Presentation on theme: "1/19/2014Daniel Dobbs 949 250-39811 203(k) Financing Daniel Dobbs….Senior Loan Officer American Commerce Mortgage (949) 250-3981"— Presentation transcript:
1/19/2014Daniel Dobbs (k) Financing Daniel Dobbs….Senior Loan Officer American Commerce Mortgage (949)
1/19/2014Daniel Dobbs Introduction Daniel Dobbs; 24 years as a loan consultant Closed over 1,000 personal transactions Brokers & Notary License AA from OCC ….B.A in Comm from CSUF … Published writer, photographer Formerly Licensed by the DRE for Continuing Ed Attended all the Googles work shops for SEO Have Produced 4 RE Videos Built 8 highly Google Ranked Websites
1/19/2014Daniel Dobbs Todays Agenda Introduction 20 minutes or less Featured Programs: Standard FHA 203k ($100k max) Streamlined FHA 203k ($ 35K max) Eligible / Ineligible Properties Eligible / Ineligible Improvements
1/19/2014Daniel Dobbs Todays Agenda Qualifying Flow Process (who does what and when) Disbursement Process Making this Work FHA 203k Resources FHA Worksheets
1/19/2014Daniel Dobbs Why the 203(k)? FHA 203(k) –Increase loan origination volume –Sell more listings –Work with more buyers –Helps buyers buy the worst home in the best neighborhood (referrals) –The good news….very few industry professionals know anything about
1/19/2014Daniel Dobbs Eligible Properties SFRs, PUDs Condos (Rehab limited only to unit interior) 2-4 unit properties..1 unit must be owner occupied Condos in FHA approved projects REOs, foreclosures, and short sales Rental properties in wrecked condition
1/19/2014Daniel Dobbs In-Eligible Properties Homes that have never been completed Log Homes Condotels Cooperatives New home never before occupied (1 yr) REOs, foreclosures, and short sales Rental properties in wrecked condition
1/19/2014Daniel Dobbs Eligible Improvements are: Permanent part of the home & adds value Architectural exhibits not required Additions to the structure (bed & bath) Finish basement or attic patios, decks, roofing, landscaping or terraces Safety, energy efficiency & electrical upgrades (solar panels) Handicapped accessibility improvements
1/19/2014Daniel Dobbs Eligible Improvements are: Upgrade of existing HVAC systems Appliances Upgrade of plumbing & electrical systems Flooring Minor remodeling (no structural repairs) Weatherization – including storm windows/ doors, insulation, weather stripping, etc Purchase & installation of new
1/19/2014Daniel Dobbs Ineligible Improvements are: Luxury Items Pools / Hot Tubs…($1500 can go to repair of present pool and spa) Tennis Courts…. Gazebos Any improvement that will take longer than than 3 months Amenity improvements New or foundation repairs
1/19/2014Daniel Dobbs Rehab House #1 Appraised Value: $525,000 Net Sales Price: $500,000 Closing costs: $25,000 Up to 6% of the sales price No Cash Back…No Cash-Out
1/19/2014Daniel Dobbs Rehab House Appraised Value: $525,000 Net Sales Price: $500,000 Closing costs: Seller pays 25,000
1/19/2014Daniel Dobbs Available Loan Programs 30 yr … Owner Occupied … Primary Res Jumbo loan amounts (to $625,000) Conforming loans (to $417,000) 1-yr adjustable-rate mortgages are for Conforming loan limits only (no jumbos) Temporary rate buy down (no permanent ) No permanent buy downs Loan is fully assumable to qualified buyers with credit check
1/19/2014Daniel Dobbs FHA Eligible Closing Costs The buyer is limited to paying 1 point origination..originators can receive rebate pricing Buyer can pay discount points…must be a true cost and can not be charged by broker..only a mortgage banker or other direct lending instition Other Loan Costs Escrow & Title Fees Appraisal Pre - Paids (prop taxes, insurance premiums.. Hoa dues)
1/19/2014Daniel Dobbs How to Qualify? US Citizens, Perm.& Non-Resident aliens Owner- Occ, Primary Res, No 2 nd homes UW may be automated or manual Standard FHA guidelines apply Non-Occupant Co-signers ok Move-up Buyers (75% equity in current home if that is being rented out…verified by appraisal)
1/19/2014Daniel Dobbs How to Qualify? Self Employed $$$ ok avg. over 2 years 2 years Complete Fed. Tax Returns W-2s Beware of hidden expenses that are revealed on the 1040s (i.e. child care union dues, child support / alimony) 1 month Paystubs 2 mos. Bank Statements
1/19/2014Daniel Dobbs Marginal Credit OK (1) Chapter 7 BK allowed 24 mos after discharge date & good credit has been re- established Less than 24 mos. (more than 12 mos) may be allowed…provided the reason for BK was due to extenuating circumstances and unlikely to re occur Chapter 13 BK allowed after 12 mo.
1/19/2014Daniel Dobbs Marginal Credit (2) Provided payment history has been satisfactory & with court approval Foreclosures/deed-in-lieu OK after 3 yrs Court ordered judgments & Tax liens may be included in the refinance All neg credit must be addressed by letters of explanation and documentation
1/19/2014Daniel Dobbs Down Payment Purchases/Refi – 3.5% minimum required Checking, savings,401K or cash-on-hand Gift from relative, fiancé or domestic partner Can be from Non-Occupying on borrower Cash Reserves NOT REQUIRED on 1-2 unit properties…. With that in mind……..
