Renovation Lending Division

EVERYTHINGYOU NEED TO KNOW

FHA 203KM A N U A L

American Neighborhood Mortgage Acceptance Company is licensed by the New Jersey Department of Banking and Insurance (#NO00004875), Licensed by the Pennsylvania Department ofBanking as a Mortgage Lender (#33587). NMLS# 338923. Additional Licensing info: http://anniemacrenovationlending.com/licensing/

This program can be used to accomplish rehabilitationand/or improvement of an existing one to four-unitresidential property in one of three ways:

To purchase a property and the land on which the property is located & rehabilitate it.

To purchase a property and the land on which it is not located, moving it onto a new foundation & rehabilitating it.

To refinance existing liens secured against the subject property and rehabilitate it.

You just found the deal of a lifetime! With improvements to this property, there is endless potential. This could be your dream home and a phenomenal opportunity to obtain instant equity. BUT there are just a few minor problems…

The bank won’t lend the money to buy the house until the repairs are complete and the repairs can’t be done untilthe house has been purchased. It’s a catch 22! Even if you were able to find a bank or family member to lend youmoney to purchase the property, you don’t have the money or want to use your own money to make the repairs.Now what???

The FHA 203K loan offers everything you could want for that home needing a little TLC to a complete renovation.However, an experienced Renovation Mortgage Originator makes all the difference. One that specializes in FHA203K loans will have a good HUD Consultant and not all Consultants are created equal - they can make or break adeal. So, using an experience Renovation Mortgage Originator who is focused exclusively on this market can helpsave your self some grief.

Hello, I am Jeff Onofrio, the Director of Renovation Lending and a Licensed Mortgage Originator here inMount Laurel, New Jersey, and I’m going to educate you on this extraordinary opportunity. Not only canyou turn any home into your dream home, but you will instantly establish equity along the way!

The program is the FHA 203K loan and it has been existence for more than 30 years! The FHA 203Kloan will allow you to purchase OR refinance a property, plus include in the loan the cost of making repairs &improvements and with as little as 3.5% down!

1)2)

3) 888.680.RENO (7366) or email us at 203kinfo@annie-mac.com. We are available 7 days a week!

Renovation Lending Division

EVERYTHINGYOU NEED TO KNOW

FHA 203KM A N U A L

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TYPESof 203KLOANS

There are two differenttypes of FHA 203K loansavailable to homebuyersand homeowners.

Choosing the type which suits you best willdepend on the amountof improvements yourproperty needs.

FHA 203K StreamlineThe 203K Streamline loan is used for homes that need minor repairs, remodelingor upgrades and has a cap of $35,000.

FHA 203K Standard The 203K Standard loan is for homes that need major rehabilitation or repair.There must be at least $5000 worth of repairs and the loan limits are based on the property type and location.

For FHA 203K Lending Limits in your area visit:https://entp.hud.gov/idapp/html/hicostlook.cfm.

Because of the size and complexity of the FHA 203K Standard loan, FHA requiresa FHA 203K Consultant be involved in your project. You will find the FHA 203KConsultant very helpful, as they will assist you in determining the scope of repairs,the budget for the work to be done, and verify all work is completed satisfactorilyand as stated by the contractor.

THE FHA203KLOAN

PROCESSBefore we get into thedetails of each type ofFHA 203K loan, let’s gothrough the loan processstep by step to give youa better understanding &what to expect whenobtaining your loan.

Get Pre-approved with a Qualified, Experienced FHA 203K Lender Having a pre-approved loan will:

• Ensure you know the price range of homes to be shopping and are comfortablewith the total monthly payment, down payment and costs to close.

• Help you understand the process and requirements of the FHA 203K loan.

• Put you at the top of the list when presenting your offer.

• Expedite your closing process.

REMEMBER! 95% of mortgage lenders are unable to lend on FHA 203K loansand it is crucial to find a lender who can offer this program, but is also a specialist.This is an extremely important fact to understand. There are plenty of lenders whocan offer the FHA 203K mortgage but not many are specialists - having a specialistlike myself will ensure your loan closes in a timely fashion.

