Presentation on theme: "Why didnt I call Dennis?!?! Dennis Vicars, Mortgage Banker Southwest Funding LP 1011 N. Causeway Blvd., # 8 Mandeville, LA 70471 direct 985-624-3941 |"— Presentation transcript:
Why didnt I call Dennis?!?! Dennis Vicars, Mortgage Banker Southwest Funding LP 1011 N. Causeway Blvd., # 8 Mandeville, LA direct | fax | 37% of all Closings are Bank Owned Properties in need of Repairs. Let me help you make this! your 2011 Niche!!
Step 1: Get your Client Pre-Qualified Immediately. Complete an easy Pre-Qual Application and send it to Dennis Vicars at Southwest Funding.Pre-Qual Application Step 2: Once you have a Pre Approval Letter contact Dennis to discuss how to submit your bid. Some items to consider when using FHA 203K financing are: Try to include up to 6% in Seller Concessions when submitting your bid. Ask for at least 60 days from time of acceptance to close your loan. Of course we will 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 escrow disbursement accounts have to be set up. Assist your client in locating a Home Improvement Specialist immediately and inform the Contractor we will be asking them to provide a Contractors Estimate of Repairs once your bid has been accepted. Have them call Dennis to secure an list of exhibit they need to provide. This by far is can be were your closing gets delayed. Many Contractors simply arent prepared or dont have the proper experience or licensing to meet FHA requirements to complete the work and Dennis will insure you dont get begin with an unqualified contractor. 1. FHA 203K Checklist FHA 203K Checklist 2. FHA 203K Homeowner/Contractor Agreement FHA 203K Homeowner/Contractor Agreement Advise your client NOT to purchase any materials prior to closing, otherwise the cost of these materials cannot be included in the loan. Have your client call Dennis before the bid has been accepted to start the application process early. Whether or not the seller accepts your bid, your client will be well on their way to final loan approval and if the bid is not accepted Dennis can easily transfer your clients documents to a new purchase agreement. Watch the Video (985)
Okay, maybe not, but I want to attempt to make it as simple as possible and hope you will take the time to read on. For many of us in the business who are "in the know" we forget the need to go back to basics and spell it out in simple terms for others to understand. So I've compiled some information based on my most recent commonly asked questions. FHA loans have become the driving force behind residential purchases over the past few years because of the increased FHA Maximum Mortgage limits and now that the limits have been increased and prices have decreased, FHA loans have become the most utilized loan in recent years! HOWEVER, because it was not a popular loan, you would be amazed at how many of us in the real estate profession do not know what we are doing, especially when it comes to the 203K loan.FHA Maximum Mortgage limits I spoke to an Agent the other day that was given such miss-information it made me cringe. Apparently a Lender told the Agent that an FHA 203K loans could not be secured on her property because the ingress and egress (driveway) access a gravel road! Luckily she called me later and I let her know no such rule existed and gave her a just some of the items that could be included in the rehabilitation of the property. Dont forget to check out how to go Green with a 203K (985)
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 owner. With so many foreclosures in today's market, many times these houses in need of repair are listed "as is", which in the past required a cash buyer or conventional financing and either are seldom found these days! Not using the FHA 203K loan as your financing tool I believe is pure ignorance of the program and lenders havent properly prepare you the agents on how to use the great financing tool to close the deal. Listed below are just a few things your client can include in their FHA 203K Streamline. 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 doesnt have the right number of bedrooms or they need an extra bathroom they can include the cost of these additions with the FHA 203K Standard Loan Financing Program, as long as the market supports these additions. BIG PLUS I almost forget to mention, when your client use the FHA 203K Standard Financing we 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! Well also including up to 15% in contingency reserves just in case your client has some additional cost and once all the repairs are complete any money left over in reserves or built in house payments will be applied to the principle of the loan. (985)
The FHA 203K loans allow your client to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser) What does this mean? You client buys a house for $170,000 that needs $50,000 in repairs and closing cost and the Subject To Value is estimated at $200,000, we can offer financing on that home in the amount of $212,300 or 3.5% of the after improved value. Of course in this market most bank owned properties are being sold at significantly reduce values and you are a savvy negotiator, so lets take that same home with a purchases price of $130,000; homes in the area with similar square footage and curb appeal are selling for $200,000 and we still have $50,000 in repairs and closing cost. We can offer financing up to $173,700 or 3.5% of the purchase price plus the cost of repairs and after the improvements are done your borrower begins the home ownership with over 13% equity built in once the final disbursement has been made translating into $19,300 of equity for a $6,300 investment in six months or less! Too good to be true? NOPE. That's it in a nutshell.... Think about just how easy it is to sale a home when you crunch the numbers like that and work with a lender that knows how to partner with you to move your inventory! And, dont forget to tell you clients or have them ask me about the Energy Efficient Mortgage Add On that will have reduce Utility Cost and a must do when doing a remodel. Your buyer is automatically approved and can save them $100 of dollars a month.
