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FHA Streamlined 203(k) Simple Process For Simple Repairs.

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Presentation on theme: "FHA Streamlined 203(k) Simple Process For Simple Repairs."— Presentation transcript:

1 FHA Streamlined 203(k) Simple Process For Simple Repairs

2 FHA Streamlined 203(k) Review Streamlined 203(k) Loan Program Market Opportunity Program Guidelines Types of Improvements Recent Examples Financing Process Commonly Asked Questions

3 FHA Streamlined 203(k) Loan Program Through the Federal Housing Administrations (FHA) Streamline 203(k) program, borrowers can purchase or refinance their home and include rehabilitation and repair costs in the same loan. This program can help you expand homeownership opportunities by offering a renovation program to people who want to revitalize the communities they serve.

4 FHA Streamlined 203(k) Program Purchase or refinance a property Update a property Fix a required repair Make optional improvements An affordable financing solution that combines the purchase or refinance of the home along with the costs of the improvements into a single loan.

5 Increased Market Opportunity Borrowers purchasing a home in need of rehabilitation – Perfect for HUD REOs, foreclosures, and short sales – Incomplete renovations – Out-dated kitchens, bathrooms, etc. Borrowers refinancing their principle residences and making improvements – Improve instead of move – Out-dated kitchen, bathrooms, etc. – Expand to accommodate a growing family

6 Improvements Allowed Roofs, gutters and downspouts Basement waterproofing Mild mold remediation Heating, ventilation and air conditioning systems Plumbing and electrical systems Flooring, exterior and interior painting Minor remodeling that does not involve structural repairs

7 Weatherization, including storm windows and doors, insulation, weather stripping Replacement of window and doors and exterior wall re-siding Appliances, including free-standing ranges, refrigerators, washers and dryers, dishwashers and microwaves. Improvements for accessibility for persons with disabilities Lead-based paint stabilization or abatement of lead-based paint hazards Replacement/addition of exterior decks, patios, porches Improvements Allowed

8 – Major structural repairs – 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 are not eligible Swimming pools, hot tubs, tennis courts, gazebos, barbecue pits, saunas or alterations to support commercial use Improvements Not Allowed

9 Property Guidelines Owner Occupied Properties Only Single Family Residence Manufactured Approved Condos PUDs (planned unit development) 2-4 Unit Properties REO, Short Sale, Foreclosure Ok! (need minimum of 12 mo. Cert. of completion, no builder spec foreclosures)

10 Streamlined 203(k) Loan Up to $35,000 in renovation allowed – Including all repair costs & contingency Must utilize borrower directed licensed contractor – No self help allowed 2 Draws- – Initial draw of up to 50% of repair costs is disbursed at funding – Final draw after final inspection

11 EXAMPLE: Purchase of a property with 96.5% LTV Purchase and Renovation Cost Sales Price ("as-is" appraised value) $120,000 Labor / materials, inspection fee for renovation $25,000 Contingency (10% required) $2,500 Total for Purchase and Renovation $147,500 "As-Completed" Value (Determined by the appraiser)$160,000 Value to use for determination of LTV must be the lesser of the total cost of purchase & renovation or the "as-completed" value. Maximum Loan Amount at 96.5% LTV $142,338

12 Recent AFR FHA Streamlined 203(k) Repairs / Renovation included: New kitchen cabinets Carpeting replacement Laminate floors Interior / Exterior painting Electrical GFI installation Bathroom upgrade Repair of decking / steps New gutters / downspouts Garage door replacement Vinyl siding Ceiling repair New smoke alarms HVAC Replacement Window replacement

13 Before After Missing Appliances New Laminate Flooring Mold on walls in Kitchen New Appliances / Mold Removed

14 Before After

15 Before After No Smoke Alarms Smoke Alarms installed Stairs in need of repair Stairs replaced

16 After Before New Kitchen & Flooring Missing Appliances & Floor Mold & Vent leakage Mold removed & painted

17 Simple Process To Financing Borrower purchase offer for As Is condition is acceptedBuyer obtains estimates for repairs and /or rehabilitation Appraiser uses estimates to determine as-is and to be improved value Loan Amount requested based on purchase price & repair estimatesLoan Processed, Underwritten, Closed as normalUp to 50% of repair costs disbursed at closing, remainder put in escrowWork is started within 30 days of closing and completed within 3 months.Any funds remaining in escrow will be applied to principal reduction of loan

18 Renovation Period Renovation should begin within 30 days of closing Borrowers will make their regular mortgage payments throughout the course of construction Maximum renovation period is 3 months.

