FHA 203k Construction Loans

FHA 203k Construction Loans…well not exactly.

Some might think that a 203k loan is a construction loan but actually it isn’t. Although a 203k can be used for remodeling, renovations and repairs there is a difference between this FHA loan and a construction loan.

The main difference is that construction loans can be used to build a brand new property from the ground up on raw land. 203k loans on the other hand are only for properties that are at least one year old and that already have an existing foundation. Along with that there are loan limits that apply to FHA loans which vary depending on your area.

Once you remove those two major differences, then the 203k does have similarities to a construction loan as far as the type of work that can be done to the property as well as how contractors get paid as the work gets completed. The 203k may have some similarities, but unlike a construction loan, the 203k offers the following features that a construction loan doesn’t.

The 203k:

• Can be used to purchase or refinance an existing property and includes the funds needed for improvements combined


• Has a low down payment for purchases


• Has minimal equity requirements for refinances.


• Has the same current attractive interest rates like other first mortgages


• Is an all in one loan with terms up to 30 years.

If only they could come up with one loan to buy/refinance, include the improvements and pay off debts! Now that would be something. But, in the meantime 2 out of 3 aren’t bad with the 203k loan.

Homepath Renovation Mortgage Financing and the FHA 203k Loan

Have you ever driven past a home with a sign that says “Fannie Mae Homepath"? If so, and if you’re in the market to buy a home then this could be another option for you to add to your property search. So, what is a Homepath property? It’s a property which is currently owned by Fannie Mae and was acquired through the foreclosure process. The name “HomePath” is the branding term used for these Fannie Mae-owned properties.

There is no special requirement for you the buyer as HomePath properties can be purchased like any other property on the market with or without financing. It can be purchased as an owner occupied (your primary residence), an investment property or even as a second home. Fannie Mae also offers its own financing product specifically for these properties called a “HomePath Mortgage”.

Just like HUD homes, Homepath properties can have an advantage of being financed with the same type of home loan originally used before it was foreclosed on. On HUD homes that would be FHA insured financing. For Homepath properties that would be a “Homepath Mortgage”. There are two types to choose from, one with renovations and one without. Depending on the property it will indicate which type of Homepath financing is available which you can find at the HomePath website.

HomePath Mortgage: The “HomePath Mortgage” has a minimum down payment of 3% and no mortgage insurance or appraisal is required, which is a great feature. But, in exchange for a home loan with no mortgage insurance which is typically required, there may be a higher interest rate in comparison to other home loans with mortgage insurance. For the most part, the monthly payments would still be within the same range so using a “HomePath Mortgage” when buying a “HomePath property” could still be your best bet. Both “owner occupied” buyers and investors can apply for the “Homepath Mortgage”.  

HomePath Renovation Mortgage: For properties needing minor or moderate repairs Fannie Mae offers the “HomePath Renovation Mortgage”. It works similar to the FHA 203k loan in the sense that it is one loan amount which includes both the funds for the purchase and renovations but it has more limitations than the FHA 203k loan.

For instance “HomePath Renovation Financing” allows for light to moderate renovations of a property with a limitation of 35% of the “as completed value” with a maximum renovation amount of $35,000. Light to moderate renovations are ones that will allow the borrower to live in the property while the renovations are completed. Those repairs will be identified in the appraisal, including any cosmetic repairs identified by you, the buyer. Both owner occupied buyers and investors can apply for the “HomePath Renovation Mortgage”.  

HomePath & FHA Lenders Now even though “HomePath properties” give you the option to use a “HomePath loan” you can also purchase the property with any other type of mortgage financing as well. Your best comparable alternative, if you plan to purchase as owner occupied with a minimal down payment, would be an FHA loan. The FHA loan has a similar minimum down payment of 3.5% which is only a half percent (.5%) more than a “HomePath Mortgage”. And if the property needs improvements, be it minor or major rehab, you can utilize the FHA 203K. FHA loans also have a bit more flexibility in qualifying plus on average a lower interest rate. As a reminder, FHA loans do require mortgage insurance.

Having choices and making sure you get the right loan for your “HomePath Property” is important so the first step you should take is to talk to a lender. Keep in mind though, not all lenders are approved or specialize in these types of loans. So, whether it’s the “HomePath Mortgage” the “Homepath Renovation Mortgage”, FHA or FHA 203k loan choose wisely. A good start would be contacting your 203k Loan Specialist for your State on more information regarding your “HomePath” and FHA 203k options.  

 

Happy House Hunting.  

HUD Homes

HUD Homes and the FHA 203k Loan

  What is a HUD Home?