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, but can be paid by the seller when negotiating the sales contract price up to 6% of the final sale price. Buyer often will hire (I can recommend one to you) a HUD approved FHA 203k Consultant to go to the property with the buyer to determine the required repairs and their wish list and the fee charged by the consultant can be included in the mortgage. The fee can range anywhere from $ 400 to $1000 depending on the repairs required. Please check with the consultant prior to scheduling your appointment.HUD approved FHA 203k Consultant Buyer will obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs. Three estimates are recommended for each contractor but not necessary. The buyer can act as their own general contractor in many purchases if experienced (FHA says experienced, but most investors require the buyer to be licensed). The buyer must provide documentation to be approved by the lender prior to doing a Self Improvement FHA 203K loan and often times you will be working with someone who working in the construction industry or has friends and/or relatives that can perform the work that can reduce the cost or repairs and increase their equity by thousands! The consultant will determine the "required" repairs versus the "wish list repairs". Your client must start with the required repairs and then move on from there for their wish list. This is an important step for the consultant and appraiser, so that your client doesnt over improve the home and exceed the comparable properties in the area. (985)
Once the consultant completes their report of required and wish list repairs, we forward it to the appraiser for an "After Improved Value". This is where your clients may run into problems with OVER improving the property based on current values, so it is imperative that you listen closely to your buyers wish list and advise your clients what is and isnt common for the area. Between the consultant, appraiser, your client and you - the FINAL report will be tweaked to come up with a final report that the contractors will be hired to do. So now the file is submitted to underwriting and approved (your client needs to qualify at the full amount they are borrowing of course and the normal steps for closing will occur. Closing occurs, and the work begins within 30 days of closing/funding. (This is when your clients mortgage payments start since this is when they started borrowing the money - however, if we included the 6 months mortgage payments; they will be deducted from escrow starting when their first payment is due) Disbursements are made throughout the following 6 months from the escrow account (normally up to 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed. Remember you paid the seller for the price of the home, and then you borrowed an additional amount of X which is sitting in an escrow account to pay the contractors (your clients total loan is the total amount they borrowed). Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT your clients are done! Simple as okay maybe not, but that's why having an experienced lender on your side is crucial! (985)
One to Four Family Units To be eligible, the property must be a one to four family dwelling that will be owner occupied and has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible. Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place. In addition to typical home rehabilitation projects, the FHA 203K Program can be used to convert a one-family dwelling to a two, three, or four family dwelling. An existing multi-unit dwelling could be decreased to a one to four family unit, so keep this in mind when being faced with selling a five or more unit property. Existing Homes being moved on site or Modular Homes An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation. Manufactured Homes Yes we offer the FHA 203K on Manufactured home less than 15 years old and a minimum loan amount of $45,000. These homes must meet the same building requirements for FHA Manufactured Housing requirements established by FHA. Mixed Used Properties An FHA 203K mortgage may be originated on a "mixed use" residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property. (985) FHA 203K
Condominium Unit FHA 203K mortgages can be used for individual units in condominium projects that have been approved by FHA, the Department of Veterans Affairs, or are acceptable to FNMA under the guidelines listed below. Condominium rehabilitation is subject to the following conditions; Occupant and qualified non-profit borrowers only; no investors; Rehabilitation is limited to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of the exterior or other areas which are the responsibility of the condominium association, except for the installation in the attic of the unit; The lesser of five units per condominium association, or 25% of the total number of units can be under rehabilitation at any one time; 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. Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for an FHA 203K loan. Likewise, a project could contain a row of more than four attached townhouses and be eligible for an FHA 203K loan because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof). Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units. (985)