To get pre-approved with an FHA 203K lender, go to:www.anniemac203Klending.com and click “Confidential Quick Quote Form”.

1)Get Pre-Approved(Homebuyer/Borrower)

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(Homebuyer)

A great way to expedite the closing process is to interview contractors whileyou’re searching for a property. Depending on your area, AnnieMac RenovationLending works with experienced 203K contractors and we would be happy torecommend one out. If you already have a contractor you would like to use, thismanual will provide the eligibility requirements for contractors. Many clients havealso found it beneficial to spend time at local hardware stores (i.e. Home Depot,Lowes, etc.) researching possibilities and prices.

When searching for a property, the property can be a single family residence, 2to 4 units (e.g. duplex, triplex or fourplex), condo, or PUD. There are differentmaximum loan limits that apply and will vary depending on the county in whichthe property is located and whether the property is 1 to 4 units.

For a table of the maximum loan limits in your area visithttps://entp.hud.gov/idapp/html/hicostlook.cfm.2)Searching for

a Property

(Homebuyer & Real Estate Agent)

You’ve found a house!! Before meeting with your agent to make the offer, develop alist of possible renovation options. I would suggest you develop the following lists:

MUST DO LIST (addresses health & safety)

• Appraiser may add to this after viewing property.

• Meet with a FHA 203K Consultant that can do a feasibility analysis for you. This analysis will show you what is necessary to get your home into shape so that it meets FHA minimum property standards. The consultant report takes what has to be done and then allows for your “Wish List” to be added.

• Wish List

To review a list of eligible improvements for the 203K Streamline loan see page10 of this manual. For 203K Standard eligible improvements please see pages13 & 14 of this manual.

This is the time for you and your real estate agent to sit down and determine anappropriate purchase price, while taking into consideration a very rough esti-mate of additional money needed for work to be done. When making the offerto the seller, the offer you make is for the purchase price only and will notinclude the money needed for repairs/remodel.

For example: You want to pay $100,000 for a house and plan to roll $20,000-$30,000 into the FHA 203K loan for repairs/remodel. The offer to the seller willbe for $100,000 (the “as is” price); the additional money for repairs/remodel willcome from the lender and should not be included in the offer to the seller.

Meeting with your contractor before submitting an offer can be very helpful;however, in a competitive market you risk losing the house while getting yourducks in a row. Not to worry, there is a way around this dilemma. In your con-tract you can specify the necessary dates and deadlines, allowing you the timerequired for completing all inspections and gathering all estimates.

3)Making the Offer

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(Real Estate Agent)

This step is your real estate agent’s responsibility; however, it’s beneficial for youto understand the requirements, so you can review your offer prior to your agentsubmitting it to the seller.

When writing the contract, many real estate agents specify (under additionalprovisions) that the buyer will be obtaining a FHA 203K loan. This is a greatplace to give the listing agent and seller a heads up because 1) if the property isnot currently in the FHA required condition, they know you have a strategy toaddress all necessary repairs and 2) FHA 203K loans may require more inspec-tions and different dates and deadlines than a typical transaction.

It has been my experience that many clients are awarded the winning bidbecause their offer specified the buyer will be obtaining a FHA 203K loan. This isespecially the case when bidding on foreclosure, REO, bank owned and shortsale properties because the bank knows the loan can close despite the condi-tion, unlike all other loan types.

When obtaining a FHA 203K loan, all work is done after your closing, so theclosing timeframe is similar to a typical transaction - real estate agents and sell-ers love this.

4)Submittingthe Offer

Still have questions about FHA 203K Loans? Call us at: 888.680.RENO (7366) or email us at 203kinfo@annie-mac.com. We are available 7 days a week!