19 Final Inspection - Completion When the work is complete, simply send an requesting final funds to Include the Conditional Waiver & Release and the Mortgagors Letter of Completion Once the documents are received, AFR will order the final inspection from the original appraiser Upon the receipt of the acceptable final inspection, a final disbursement will be made to the contractor All remaining funds in escrow will be made as a principal reduction to the mortgage

20 AFRs FHA Streamlined 203(k) Forms found on – Contractor Profile Contractor Profile – Consumer Renovation Information Consumer Renovation Information – Rehabilitation Loan Agreement Rehabilitation Loan Agreement – Homeowner Contractor Agreement Homeowner Contractor Agreement – Disclosure Statement - Texas Disclosure Statement - Texas – IRS W9 Form IRS W9 Form – Identity of Interest Form Identity of Interest Form – 203K Maximum Mortgage Worksheet - HUD K Maximum Mortgage Worksheet - HUD – 203K Borrower's Acknowledgement - HUD 92700a 203K Borrower's Acknowledgement - HUD 92700a When the work is 100% complete, please have the following forms completed and executed.. – Conditional Waiver & Release Conditional Waiver & Release – Mortgagor's Letter of Completion Mortgagor's Letter of Completion

21 A Few Commonly Asked Questions (See guidelines for complete details) What are the minimum and maximum amounts for repair costs under this program? – There are no minimum repair costs. The maximum total repair costs including the contingency reserve (10%) and costs are $35,000 subject to a maximum loan to value. Is there a maximum mortgage amount worksheet that must be used? – Form HUD-92700, 203(k) Maximum Mortgage Worksheet must be used to calculate the mortgage amount. Is there a final inspection required to be done once all the work is completed? – Yes, an inspection to determine that all listed repairs and or renovations were satisfactorily completed is required regardless of the amount borrowed for the repairs Can this program be used for the purchase of HUD homes? – Yes. The Streamlined 203(k) program may be used for single-family housing sold by HUD. REO properties that have been designated by FHA's Management and Marketing contractor as "insurable" with repair escrow ($5,000 or less repairs) or "uninsurable" (with m ore than $5,000 but no more than $35,000 in required repairs) are eligible How much time is permitted to complete the work? – The contractor must finish the work within 90 days. If the work is not completed within 90 days of closing, a principal reduction will be made towards the remaining unpaid balance of the mortgage.

22 Are there additional costs to the mortgagor? – AFR will hold back $300 to be used towards final inspection. Unused inspection fees will be credited against the unpaid principal balance within 30 days of the projects completion. Can the Streamline 203(k) program be used for Manufactured Housing? – Yes. The program can be used for a loan on a manufactured home however, it cannot be used to permanently affix the home to the foundation. The home must be completely secured to the foundation as evidenced by an engineer's certification and appraisal prior to closing. How much is the contingency reserve? – The contingency reserve is up to 10% of all repairs or rehabilitation expenses. The amount of reserve is at the underwriters discretion. All funds remaining in the escrow account after final payment to the contractor is made, including any remaining reserve amount will be used as a principle reduction. Where can I go if I have questions or need additional information about the Streamlined 203(k) program – or A Few Commonly Asked Questions (See guidelines for complete details)

23 American Financial Resources, Inc. About Us – AFR Wholesale, a division of American Financial Resources, Inc. – Nationwide wholesale residential mortgage lender – Headquartered in Parsippany, NJ. – GNMA approved seller/issuer, FHA Mortgagee and FNMA seller/servicer. – Serve thousands of mortgage brokers and lenders throughout the country – In business since 1997 – Grown to one of the largest FHA lenders in the country. Become an Approved Lender – As an approved lending partner, you can be set as: TPO – Third Party Origination, TF – Table Funded, C – Correspondent, and/or CDE – Correspondent, Direct Endorsement.


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