Are you interested or wondered what HUD homes are and how to finance them?  Well, just like properties which are purchased with conventional loans, properties purchased with FHA insured financing also at times go into foreclosure.  When that happens those properties are then acquired by the Housing and Urban development (HUD).  HUD becomes the owner of these properties that were financed with an insured FHA loan and then offers them for sale to recover the loss on the foreclosure.  That is what a HUD home is.

How can I buy a HUD Home?

A HUD home can be a 1-to-4 unit residential property, condo, townhome or PUD and yes you can buy one.  Actually anyone can buy one if you have the cash or can qualify for a loan. HUD sells these properties through a bidding process so you will need a Real Estate Broker that can sell HUD homes to submit the bid for you.  The bidding time frame and who is allowed to bid on the property depends on what listing period it’s in.  The two most common listing periods you will see when searching for HUD properties will be “exclusive” and “extended” listing periods.

The exclusive listing period is primarily to give owner occupant bidders a head start before the property goes into the extended listing period phase.  When the exclusive listing period ends then all buyers are welcome to bid, owner and non-owner, so investors are welcome during the extended listing period.

If you are a homebuyer who plans on occupying the property then your bid is given priority over all other bidders regardless of the listing period, exclusive or extended. When making bids for a property in the exclusive listing stage, your submitted sealed bid will be reviewed along with any others on the “bid open date”.  When biding on a property in the extended listing period, bids are reviewed as they come in on a first come, first served basis.  

How to finance a HUD Home

If you can purchase using all cash great!  There is no need to talk about financing.  For most homebuyers though who need a loan, the lending options are the same as if you were buying any other type of property on the market.  In other words, the financing is your responsibility as HUD does not provide direct financing to buyers of HUD Homes.  There is good news though if you use an FHA loan, because HUD will have already had an appraisal performed before they put the property on the market, so you could bypass ordering a new appraisal.

To find out if you can take advantage of using an FHA loan you must find out if the HUD Home you are interested in is “insured” or “un-insured”.  If the property indicates “Insured” then you have the green light for an FHA 203b loan.  If the property is “un-insured” then it might be eligible for an FHA 203k loan which includes rehab funds.  Both FHA loans are only for owner occupied buyers.  Sometimes HUD homes will have two FHA financing options.  The FHA 203b (without rehab) and the FHA 203k (with rehab) but other times only one of those choices will be available and at times neither will be a choice.

Here is an example of what you might see under listing information and what you should look for if you plan to use FHA financing on a HUD home.  If the “FHA financing” slot shows IE (insured escrow) that means you can use a standard FHA 203b loan to purchase the property.

If the “203k Eligible” slot shows “Yes” that means you can use the FHA 203k as another financing option to purchase your property as well.  The “Repair Escrow” slot is the allowance amount that HUD will give the buyer to address specific repairs.  “Repair Escrow” is only available on some properties.

Listing Information
List Date:	01/01/20**
Listing Period:	Exclusive
Period Deadline:	01/01/20** 11:59:59 PM CST
List Price:	$100,000.00
As-Is Value:	$100,000.00
FHA Financing:	IE (Insured Escrow)
203K Eligible:	Yes
Repair Escrow:	$1,100.00
Review PCR for Repair Escrow Items

When the “FHA Financing” slot shows UI (uninsured) then the FHA 203b is not an option.

When the “203k eligible” slot shows “NO” then the FHA 203k is also not an option.

HUD homes are sold in there “AS IS” condition which is why many of them give you the option to use the FHA 203k loan.  Remember these properties are foreclosures so it’s not unusual that something is needed.  This is where the 203k loan comes into play because you can purchase and renovate or repair your HUD home all in one loan.  It’s a great way to purchase your HUD Property to turn it into the home you want, so working with an FHA 203k Loan Specialist will allow you to have both FHA options available to you.  

Where do I find a HUD home?

You can find your HUD home online at the HUD home store here: http://hudhomestore.com/HudHome/Index.aspx

Ready to get started?

Then get qualified first with an FHA Loan Specialist for your state and then get connected to an authorized HUD Broker/Agent to get your bid submitted on your HUD Home. Happy bidding…

Foundation Repairs

Foundation Repairs and the 203k Loan

For many home-buyers foundation repairs can be a deal breaker. You would probably say, “If it wasn’t for those foundation problems I might have really considered that property”. Well before scratching the property off your list you might want to do some further investigations on how bad it is and what the foundation repair cost will be because luckily, the FHA 203k loan can handle it.

Many Home-buyers, Homeowners, Real Estate Agents and even Lenders might not be aware that the FHA 203k is even an option and could possibly save the deal. A few months ago on a Real Estate blog I read about a Real Estate agent who had a transaction involving foundation issues. It was discovered during the home inspection that the house was leaning forward. That then led to a foundation inspection. The deal was not looking promising, until the agent thought of the 203k loan as an option. If the sellers would agree to lower the price to offset the cost of the foundation repair then the deal could be saved. After figuring out a solution she mentioned it to her lender. The Lender, who worked with the Agent told her, “The 203k doesn't allow foundation repairs”.  

