HomeBridge Financial, Destin Florida ~FHA 203k Options ~Home Improvement Loan
FHA 203K Benefits
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Transcript of FHA 203K Benefits
Renovation 203(k) Lending
Lee Robinson
ASM Freedom Mortgage
Renovation Defined
What is a Renovation Loan? A Renovation Loan is a fully disbursed mortgage that adds the
costs of repairs or improvements to the mortgage. Renovations Loans are available on: Purchases and Rate/Term Refinances. 15, 20, 25 or 30yr Fixed Rate Mortgage. 1-4 Family Owner Occupied Properties. Homes that are at least one year old & complete. •
• * An Appraisal based on the future value or “as completed” value of the property is required on all 203(k) loans.
• * On HUD Repo’s, the “as is” appraisal (the original appraisal from HUD that comes with the contract) will also
need to be provided.
Why Renovation Lending?
Understanding renovation loans and taking advantage of this product provides otherwise unknown opportunities for:
• Real Estate Agents• Consumers
Realtor Benefits
● Sell neighborhood/location.
● Overcome objections by providing an option.
● Loan closes before the work begins.
● Move slow listings faster.
● Attract more buyers and listings.
Borrower Benefits
● Remain in or move in to a desired location and have the home they want.
● More affordable; one closing with one set of closing costs.
● Create equity with the transaction by adding value to the home.
● Get the job done now: renovations, upgrades and repairs done in weeks or months versus years.
Time for you to do a Renovation loan?
Is this the only time to do a Renovation
loan? NO
ANY existing home can benefit by some
improvements. Homeowners spend
nearly $300,000,000,000 (300
billion dollars) on home improvement
costs each year!
Renovations to Consider
● Additions, improvements and structural changes to a home– add a second level, a screened porch, or finish a basement!
● Remodel kitchens and bathrooms– Kitchen appliances can be included!
● New carpet, tile, hardwood floors, paint● Repair or replace plumbing, heating, air conditioning or
electrical systems● Replace siding, windows and doors● Replace roofing, gutters and downspouts
● Many more possibilities!
Traditional 203K
One General Contractor FHA approved assigned Consultant is required Detailed work write-up Minimum amount of repair work is $5,000 No maximum amount of repairs 4-5 draw requests depending on repair amount
and contractor Streamline 203K coming soon!!! No consultant
required or minimum amount of repairs. Limited to $25,000 and no structural repairs
203(k) is an FHA Loan
● Minimum FICO 640● Purchase or Rate/Term Refinance
– no cash-out● 15, 20, 25 or 30yr Fixed Rate Loan
● 1-4 Family Owner Occupied Property– Investment properties are not allowed
● Property must be at least one year old and complete
– c/o issued one year
Due to the multi-faceted nature of 203(k) loans, these files cannot be rushed! Set realistic expectations. Please allow an additional
week or two for closing maybe more depending on the nature and degree of renovations.
Costs to Consider
● Consultant fees; ranging from $400 to $1,000 based on the work being done.
* traditional 203K only
● Architect/Engineer Fees.● Permit Fees● Inspection Fees ● Title Updates to ensure our 1st lien position.
Consultant Fees
Cost of Repairs Fee <$7,500 $400 <$15,001 $500 <$30,001 $600 <$50,001 $700 <$75,001 $800 <$100,001 $900 >$100,000 $1,000 Note: An additional $100 can be charged for a
feasibility study.
Consultant Role
• Meets with borrowers at the subject property.
• Conducts thorough walk through of home and performs extensive inspection.
• Prepares on-site “Work Write-Up” and cost estimate.
• Obtains contractor bid (if available).
• Reconciles contractor bid with “Work Write-Up” and reconciles for all parties.
• Coordinates final contractor agreement amongst all parties.
• Coordinates draw process.
Closing Consideration
● At closing, the investor creates the renovation escrow account.
● There is N0 cash out to borrower.● There are NO draws at closing for materials,
labor, deposits etc. ● The consultant must be notified that the loan
has closed in order to begin the renovation process.
Draw Management
● ALL permits must be obtained as first step of the renovation process.
● Draw requests are made for the work completed and inspected.
● Disbursements are made by check payable to the borrower and the contractor.
● Unused escrow is applied to the principal balance or can be used for additional improvements
● Minimal interest is earned on the escrow account.