American Neighborhood Mortgage Acceptance Company is licensed by the New Jersey Department of Banking and Insurance (#NO00004875), Licensed by the PennsylvaniaDepartment of Banking as a Mortgage Lender (#33587). NMLS# 338923. Additional Licensing info: http://anniemacrenovationlending.com/licensing/

SUGGESTED DATES & DEADLINESFOR YOUR OFFER/PURCHASE CONTRACT

CLOSING DEADLINE:35 days from contract acceptance dateINSPECTION DEADLINE: 14 days from contract acceptance dateAPPRAISAL DEADLINE: 21 days from contract acceptance dateLOAN CONDITIONS DEADLINE: 30 days from contract acceptance date

FHA 203KStreamline:(Up to $35,000in repairs)

CLOSING DEADLINE: 40 days from contract acceptance dateINSPECTION DEADLINE: 17 days from contract acceptance dateAPPRAISAL DEADLINE: 25 days from contract acceptance dateLOAN CONDITIONS DEADLINE: 35 days from contract acceptance date

FHAStandard203K:($35,000 ormore in repairs)

JeffOnofrioDirector ofRenovationLending,NMLS# 38670

Office: 888-680-RENO (7366)Mobile: 609-217-9409Fax: 866-438-1351Email: jonofrio@annie-mac.com

Renovation Lending Division

5)

(FHA 203K Lender)

Once your inspection has been completed and you have received all estimatesgiving you a breakdown of the costs of the work to be done, your FHA 203Klender will order the appraisal.

The appraiser will go out to the property and give an “as-is” value as well as an“after improved” value.

FHA 203K FeasibilityStudy or Full WorkWrite Up Ordered &Estimates Calculated

6)TheAppraisal is Ordered

(FHA 203K Lender)

Now that the appraisal has been completed and received, your loan numberscan be finalized. On a purchase, the maximum loan amount and down payment(3.5%) are calculated and based on the sum of the purchase price, repairs andcontingency reserves, or 110% of the “after improved” value, whichever is less.(see below example)

On a refinance, the maximum loan amount is based on the sum of the loan pay-off, closing costs, prepaids, repairs and contingency reserves, or 97.75 * (110%of the “after improved” value), whichever is less.

The contingency reserve is the required buffer, covering unforeseen situationsthat may cause you to need more money to complete your project. Dependingon your project’s complexity, the lender will appropriate 10% to 20% of the totalremodeling costs to the contingency reserve. After completing your project, allunused money will be applied to the principal balance of your loan.

On REO, short sale and vacant properties, AnnieMac Renovation Lending willtake 15% for a contingency fund and must be a FHA 203K Standard loan.

7)Verifying the LoanAmount

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(Homebuyer & FHA 203K Lender, Homebuyer & Contractorand/or FHA 203K Consultant)

Congratulations! The offer has been accepted, the clock has now started and it’stime for you to:

• Order your inspection: your 203K Lender will guide you through this. NOTE: If you think it is possible that you will be obtaining a FHA 203K Standard loan, you will want to have the FHA 203K Consultant do a feasibilitystudy prior to performing the full work write up. Contact your FHA 203K lender for details.

• Meet with the contractor and FHA 203K Consultant to go over the estimate of all the repairs, updates and rehab that will be done to the property.

• Contact your FHA 203K lender to discuss the outcome of your meetings with your contractor and FHA 203K Consultant and determine the best FHA 203K to suit your needs.

If you have additional repairs required as an outcome of yourhome inspection, these repairs can be included into the esti-mate, as well.

Example of an

FHA 203KPurchase:

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• Purchase Price of Property: $250,000

• Total of Bids: $30,000

• Contingency Reserves (10-20% of total bids): $3000 (10% of bids)

• Total Project Cost: $283,000

• “After Improved” Value (appraisal): $300,000

1) Decrease your bids on the work to be done, or

2) Bring the difference to the closing table along withyour down payment. Because of the 110% loan to value buffer, this very rarely happens but it is good to be aware of.