After sharing her story on the Real Estate blog the Agent asked for suggestions from other Real Estate professionals. Luckily some knew enough to know that the information her Lender gave her might not be correct. So, after getting feedback and doing some further research the agent found out that foundation repairs could be handled through the Standard (full) 203k Loan which involves an FHA 203k Consultant. Now just for clarification, there is another type of 203K Loan which is called a 203K Streamline, but the 203K Streamline does not cover foundation work and only a Standard 203K does. So her lender had misled her. Now assuming the lender could do 203k loans, the lender either didn’t know about the Standard 203K Loan or could only do the Streamline version. In any case it is important to work with professionals who know their stuff.  

If you have ever walked through a property or currently own a home and have noticed cracks on interior walls, flooring seems to be off, large trees planted close to the house, things don't open and close properly such as windows or doors, cracks on the garage floor then these could be signs of a bigger problem related to the house foundation. The foundation repairs cost will vary depending on the different foundation repair methods and the extent of those repairs. The good news is that it will take some homebuyers out of the running for that property but you on the other hand have the 203k loan at your disposable to keep the deal in play if you still chose to.    

FHA Loan Limits - 2011 into 2012

Ready or not the new FHA loan limits are coming starting October 1^st. 2011. It will be effective from that date until the end of the year and beyond unless legislation acts to extend them. So, if you haven’t found or refinanced your home yet or still in the process you might find yourself having to readjust. Now, for most home-buyers and homeowners the new loan limits probably won’t affect you because according to the Federal Housing Authority (FHA) they estimate that only a fraction of borrowers living in the nation’s highest cost areas will be impacted and that only three percent of FHA-insured borrowers lived in these high-cost areas. FHA Loan Limits in 669 Counties out of 3,234 across the country though will be affected. For transactions that don’t close before the September 30^th. 2011 deadline there are exceptions which would still allow your loan to close after that date and at the higher loan amount, so don’t panic yet. Your loan officer and lender should inform you on what those exceptions are. Now these new loan limits also apply to conventional (Fannie & Freddie) loans as well and will have a bigger impact for home-buyers and homeowners using conventional financing. So, how much of a difference in the FHA loan limits are you looking at? Well, let’s take a look at the ceiling in the “Highest cost areas” before and after the deadline, they are as follows: Ceiling in the “High cost Areas"

Before & After October 1st, 2011

	Before October 1st. 2011	Effective October 1st. 2011
1 Unit	$729,750	$625,500
2 Units	$934,200	$800,775
3 Units	$1,129,250	$967,950
4 Units	$1,403,400	$1,202,925

 

For home-buyers and homeowners in Alaska, Hawaii, Guam, and the Virgin Islands where the loan limits are higher than the rest of the country the maximums are:

1 unit	$938,250
2 units	$1,201,162
3 units	$1,451,925
4 units	$1,804,387

 

With the decline of home prices we have all seen, hopefully this change in loan limits won’t affect home-buyers too much who are looking to purchase as much as homeowners looking to refinance. If you need to find out or just curious on what the new FHA loan limits are for the county your property is in then check out the FHA Mortgage Limit page on the Housing and Urban development (HUD) website .

Only the 4 drop-down boxes are needed to get your loan limit information…

1. Sort by

2. State

3. Limit type – would be “FHA forward” which is for both FHA 203k and FHA 203b loans

4. Limit Year – would be Oct. 1^st. through Dec.31^st. 2011

For more details on the new role the FHA loan limits play on your current or future FHA loan whether it’s the 203k with renovations or 203B without contact the 203k Loan Specialist for your state.

 

FHA 203k Loan Limits In Your Area

FHA 203k loan limits vary from county to county throughout the different states for 1 to 4 unit properties and are the same for both FHA 203K and regular FHA purchase or refinance loans.

To find out what those limits are in your area try this free tool to look up the maximum FHA loan limits by entering your zip code.

FHA Loan Rates © ML

You can also search & view FHA mortgage limits by state or county at the HUD website using the link below.

https://entp.hud.gov/idapp/html/hicostlook.cfm

Can You Afford to Say No to FHA 203K Borrowers?

This is for all the Real Estate Agents out there!

Today I came across yet another great post encouraging Real Estate Agents to consider those buyers who want to use FHA financing. As a 203K Mortgage Lender I am trying to do my part in spreading the word that FHA Loans have a lot of benefits that the standard Conventional loans don’t. So read on…you may be pleasantly surprised on how far FHA has come.