Embed Size (px)
Citation preview
FHA Streamlined 203(k) Review
• Streamlined 203(k) Loan Program• Market Opportunity• Program Guidelines• Types of Improvements • Recent Examples• Financing Process• Commonly Asked Questions
FHA Streamlined 203(k) Loan Program
Through the Federal Housing Administration’s (FHA) Streamline 203(k) program, borrowers can purchase or refinance their home and include rehabilitation and repair costs in the same loan.
This program can help you expand homeownership opportunities by offering a renovation program to people who want to revitalize the communities they serve.
FHA Streamlined 203(k) Program
• Purchase or refinance a property• “Update” a property• Fix a required repair• Make optional improvements
An affordable financing solution that combines the purchase or refinance of the home along with the costs of the improvements into a single loan.
Increased Market Opportunity
• Borrowers purchasing a home in need of rehabilitation– Perfect for HUD REOs, foreclosures, and short sales – Incomplete renovations– Out-dated kitchens, bathrooms, etc.
• Borrowers refinancing their principle residences and making improvements– Improve instead of move– Out-dated kitchen, bathrooms, etc.– Expand to accommodate a growing family
Improvements Allowed
• Roofs, gutters and downspouts• Basement waterproofing• Mild mold remediation• Heating, ventilation and air conditioning systems• Plumbing and electrical systems• Flooring, exterior and interior painting• Minor remodeling that does not involve structural repairs
• Weatherization, including storm windows and doors, insulation, weather stripping
• Replacement of window and doors and exterior wall re-siding• Appliances, including free-standing ranges, refrigerators,
washers and dryers, dishwashers and microwaves.• Improvements for accessibility for persons with disabilities• Lead-based paint stabilization or abatement of lead-based
paint hazards• Replacement/addition of exterior decks, patios, porches
Improvements Allowed
– Major structural repairs– New construction (adding a room)– Repairs requiring detailed plans and specs– Any repair taking longer than 3 months– Repairs requiring more than 2 draws – Luxury items are not eligible
• Swimming pools, hot tubs, tennis courts, gazebos, barbecue pits, saunas or alterations to support commercial use
Improvements Not Allowed
Property Guidelines
• Owner Occupied Properties Only• Single Family Residence• Manufactured• Approved Condo’s• PUD’s (planned unit development)• 2-4 Unit Properties• REO, Short Sale, Foreclosure Ok!
(need minimum of 12 mo. Cert. of completion, no builder spec foreclosures)
Streamlined 203(k) Loan
• Up to $35,000 in renovation allowed– Including all repair costs & contingency
• Must utilize borrower directed licensed contractor– No self help allowed
• 2 Draws- – Initial draw of up to 50% of repair costs is disbursed at funding– Final draw after final inspection
EXAMPLE: Purchase of a property with 96.5% LTV
Purchase and Renovation Cost
Sales Price ("as-is" appraised value) $120,000Labor / materials, inspection fee for renovation $25,000Contingency (10% required) $2,500Total for Purchase and Renovation $147,500
"As-Completed" Value (Determined by the appraiser) $160,000
Value to use for determination of LTV must be the lesser of the total cost of purchase & renovation or the "as-completed" value.
Maximum Loan Amount at 96.5% LTV $142,338
Recent AFR FHA Streamlined 203(k) Repairs / Renovation included:
• New kitchen cabinets• Carpeting replacement• Laminate floors• Interior / Exterior painting• Electrical GFI installation• Bathroom upgrade• Repair of decking / steps
• New gutters / downspouts• Garage door replacement• Vinyl siding • Ceiling repair• New smoke alarms• HVAC Replacement• Window replacement
Before
After
Missing Appliances
New Laminate Flooring
Mold on walls in Kitchen
New Appliances / Mold Removed
Before
After
Before
After
No Smoke Alarms
Smoke Alarms installed
Stairs in need of repair
Stairs replaced
After Before
New Kitchen & Flooring
Missing Appliances & Floor Mold & Vent leakage
Mold removed & painted
Simple Process To Financing
•Borrower purchase offer for “As Is” condition is accepted
•Buyer obtains estimates for repairs and /or rehabilitation
•Appraiser uses estimates to determine “as-is” and “to be improved” value
•Loan Amount requested based on purchase price & repair estimates
•Loan Processed, Underwritten, Closed as normal
•Up to 50% of repair costs disbursed at closing, remainder put in escrow
•Work is started within 30 days of closing and completed within 3 months.