Maximum Loan Amount is the lesser of: Total Project Cost = $283,000 (see above)

OR

110% * After Improved Value (appraisal) = $330,000 (110% * $300,000)

(For this example, the Total Project Cost is less, so your down payment will be calculated off of this number.)

3.5% x $283,000 = $9905

It’s okay to go over the After ImprovedValue (the appraised value after allrepairs) as long as you don’t go over110% of this value. If you do exceed110% of your After Improved Value, youwill either have to:

Still have questions about FHA 203K Loans? Call us at: 888.680.RENO (7366) or email us at 203kinfo@annie-mac.com.

We are available 7 days a week!

American Neighborhood Mortgage Acceptance Company is licensed by the New Jersey Department of Banking and Insurance (#NO00004875),Licensed by the Pennsylvania Department of Banking as a Mortgage Lender (#33587). NMLS# 338923. Additional Licensing info:http://anniemacrenovationlending.com/licensing/Renovation Lending Division

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Example of an

FHA 203KRefinance:

• Current Value of Property: $235,000

• Payoff of Existing Loan: $223,000

• Closing Costs: $3500

• Prepaids: $2500 (setting up a new escrow account)

The first step when doing a FHA 203K refinance loan is to determinethe current value of your property. Without doing an appraisal,there’s no way to know the exact value. To get an idea of the currentvalue of your home, you can:

1) Call your real estate agent to reference comparable property sales in your area.

2) Reference the county assessor’s website.

3) Utilize an online value estimator such as www.zillow.com.

You will need to have a little equity. Our general rule of thumb isat least 5%.

*Remember if you currently have an escrow account (i.e. where your taxes &home insurance payments are included in your mortgage payment) on yourloan, it will be refunded to you within 30-60 days.

• Total of Bids: $30,000

• Contingency Reserves (10-20% of total bids): $3000 (10% of bids)

• Total Project Cost: $262,000

• “After Improved” Value (appraisal): $275,000

Maximum Loan Amount is whichever is less: Total Project Cost = $262,000 (see above)

OR

97.75% * (110% * After Improved Value) = $295,693 (110% * $275,000)

(For this example, the Total Project Cost is less, so your down payment will be calculated off of this number.)

For this example the Total Project Cost is less, so you will not be required to bring any money to the closing table. If yourTotal Project Cost did exceed $295,693 (for this example only), you would be required to bring the difference to the clos-ing table or you could decrease your bids by the desired amount.

Remember, you will always skip a monthly payment after closing your purchase or refinance. Your first payment is not dueuntil the month following the month after your closing (e.g. you close in May, your first payment is not due until July).

(FHA 203K Lender)

The loan package has now been completed, submitted to underwriting and approved.

Once the loan is approved and conditions are satisfied, the final loan documentsare ordered & signed.8)This is when everything is now in line and ready to fund. The wire/loan proceedsare disbursed to pay off the seller, as well as to set up the escrow account forthe improvements to be made after closing.

The final HUD-1 statement is the real estate document containing all your finalnumbers, including the exact amount of money you need to bring to the closingtable. This will be available at a minimum of 48 hours before your closing.

LoanApproval

9)Closing

If your loan is a FHA 203K Streamline, there will be one inspection andtwo checks, one upfront check within 2 to 4 weeks from closing and thesecond & final check after the work and inspection have been completed.

If your loan is a FHA 203K Standard, there will be one up-front checkwithin 3o days from your closing and up to four inspections with dis-bursement checks to follow.

Permits must be applied for and work must start within 30 days of closing.

10) ConstructionBegins &Disbursementsare Paid

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Still have questions about FHA 203K Loans?Call us at: 888.680.RENO (7366) or email us at 203kinfo@annie-mac.com.

