 203 (k) Flexible Down Payment and Source of Funds Minimum $5,000 rehabilitation amount 3% minimum down payment required Checking, savings, or other depository accounts Proceeds from 401(k) Gift from relative, fiancé/fiancée, or domestic partner Cash-on-hand Interest party contributions allowed up to 6% Cash reserves are not required on 1-2 unit properties March 22nd 2008
  11. 11. FHA 203 (k) Application Process Homebuyer locates property and signs a sales contract (purchase subject to home inspection) Homebuyer schedules an inspection with a 203(k) cost consultant to budget the improvements (Cost consultants can be found on HUD’s website: https://entp.hud.gov/idapp/html/f17cnsltdata.cfm) Once budget is approved by borrower, cost consultant completes the work write-up and prepares contractor bid packages to obtain cost estimates Appraiser uses work write-up to determine “as-is” and “improved value” Loan closes Construction begins within 30 days of loan closing Must be completed in six months or less March 22nd 2008
  12. 12. FHA 203 (k) Marketing Opportunities Buyers Renters Sellers List - zero cash down Existing Homeowners Refinance existing 1st 2nd Combos with no equity Expired listings Recent Purchases Older Homes Newer Homes March 22nd 2008
  13. 13. FHA 203 (k) Good Neighbor Next Door Additional benefits for borrowers who serve their communities Such as police officers, firefighters, emergency medical technicians, and school teachers 1-unit, PUDs, and condos Minimum $100 down payment Closing and financing costs can be included in mortgage amount Borrowers must agree to occupy the property as a primary residence for three consecutive years Designated HUD-owned properties in revitalization/exception areas are eligible at 50% off the sales price March 22nd 2008
  14. 14. FHA 203 (k) Resources Cost consultants can be found on HUD’s website: https://entp.hud.gov/idapp/html/f17cnsltdata.cfm For information on FHA mortgage insurance programs, visit: http://www.fha.gov/ For information on U.S. Department of Housing and Urban Development, visit: https://www.hud.gov/ March 22nd 2008

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