FHA 203(k) () streamline mortgage Program. make improvements all with a single loan

Transcription

1 FHA 203(k) () streamline mortgage Program Help qualified borrowers purchase or refinance and make improvements all with a single loan

2 Why FHA 203(k) Through the Federal Housing Administration (FHA) 203(k) mortgage insurance program, borrowers can purchase a home and include the costs to rehabilitate and repair it in the same loan. This program can help you expand homeownership opportunities while at the same time revitalizing the communities you serve. FHA 203(k) can help you: Increase loan origination volume Expand your market reach Help borrowers find affordable financing and realize the dream of homeownership

3 Solution Provide borrowers an affordable, stable financing solution that combines the purchase of the home along with the costs of the improvements into a single loan FHA guidelines apply Opportunity to borrow against the value of the home after improvements Low down payment requirements Flexible credit qualifying, i as low as (640 FICO) 30-year fixed-rate mortgages Fully assumable loans to qualified borrowers Owner-occupied 1-2 unit properties, PUDs, condos, and REO properties

4 Target Markets Borrowers purchasing a home in need of minor rehabilitation ti May be REOs, foreclosures, and short sales Incomplete renovations Out-dated kitchen, bathrooms, etc.

5 Program Highlights FHA jumbo loan amounts permitted 50% of funds disbursed d at funding and at least 4 weeks after all work is complete for second half of disbursements 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 three months after closing) PITI (contingency) not permitted on 203K Streamline Loan is fully assumable to qualified borrowers with no money down

6 Eligible Improvements Many types of improvement are eligible provided they becomes a permanent part of the real property and adds value, for instance Roofs, gutters and downspouts Heating, ventilation, and A/C system Flooring Well; septic system Painting (exterior/ interior Windows, doors, exterior siding Minor remodeling (nothing structural) Free standing appliances (when at least 3, of basic repairs are complete) Safety, energy efficiency, and electrical upgrades Handicapped accessibility improvements

7 Non-Acceptable Improvements Luxury items such as, swimming pools, hot tubs, tennis courts,,g gazebos, barbecue pits, saunas, or alterations to support commercial use Structural items Items that require a permit (some exceptions)

8 Credit FHA guidelines apply Desktop Underwriter (DU ), Loan Prospector (LP), or manual underwriting Minimum 640credit score required on all loans If you have thin credit see with a 640 FICO and a scorecard approval refer to (MWF bulletin ) Bankruptcy and foreclosure Chapter 7 allowed after 24 months since the discharge date and good credit has been reestablished 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

9 Program Eligibility Types of mortgages 30-year fixed-rate mortgages Optional temporary 2/1 buydown Purchase of owner-occupied, primary residence Attached and detached single family residences, condos, and PUDs 1-2 unit properties HUD-owned properties Eligible borrowers Each borrower must have a valid Social Security number U.S. citizens Permanent and non-permanent resident aliens Non-occupant occupant co-borrowers

10 Flexible Down Payment and Source of Funds Minimum $5,000 rehabilitation amount 3.5% 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 Cash reserves are not required on 1-2 unit properties Cash reserves are not required on 1 2 unit properties Interested party contributions allowed up to 6% of the purchase price

11 Contingency Reserve Used to cover health, safety and unplanned issues that arise during construction 20% required for all properties If not used (after all construction is complete) the remaining amount can be Applied to principal p Used to make other improvements (additional approval is required)

12 Determining the Value The loan-to-value is based on the lesser of The sales price or "as is" appraised value plus borrower paid repairs minus sales concessions, or 110% of as completed appraised value When a 203(k) loan is coupled with an energy efficient mortgage, the base loan amount may exceed the county maximum per Mortgagee Letter

13 Example: Determining the Maximum Loan Amount EXAMPLE: purchase of a 1-unit property with 96.5% LTV/CLTV Purchase and Renovation Costs Sales Price $ 164,000 Labor/Material $ 27,000 Soft Costs $ 790 Contingency (utilities functioning 20% required) $ 5,400 Monthly PITI (Not required to vacate property during renovations) $ 0 Total for Purchase and Renovation $ 197,190 As-completed value (determined by appraiser) $ 200,000 Value to use for determination of LTV must be the lesser of the total cost of renovation or the as-completed value. In this example, $197,190. is less than $200,000, therefore the value you must use when determining the maximum loan amount is $197, Maximum Loan Amount at 96.5% $ 190,288.00

14

15 Originator ID: Da Best Broker Utopia, CA NMLS ID:

16

17

18

19

20

21 Note: Make sure that the supplemental origination is disclosed d up front on the new GFE. It is either 1.5% of line B10 of the maximum mortgage worksheet amount or whichever is greater It must be shown in Box 1 of the GFE which is my origination charge. All inspections must be disclosed also

22

23

24

25

26

27 Application Process Borrower locates property in need of repairs and determines that the home needs improvements Borrower determines improvements needed and schedules an inspection with a cost consultant (or creates a list of improvements) Cost consultant or borrower 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 Construction begins within 30 days of loan closing must be completed Construction begins within 30 days of loan closing must be completed in 90 days or less

28 Streamlined FHA 203(k) Draw Process 50% of the rehabilitation funds are disbursed immediately For borrowers doing the work themselves, a self-help agreement is required before any funds are disbursed - the check is made payable to the borrower For borrowers working with a contractor, a W-9 must be provided to establish the contractor as approved - a two-party check is made payable to the borrower and the contractor, the check will be sent to the borrower Included with the disbursement is an instruction letter that explains how the final disbursement works The balance is disbursed 2 to 3 weeks after completion of all work If the cost of the renovation is over $15,000, an inspection by the original appraiser is required Two disbursements are made One at closing Second and final disbursement once all work has been completed

29 Tips and Tools Make sure all impacted parties understand the draws When the first and all subsequent draw is made Title must be clear before final payment is made The most common cause for a delay in draw is a missing W-9 Cost consultants can be found at HUD s website at: Cost consultants can make the process easier they are litd listed by location (search neighboring ihb i towns to locate additional cost consultants) Additional Info can be found at HUD s website Mortgagee Letter