We are available 7 days a week!American Neighborhood Mortgage Acceptance Company is licensed by the New Jersey Department of Banking and Insurance(#NO00004875), Licensed by the Pennsylvania Department of Banking as a Mortgage Lender (#33587). NMLS# 338923.Additional Licensing info: http://anniemacrenovationlending.com/licensing/Renovation Lending Division

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ELIGIBLE PROPERTIES

This loan is for purchasing or refinancing primary residences only;however, with the FHA 203K loan you can purchase a one-tofour-unit property that has been completed for at least one year,as long as you live in one of the units as your primary residence.So, you can use this to buy a single family home, townhome,duplex, triplex, fourplex, condo or PUD. What a great way tojump start your real estate investing portfolio, not to mentioncreate an opportuni-ty where someoneelse is paying your mortgage! This loancan also be used toconvert a one-familyproperty to a two-,three-, or four-familyproperty, OR anexisting multi-unitproperty could be decreased to a one- to four-family unit.

IF you found the home you LOVE, but it is not in your ideal location, you can use this loan on an existing property on anoth-er site and move it to the mortgaged property.

Of all property types, condos have the most requirementsregarding eligibility.

CONDOMINIUM REHABILITATIONREQUIREMENTS ARE AS FOLLOWS:

• Rehabilitation is limited only to the interior of the unit. Mortgage proceeds cannot be used for the rehabilitation of exteriors or other areas which are the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit;

• Only the lesser of five units per condominium association or 25 percent of the total number of units can be undergoing rehabilitation at anyone time;

• The maximum mortgage amount cannot exceed 100 percent of after-improved value.

• After rehabilitation is complete, the individual buildings within the condominium must notcontain more than four units.

THIS CAN ALSO BE USED ON A “MIXEDUSE” PROPERTY AS LONG AS IT MEETSTHE FOLLOWING REQUIREMENTS:

• The property has no greater than 25% (for a one-story building); 33% (for a three story building); and 49% (for a two-story building) of its floor area used for commercial (storefront) purposes;

• The commercial use will not affect the health & safety of the occupants of the residential property;

• The rehabilitation funds will only be used for the residential functions of the property and areas used to access the residential part of the property.

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FHA 203K STREAMLINEThe FHA 203K Streamline loan is intended to providehomebuyers a means to complete uncomplicated rehabilitation projects and/or improvements to a home for which plans, engineers and/or architects are not required.

THE MAIN REQUIREMENTS OF THE FHA 203KSTREAMLINE ARE:

• Total cost of project not to exceed $35,000

• The home will be occupied within 30 days of funding (closing of your loan)

• The work must start within 30 days of funding

• The project can easily be completed in 6 months or less

Please provide us with a list of contractors you will beusing. If you are having difficulties finding contractors,we can help you find qualified contractors who will meetthe FHA 203K loan requirements.

ELIGIBLE IMPROVEMENTS FOR THE FHA 203KSTREAMLINE INCLUDE:

• Repair/Replacement of roofs, gutters and downspouts

• Repair/Replacement/upgrade of existing HVAC systems

• Repair/Replacement/upgrade of plumbing and electrical systems

• Repair/Replacement of flooring

• Minor remodeling, such as kitchens & baths, which do not involve structural repairs

• Painting, both exterior and interior

• Weatherization, including storm windows and doors, insulation, weather stripping, etc.

• Purchase and installation of appliances, including freestanding ranges, refrigerators, washers/dryers, dishwashers and microwave ovens

• Accessibility improvements for persons with disabilities

• Lead-based paint stabilization or abatement of lead-based paint hazards

• Repair/replace/add exterior decks, patios, porches

• Basement finishing and remodeling, which does notinvolve structural repairs

• Basement waterproofing

• Window and door replacements and exterior wall re-siding

• Septic system and/or well repair or replacement

INELIGIBLE IMPROVEMENTS FOR THE FHA203K STREAMLINE INCLUDE:

• Major rehabilitation or major remodeling, (i.e. relocation of a load-bearing wall)

• New construction (including room additions);

• Repair of structural damage;

• Repairs requiring detailed drawings or architectural exhibits;

• Landscaping or similar site amenity improvements;

• Any repair or improvement requiring a work schedule longer than six (6) months; or

• Rehabilitation activities that require more than two (2) payments per specialized contractor.