•Any funds remaining in escrow will be applied to principal reduction of loan
Renovation Period
• Renovation should begin within 30 days of closing• Borrowers will make their regular mortgage
payments throughout the course of construction• Maximum renovation period is 3 months.
Final Inspection - Completion• When the work is complete, simply send an email requesting
final funds to [email protected]• Include the Conditional Waiver & Release and the
Mortgagor’s Letter of Completion• Once the documents are received, AFR will order the final
inspection from the original appraiser• Upon the receipt of the acceptable final inspection, a final
disbursement will be made to the contractor• All remaining funds in escrow will be made as a principal
reduction to the mortgage
AFR’s FHA Streamlined 203(k) Forms found on www.AFRWholesale.com
– Contractor Profile– Consumer Renovation Information– Rehabilitation Loan Agreement– Homeowner Contractor Agreement– Disclosure Statement - Texas– IRS W9 Form– Identity of Interest Form– 203K Maximum Mortgage Worksheet - HUD 92700– 203K Borrower's Acknowledgement - HUD 92700a
When the work is 100% complete, please have the following forms completed and executed..– Conditional Waiver & Release– Mortgagor's Letter of Completion
A Few Commonly Asked Questions (See guidelines for complete details)
• What are the minimum and maximum amounts for repair costs under this program?– There are no minimum repair costs. The maximum total repair costs including the
contingency reserve (10%) and costs are $35,000 subject to a maximum loan to value.• Is there a maximum mortgage amount worksheet that must be used?
– Form HUD-92700, 203(k) Maximum Mortgage Worksheet must be used to calculate the mortgage amount.
• Is there a final inspection required to be done once all the work is completed?– Yes, an inspection to determine that all listed repairs and or renovations were
satisfactorily completed is required regardless of the amount borrowed for the repairs• Can this program be used for the purchase of HUD homes?
– Yes. The Streamlined 203(k) program may be used for single-family housing sold by HUD. REO properties that have been designated by FHA's Management and Marketing contractor as "insurable" with repair escrow ($5,000 or less repairs) or "uninsurable" (with m ore than $5,000 but no more than $35,000 in required repairs) are eligible
• How much time is permitted to complete the work?– The contractor must finish the work within 90 days. If the work is not completed within
90 days of closing, a principal reduction will be made towards the remaining unpaid balance of the mortgage.
• Are there additional costs to the mortgagor?– AFR will hold back $300 to be used towards final inspection. Unused inspection fees
will be credited against the unpaid principal balance within 30 days of the projects completion.
• Can the Streamline 203(k) program be used for Manufactured Housing?– Yes. The program can be used for a loan on a manufactured home however, it cannot
be used to permanently affix the home to the foundation. The home must be completely secured to the foundation as evidenced by an engineer's certification and appraisal prior to closing.
• How much is the contingency reserve?– The contingency reserve is up to 10% of all repairs or rehabilitation expenses. The
amount of reserve is at the underwriters discretion. All funds remaining in the escrow account after final payment to the contractor is made, including any remaining reserve amount will be used as a principle reduction.
• Where can I go if I have questions or need additional information about the Streamlined 203(k) program – [email protected] or [email protected]
A Few Commonly Asked Questions (See guidelines for complete details)
American Financial Resources, Inc.• About Us
– AFR Wholesale, a division of American Financial Resources, Inc. – Nationwide wholesale residential mortgage lender – Headquartered in Parsippany, NJ. – GNMA approved seller/issuer, FHA Mortgagee and FNMA seller/servicer. – Serve thousands of mortgage brokers and lenders throughout the country – In business since 1997– Grown to one of the largest FHA lenders in the country.
• Become an Approved Lender– As an approved lending partner, you can be set as:
• TPO – Third Party Origination,• TF – Table Funded,• C – Correspondent, and/or• CDE – Correspondent, Direct Endorsement.