FHA's Energy Efficient Mortgage Add On (EEM) helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to their FHA 203K or 203B loan. At a minimum your clients will be required to apply the EEM funds to address: the local recommended R value (insulation rating factor) in ceilings, walls and floors; infiltration levels and barriers (caulking, weather stripping and sealing); adding storm windows and doors; the heating (including water heating) and cooling systems. Once the above items are addressed your clients can use any additional funds to purchase other energy efficient appliances or equipment such as active or passive solar technologies. Your client does not have to qualify for the additional money, nor do they have to make and additional down payment on these improvements since FHA wants to help everyone to Go Green! If you are showing an older home that does not appear to be well weatherized, let your clients know they can include many energy efficient improvements in their FHA 203K or 203B Home Loan and all at the same interest rate. Not only can this save them thousands of dollars in interest and utility cost, but you clients dont have made a cash purchase or finance the cost at much higher rates while focusing on buying the extras that make a newly purchased house a home. The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating system (HERS) or an Energy Consultant. The fees and inspection report are included in the mortgage just like the cost when using an FHA Consultant. Thats right the cost to weatherize their some has NO OUT OF POCKET EXPENSES OR ADDITIONAL DOWN PAYMENT REQUIREMENTS. If your client has an interest to include this Add On Have them call me immediately and Ill send them more information about the EEM Add On Program and explain some easy steps to explore the benefits while waiting for your offer to be approved. And remember this program is available on all FHA programs, so if your client doesnt follow through of the purchase of the home they are looking at today we can easily apply the necessary improvements to any other home they decide to purchase and in need of weatherization. To find out how much your client can increase their mortgage to benefit from the EEM Add On Program simply locate the Parish the property is located in and determine the greater value of what is in Columns E or G on the chart link below. How Much Can Increase My Loan Amount to include and EEM Add on Energy Efficient Mortgage Add On with an FHA 203K and 203B Home Loan Dennis Vicars, Mortgage Banker Southwest Funding LP 1011 N. Causeway Blvd., # 8 Mandeville, LA direct fax
FNMA HomeStyle Program With one out of three homes sales today coming from Bank Owned Properties, it seems many investors are having to pay cash to obtain the property – because until recently, there were a limited number of financing options available to them. Well, now things have changed. There is a new Fannie Mae program called the Fannie Mae HomeStyle Loan program that can be used by investors to purchase these distressed properties with the intent to repair for resale or to keep as income producing properties. It is a lot like the FHA 203K loan program, and a perfect loan program for investors looking to take advantage of these below market value homes. Highlights of the Fannie Mae HomeStyle Loan The HomeStyle Renovation mortgage program allows borrowers to combine the cost of the home with the costs for renovation or remodeling. At closing, all funds for renovation will be escrowed in an interest-bearing account. After all renovation work is complete, any remaining funds in the escrow account will be used to pay down the principal balance of the mortgage. Fannie Mae HomeStyle Renovation Loan Highlights: 1. Up to 95% LTV (see LTV occupancy requirements below) 2. Renovation funds escrowed in an interest bearing account 3. Soft costs (architectural services, engineering, permit fees, etc.) may be financed 4. Loans are underwritten to standard FNMA guidelines Loan Amt $50,000 to $417,000 1 & 2 Family Units /Modular and PUDs FICO Scores from 680 to 740 with specific limitations to LTV Fixed Rate Loans Only with 15 and 30 yrs terms Up to 6 months of payments can be included in the loan amount HomeStyle Renovation Loan LTV Requirements: Primary Residence – Up to 95% LTV Second Home – Up to 90% LTV Investment Property – Up to 75% LTV HomeStyle Renovation Mortgage: More Information Borrowers can basically do any repairs / renovation to the home that they want as long as the appraisal supports the improved value, the improvements are common for the area (pools, for example), the repairs can be completed within six months, and the repairs do not exceed 50% of the after improved appraised value. The HomeStyle renovation mortgage isnt quite as good as the Fannie Mae HomePath renovation mortgage – BUT – the HomePath renovation loan is only allowed on homes that are currently owned by Fannie Mae. Dennis Vicars, Mortgage Banker Southwest Funding LP 1011 N. Causeway Blvd., # 8 Mandeville, LA direct fax