Luxury items & improvements are not eligible as a costof rehabilitation. These include:

• Swimming pools

• Barbecue pits

• Hot tubs

• Saunas

• Tennis courts

• Gazebos

• Alterations to support commercial use

• Improvements that are not a permanent part of the real property

We will need to prove that the selected Contractor(s) runs an actual business. We do this by:

• Verify business name registration with the secretary of state

• Reference website

DOCUMENTATION REQUIRED

• Tax document to prove that the contractor has filed taxes under a business

• Liability insurance

• License (there are exceptions to this)

• References of 2+ suppliers where contractor has a credit account or work history

• Signed waiver of lien

• Homeowner/contractor agreement per contractor – any changes to this must be approved through a change order request

• W9

• Permits – if no permits are required, please provide a letter of explanation

BID REQUIREMENTS

• Overall description of project

• Only need 1 bid per contractor (do not need 3 bids to compare pricing)

• Must be broken out into materials and labor

• Must be a specific dollar amount

• Make sure bids include: taxes, delivery/installation fees, cost per permit, etc.

At closing the seller is paid andthere is an escrow account setaside comprised of the rehabili-tation money. The FHA 203KStreamline allows for only 2draws after closing.

1ST DRAW

• 2 to 4 weeks from closing

• For 50% of materials and soft costs

Once the Project is complete,we will close out the project bysubmitting updated appraisal,title and closed permits forreview by an underwriter. Once signed off by underwriter:

2ND DRAW

• Can take up to 6 weeks from project completion

• Final check will be for 100% of balance due

• Final check will be made payable to you AND your contractor

If you do not use all moniesincluding the contingencyaccount, the remaining amountwill be applied to the principalbalance of your loan.

REQUIREMENTS OF THE CONTRACTOR

Examples of bid details needed:• Appliances –

need make, model and cost

• Fixtures – need brand, model number, and cost

• Flooring – need type, brand, style and cost

• Counter tops – need type, brand, and cost

• Furnace – need make, model and cost

• Air Conditioner –need make, model and cost

DISBURSEMENTS

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FHA 203K STANDARDWhile the extent of the rehabilitation covered by theFHA 203K Standard loan may range from relativelyminor projects to a home that is demolished and rebuilt,this loan is primarily used for more complex renovationprojects for which plans, FHA consultants, engineersand/or architects are required.

With the FHA 203K Standard, you are not required tooccupy the property until it is habitable. Because FHArealizes there may be additional cost of living expensesduring the project, you can finance up to 6 months ofmortgage payments into the loan! Due to the complexi-ty of these projects, 6 months is the amount of timeavailable to complete the project; however, extensionsare allowed if justified e.g. weather delays.

Unlike the FHA 203K Streamline, the FHA 203KStandard is not capped at $35,000 of the total projectcost. The minimum amount of money required on theproject is $5000 & the maximum amount of moneyavailable to improve or upgrade your home is based onthe lesser of the following:

1. FHA Lending Limits per your county

For Lending Limits in your county visithttps://entp.hud.gov/idapp/html/hicostlook.cfm

2. The maximum amount of loan the client qualifies for

3. Purchase Price + Total amount of your bids + Contingency Reserves +Fees.

ELIGIBLE IMPROVEMENTS FOR THE FHA 203KSTANDARD INCLUDE:

• Structural alterations and reconstruction such as chimney repair, additions to structure, installation of additional bath(s), skylights, finished attics/basements, etc.

