Presentation on theme: "FHA 203K Streamline. Why FHA 203K Streamline? Through the FHA 203K Streamline program, borrowers can purchase or refinance their home and include the."— Presentation transcript:
FHA 203K Streamline
Why FHA 203K Streamline? Through the FHA 203K Streamline program, borrowers can purchase or refinance their home and include the costs to renovate and repair the home in the same loan. If you need work done to a home and have no equity available, THIS IS THE PROGRAM FOR YOU!
Target Markets Borrowers purchasing a home in need of renovation - REOs, Foreclosures and Short Sales - Incomplete Renovations Borrowers refinancing existing home - Improve instead of move - Out-Dated Kitchens, Bathrooms, etc…
Program Highlights Up to 96.50% LTV For Purchases 97.75% Maximum LTV on Rate & Term Refinances 640 Minimum FICO Finance up to $35,000 in Renovations Costs
Program Highlights All Work Must be Done by a qualified, and experienced, contractor Can Not be Used for Structural Improvements or Repairs Same Underwriting logic as a Standard FHA Loan
Improvements Improvements are eligible as long as they become a permanent part of the property and add value, for instance: - Roofs, gutters & downspouts - Heating and Air Conditioning - Upgrade/Repair plumbing, septic, well and electrical - Replacement of flooring, windows, doors and siding - Weatherization, painting, basement waterproofing - Purchase and installation of appliances - Elimination of Health and Safety Hazards
Improvements Luxury Items Are Not Eligible - Swimming pools & Hot Tubs - Tennis Courts - Gazebos - Barbecue Pits - Structural Changes
Determining the Value The LTV is based on the lesser of: - The Sales Price or “As Is” Appraised Value PLUS the total renovation costs, or - 110% of the “After Improved” Appraised Value (includes all work done) Purchase
Determining Max Loan Amount EXAMPLE: Purchase of a 1-Unit Property with a 96.50% LTV/CLTV Purchase and Renovation Costs Sales Price$ 120,000 Labor/Material$ 24,500 Soft Costs (permits, inspection fees, etc…)$ 2,420 Contingency Reserve (10% of non-soft costs)$ 2,450 Total for Purchase and Renovation$ 149,370 “After Improved” Value (determined by appraiser)$ 160,000 Value to use for LTV calculation must be the lesser of the total cost of renovation or the “as-completed” value. In this example, $149,370 is less than $176,000 (110% of $160,000). Therefore, the value used is $149,370. Maximum Loan Amount at 96.50% of $149,370$ 144,142.05
Determining the Value The LTV is based on the lesser of: - The unpaid principal balance, plus total rehabilitation costs, or - The “As-Is” value of the property, plus the total rehabilitation costs, or Rate & Term Refinance - 110% of the “After Improved” appraised value.
Determining Max Loan Amount EXAMPLE: Refinance of a 1-Unit Property with a 97.75% LTV/CLTV Purchase and Renovation Costs Unpaid Principal Balance$ 120,000 “As-Is” Appraised Value (determined by appraiser)$ 130,000 Labor/Material$ 24,500 Soft Costs (permits, inspection fees, etc…)$ 2,420 Contingency Reserve (10% of non-soft costs)$ 2,450 Total for Unpaid Principal and Renovation$ 149,370 “After Improved” Value (determined by appraiser)$ 160,000 Value to use for LTV calculation must be the lesser of the Unpaid Principal + Renovation, the “As-Is” Appraised Value + Renovation, or 110% of the “After Improved Appraised Value. In this example, UP+R = $149,370, AIV+R = $159,370 and 110% of AIV = $176,000. Therefore the value used for LTV/CLTV calculation is $149,370. Maximum Loan Amount at 97.75% of $149,370$ 146,009.17
Draw Process Within 30 days after loan funding, 50% of the funds are disbursed. Included with the disbursement is an instruction letter that explains how the final disbursement works. The remainder of the funds is disbursed once ALL work is complete. Inspections (or Certificates from Municipalities), to verify the work, may be required depending on the number of contractors working on the renovations.
Contingency Reserve 10% of the cost of renovation must be put into a Contingency Reserve. (15% if utilities are not on, or if property is vacant) The Contingency Reserve is used to cover health, safety and unplanned issues that arise during the renovation process. If not used (after all construction is complete) the remaining amount can be applied to the principal or used to make other improvements (additional approval is required).
GFE Disclosure Fees must be properly disclosed on the GFE A Supplemental Origination Fee is to be included in Block 1 of the GFE: 1.50% of the renovation amount, or $350, whichever is more (recommend disclosing the max $525). Inspections and Title Updates: Disclose a minimum of 1 each; Inspection - $110 and Title - $150 Change of Circumstance can be done when bid is received and more than one inspection is required.
Helpful Hints Make sure that ALL parties understand the draws, how they happen and when they happen. Title must be clear before final payment is made. The most common cause for a delay in draw is missing a W-9.