1/19/2014Daniel Dobbs The loan-to-value (LTV) is based on: Lesser of sales price or "as is" appraised value PLUS repair costs MINUS sales Concessions (carpet/paint) 110% of as completed appraised value
1/19/2014Daniel Dobbs For Example
1/19/2014Daniel Dobbs Available on Hud.gov
1/19/2014Daniel Dobbs Time Line – 3-7 Working Days
1/19/2014Daniel Dobbs Time Line …..Days??
1/19/2014Daniel Dobbs Making it Work Borrower puts together as many of these team members as soon as possible Lender and Loan Officer that is FHA 203K approved and experienced Motivated RE Agent Contractors Building material suppliers FHA Cost Consultant (CC) (HUD.gov)
1/19/2014Daniel Dobbs Time Line: 3-7 Working Days Borrower finds home…submits offer as a simple FHA loan (not 203k) Lender then accepts the offer and the 30 day clock starts ticking The offer should be recognized as for 30 days from date of final acceptance …NOT when offer was initially written Once borrower has verbal approval of the offer schedule have the CC ready for inspection.
1/19/2014Daniel Dobbs Making it Work (1) Borrower meets at property w/ Cost Consultant (400) to discuss repairs & best way maximize future increased value Agent is present to open/close property CC prepares estimates for borrower Borrower shops contractors (by fax if possible) Borrower meets contractor (s) at property w/ RE agent to open /close home & for final bids Borrower cant be compensated for their labor.
1/19/2014Daniel Dobbs Making it Work (2) Loan officer receives application and processes the loan Investor –Underwrites –Closes –Sets up Escrow Repair Account –Handles all Draws –Certifies inspections which aredone by the original appraiser)
1/19/2014Daniel Dobbs Streamline Draw Process (1) For borrowers doing the work themselves, a self- help agreement is required before funds are disbursed - the check is payable to the borrower For borrowers working with a contractor, a W-9 must be provided to establish the contractor as approved – Shortly after the close of escrow before any work is commenced two-party check made payable to the borrower & the contractor.
1/19/2014Daniel Dobbs Streamline Draw Process (2) The check is then sent & to the borrower who signs the check over to contractor. The bank place a hold on the funds until the check clear (10 days) and this may slow the start date.
1/19/2014Daniel Dobbs Streamline Draw Process (3) Included with the disbursement is an instruction letter that explains how the final disbursement works Balance disbursed upon completion of all work If the cost of the renovation is over $15,000 (of course it is) an inspection by orig.appraiser is required (signs off) and sent to lender Final Check is disbursed within 10 days
1/19/2014Daniel Dobbs K Standard Draw Process (1) After the loan is funded & set up in system Welcome package and Draw Request Guide is sent to the borrower Signed W-9 is required from contractor before funds can be drawn Disbursements are made as each phase of the project is completed based on the draw paperwork provided by the cost consultant 20 days to START the DISBURSEMENTS
1/19/2014Daniel Dobbs K Standard Draw Process (2) 20 days to START the DISBURSEMENTS Exception are for the cost of flooring, roofing, cabinets, and windows - 50% of the cost of these items can be disbursed upfront as part of a normal draw Inspections are required prior to each disbursement
1/19/2014Daniel Dobbs K Standard Draw Process (3) Inspections are required prior to each disbursement (max. of five draws are allowed) Draw amounts can vary and are based on the work performed Up to 6 months of house payments can be included in the loan IF home is not occupied during construction Borrower may not be compensated for his/her labor only actual costs (i.e materials)
1/19/2014Daniel Dobbs Borrower vs. Contractor Work can be completed by EITHER Borrower must be qualified & approved to do work before loan funds & sign Self-Help agreement Example: Borrower is a licensed plumber or electrician etc. Rehab must begin within 30 days of closing and finish in 3 months Borrower may not be compensated for his/her labor.
1/19/2014Daniel Dobbs Contractor Requirements Credentials verifying requirements for licensing, bonding & insurance Contractors provide estimates that clearly state nature & type of repair and the cost for completion of the work
1/19/2014Daniel Dobbs Trouble Shooting Loan must not exceed actual cost of construction, (purchase) or refinance of an existing lien, & reasonable closing costs. In other words: If a borrower submits cost estimates to the lender that does not increase m the propertys value DOLLAR FOR DOLLAR… the loan amount will be reduced and the borrower will need to fund the difference with their own money
1/19/2014Daniel Dobbs Trouble Shooting Unused loan proceeds not advanced …must be applied back to principal Their payments are not lowered..just the principal $$$ Contractors no showing for estimates is a real problem. W-9s not signed and submitted with first draw request.
1/19/2014Daniel Dobbs Trouble Shooting Please consult the Calif. State Contractors Board for violations or consumer complaints Borrower choosing a lender that is not local or hands on…or is FHA Direct Endorsement approved then the loan is a 60 day + nightmare For a list of eligible lenders in your area visit HUD.gov
1/19/2014Daniel Dobbs FHA 203(k) Forms
1/19/2014Daniel Dobbs FHA 203(k) Resources
1/19/2014Daniel Dobbs In Closing If you would like to be on my mailing list …. please call or send me an or visit my website OCBANKREPO.com Id like to know your thoughts about the webinar & any suggestions to make it better And thank you …I know your time is valuable; this market is driving all of us to work harder and smarter…..and I hope you feel the time we spent together was worthwhile. Thank you & good luck