• Modernization and improvements to the home’s function such as remodeled bathrooms/kitchens and a permanentlyinstalled appliances

• Elimination of health and safety hazards

• Changes that improve appearance and eliminate obsolescence, including connecting to public water or sewer, heating, air conditioning, electrical systems

• Reconditioning or replacing plumbing, including interior whirlpool bathtubs

• Installing a well and/or septic system (must be installed or repaired prior to any other repairs to property)

• Adding or replacing roofing, gutters, and downspouts

• Adding or replacing floors and/or floor treatments such as wood, laminate, tile and carpeting

• Major landscape work and site improvements, including patios, decks, terraces and fences that improve the value of the property. Correction of grading and draining problemsis also included, as is tree removal and repair of existing walks and driveway if a safety hazard exists to property

• Enhancing accessibility for a disabled person, including remodeling kitchens/baths for wheelchair access, installingwider doors, exterior ramps, etc.

• Energy conservation improvements such as double-pane windows, insulated exterior steel doors, caulking, weather stripping, etc.

INELIGIBLE IMPROVEMENTS FOR THE FHA203K STANDARD INCLUDE:

Luxury items and improvements are not eligible as a costof rehabilitation. These include:

Because of the size and complexity of the FHA 203KStandard, FHA requires a FHA 203K Consultant be involved inyour project. While you are able to select your contractor, yourlender will assign the FHA 203K Consultant to your project.

You will find the FHA 203K Consultant very helpful as theywill assist you and your contractor in determining the scopeof repairs, the budget for the work to be done, verify all workis completed satisfactorily and as stated by the contractorand manage all disbursements of money.

FOR EXAMPLE,you are under contract to buy a home for $100,000 inBurlington County, where the FHA Loan Limit is$406,250. You are approved for up to $500,000. Aftermeeting with the FHA 203K Consultant andContractor, you plan to put $150,000 in improvementsinto this property (contingency and fees = $15,000).

The maximum loan amount is the lesser of the following:

1. FHA Lending Limits per your county = $406,250

2. The maximum amount of loan the client qualifies for = $500,000

3. Purchase Price + Total amount of your bids + Contingency Reserves +Fees = $265,000

• Swimming pools• Barbecue pits

• Hot tubs• Saunas

• Tennis courts• Gazebos

STEPS 1-3 SHOULD BE COMPLETE IN 5-10 DAYS.

1. SCHEDULE REHABILITATION MEETING: After your offer is accepted and you have selected a contractor, you will meet with your contractor and FHA 203K Consultant at the property to determine the total cost of the required and optional repairs for the feasibility analysis and work write-up. During this meeting the FHA 203K Consultant performs an inspection of the property to determine any potential health and safety concerns as well as the adequacy of existing structure, roof, plumbing, electrical, heating/cooling, etc.

* REMEMBER: Do not pay for 2 inspections. Since you arerequired to have an inspection performed by the FHA 203KConsultant, do not hire another home inspector prior to this.

2. OUTCOME OF MEETING: You, the FHA 203K Consultant & yourcontractor will reach an agreement on the estimate of all repairs to be made. IF you are no longer interested in this property due to the outcome of this meeting, you simply terminate the contract to buy the property.

3. FEASIBILITY ANALYSIS: The FHA 203K Consultant will determine if the amount of repairs plus the sales price (or current mortgage balance if refinancing) makes this transaction feasible for you to proceed.

If the project is feasible, the consultant will prepare a work write-upand submit to the borrower/lender within 48 hours.

4. WORK WRITE UP: This report is provided by your FHA 203K Consultant and includes the following:

a) A detailed General Description of the property “as-is” in a narrative form

b) The Scope of Rehabilitation that will include a narrative of required repairs and any additional work requested by the client

c) All applicable FHA forms for review, contractor and consultant agreements and Architectural

Exhibits for the work

d) A Write Up Synopsis which includes a summary list of who’s doing the work, the job total, fees and expenses related to the rehab portion of the work

e) A detailed HUD/FHA Home Inspection Report

f) A complete Job Specifications and Bid request form to gather bids from contractors

g) An initial Draw Request package with Re-Cap of Sub-Totals

5. ORDER APPRAISAL: see steps 6-10 (located on pages 5-9)

At closing, the seller is paid and the rehab fundsare setup in an escrow account with our bank.Out of this escrow account, the funds are to bedisbursed in up to 5 draws through the bank’sdraw department. The first draw will is request-ed 30 days from closing.

FOR EACH DRAW REQUEST:

• The borrower or contractor will need to contactthe FHA 203K Consultant to initiate a draw.

• The Consultant does an on-site inspection of the completed work and approves a draw.

• The borrower will forward a 1) lien waiver 2) draw request and 3) compliance inspectionreport to the draw department.

• The draw department will obtain the necessary title update and/or endorsement for the amount of the draw and then forward a check directly to the borrower, payable to both the borrower & contractor.

A ten percent (10%) holdback is required on eachdisbursement released from the rehabilitationescrow account to insure all work is completed.

If all monies are not used after completion ofthe project, the remaining amount can beapplied to the principal balance of your loan ORused to make other improvements (additionalapproval is required).

THE PROCESS

DISBURSEMENTS

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ALLOWABLE CONSULTANT FEES*(Based on Repair Amount)

$7,500 or Less $400

$7,501 to $15,000 $500

$15,001 to $30,000 $600

$30,001 to $50,000 $700

$50,001 to $75,000 $800

$75,001 to $100,000 $900

$100,001 & Above $1,000

Each Additional Unit $25

Feasibility Study $200

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Licensed or registered in the following states: Colorado Mortgage Company Registration (NMLS# 338923), Connecticut First Mortgage Correspondent License Lender/Broker (#ML-338923),Delaware Chapter 22 Licensed Lender License (#011546),Licensed Correspondent Mortgage Lender in Florida (#MLD252), Indiana First Lien Mortgage Loan License (#15020), KansasLicense Mortgage Company (#MC.0025071), Licensed as a Mortgage Company in Kentucky (#MC73325), Maine Supervised Lender SLM11716, Maryland Mortgage Lender (#19406),Massachusetts Mortgage Lender and Mortgage Broker License (#MC338923), Licensed in Montana (#338923), Licensed in Nebraska (#2098), Licensed by the New Hampshire BankingDepartment (16113-MB), American Neighborhood Mortgage Acceptance Company is licensed by the New Jersey Department of Banking and Insurance (#NO00004875), North CarolinaMortgage Lender License (AL-150980), Licensed in North Dakota (#MB102155), Licensed Mortgage Lender OR (ML-5022), Oklahoma Mortgage Broker (#MB001894), Licensed by thePennsylvania Department of Banking as a Mortgage Lender (#33587), American Neighborhood Mortgage Acceptance Company, LLC, d/b/a AnnieMac Home Mortgage is licensed by theSouth Carolina Board of Financial Institutions, license MLS-338923, Licensed as a Mortgage Lender in South Dakota (NMLS# 338923), American Neighborhood Mortgage AcceptanceCompany, LLC, d/b/a AnnieMac Home Mortgage is a licensed Lender/Broker in the State of Tennessee (#0000004348), American Neighborhood Mortgage Acceptance Company LLC is aregistered Mortgage Banker in the State of Texas, Vermont Mortgage Lender # 6251, Licensed by the Virginia State Corporation Commission (MC-5523), Licensed in Washington (#CL-338923), Licensed by the West Virginia Division of Banking (License #ML-30779).

http://anniemacrenovationlending.com/apply-now/

Jeff OnofrioDirector of Renovation Lending,NMLS# 38670

Office: 888-680-RENO (7366)Mobile: 609-217-9409Fax: 866-438-1351Email: jonofrio@annie-mac.comwww.anniemac203klending.com

Renovation Lending Division

Well, I hope this has helped andyou now feel more comfortable inmaking an offer on propertiesneeding repairs, cosmetic or major,using the FHA 203K loan.

If you would like more information about

FHA 203K loans, please visit: www.anniemac203klending.com

You can also contact our team at 888.680.RENO (7366) or email us at 203kinfo@annie-mac.com

To get pre-approved go to: http://jeffonofrio.annie-mac.com and click on “apply”.