value home inspections, inc. fha 203k inspections strike while the iron is hot…

VALUE HOME INSPECTIONS, INC.

FHA 203k Inspections

Strike while the iron is HOT…




Changing climate in home buying markets:

• Mortgage qualifying harder then ever

•More people buying foreclosed/distressed properties

•Appraisals stricter

•Lower valuations of properties

•Increase in appraisal required repairs

•More people turning to FHA insured loans as conventional loans become harder to get qualified




Overview of FHA products

Term “FHA” mortgage usually refers to the 203B loan.

Most banks and lending institutions offer this insured loan to clients who don’t meet qualifications for “conventional” loan.

The FHA does not actually loan money; it insures loans that are provided by a partner bank or mortgage brokerage firm that works in partnership with the FHA.

203B loans – Benefits

NO credit score requirement- less than perfect credit o.k.

Only 3% required down payment (OPM allowed)

Seller – Assist allowed up to 6% of purchase price

“Gift-ing” allowed to help with settlement and down payment

Grant money from government programs




The CY2009 basic standard mortgage limits for FHA insured loans are:

One-family Two-family Three-family Four-family

FHA $271,050.00 $347,000.00 $419,425.00 $521,250.00

High cost area limits are subject to a ceiling based on a percentage of the Freddie Mac Loan limits

The ceilings for CY2009 are:

One-family Two-family Three-family Four-family

FHA $625,500.00 $800,775.00 $967,950.00 $1,202,925.00




203 B Loan – Challenges

Lender can (and usually does) impose their own minimum credit score requirement

Interest rates are generally slightly higher than market rates

House must pass an FHA appraisal –HUD's Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1)

(all failed items must be corrected prior to settlement)




203k Rehabilitation Mortgage

Same benefits as 203B with one important difference…

•FHA required repairs are corrected AFTER settlement and the cost to complete repairs are escrowed as part of the mortgage.




STREAMLINED (k)•Benefits

•Minor Repairs and Improvements (upgrades)

•Repair costs up to $35,000 (value permitting)

•No minimum repair cost threshold

•Repairs are completed after closing with loan proceeds

•Same down payment requirement for purchases

•No inspection required (If less than $15,000)




STREAMLINED (k)•Benefits (con’t)

•No 203 (k) Consultant

•No General Contractor

•Any FHA approved lender may originate a streamlined 203(k) mortgage




STREAMLINED (k)

What can be included?

•Total cost of rehab

•Inspection fees

•Building and other permits

•Title update costs




STREAMLINED (k) (Same as FULL 203k)Eligible Work Items

Repair/Replace/upgrade roofs, gutters and downspouts•Existing HVAC systems, plumbing, and electrical systems

•Existing flooring

•Minor remodeling (non-structural) repairs

•Exterior and interior painting

•Weatherization

•Appliances (including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves)

•Improvements for accessibility for persons with disabilities




STREAMLINED (k)Eligible Work Items (con’t)

•Environmental mitigation (radon, asbestos)

•Modifications involving disturbance of pre-1978 paint surfaces

•Lead based paint abatement

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

•Basement finishing and remodeling (non-structural repairs)

•Basement water proofing

•Window and door replacements & exterior wallre-siding

•Septic system and/or well repair or replacement




STREAMLINED (k)IneligibleWork Items

•Major rehabilitation or 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 improvements requiring more than 6 months to complete

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




203(k)•Repairs/Improvements Must be at least $5,000

•FHA Consultant Required

•Architectural Exhibits required (if necessary)

•Borrower can do repairs/ improvements if qualified

FULL 203(k) VS. 203(k) Streamline

•203(k) Streamline

•Only for uncomplicated repairs/improvements

•No Consultant required

•No Architect required

•Borrower can do repairs/improvements if qualified

•Repairs only up to $35,000




Contractors and Rehabilitation Criteria

•Borrower must use licensed and bonded contractors

•–“Self-help” is discouraged but acceptable IF the borrower can sufficiently demonstrate to the lender that he/she has the necessary expertise and experience to competently perform the work

•Eligible Properties:

•HUD REO Properties, Condominiums

•Refinance of existing Properties, 1-4 units

–Mortgagee Letter 2005-50




What is an FHA Certified 203k

Independent Consultant?

•An unbiased advocate for the buyer (usually first-time homebuyer

•The eyes and ears of the lender/HUD

•Mediator/facilitator/quality controller




What does an FHA Certified 203kIndependent Consultant do?

• Assists borrower in determining the feasibility of the renovation on the prospective home (including estimates for the repairs)

•Works with the borrower to identify improvements/upgrades to home

•Completes the work write-up documents used by the borrower/contractor (using forms that are approved by HUD and the lenders underwriting departments)

•Conduct draw inspections as work progresses to ensure quality and timeliness of renovations




The Process of Getting a 203k Mortgage

Lender meets with borrower1. Identify the want a 203k mortgage2. Complete the consultant request form

1. Borrower schedules a feasibility analysis1. Establishes whether property will meet minimum

property standards2. Consultant helps borrower decide on

repairs/improvements to be done2. Borrower gets contractors to bid- finalizes work to be done

in a Specification of Repairs report3. Go to closing4. Work begins and consultant performs draw inspections

throughout work




Sample projects..

• Replace the following slides with the 203k presentation once you have customized it.

And get it fixed up the way YOU want it…

Homes needing at least $5000 in repairs Property values are higher than sale price Homebuyer qualifies for cost of house + repairs

This is an FHA guaranteed loan that allows buyers to purchase homes that are in need of immediate

repairs. Purchaser pays a mortgage for the cost of the home + the cost of the repairs.

Able to offer a variety of loan options (conventional and FHA)

Caring and understanding

Readily accessible

Knowledgeable/Experienced

Excited about your goals

Look for problems and conditions you would change.Look for problems and conditions you would change.

?Ask yourself the question: Ask yourself the question: Would I buy the home if Would I buy the home if ________ was new? (fill in the blank)________ was new? (fill in the blank)

Find out what the homes in area are selling for. Find out what the homes in area are selling for.

? Is there room for you to add the cost of repairs to the Is there room for you to add the cost of repairs to the asking price and still be at or below market value?asking price and still be at or below market value?

Get understanding of seller’s intentions if repairs are Get understanding of seller’s intentions if repairs are needed.needed.

? Will the seller lower his price to allow you room to add repair cost?

A qualified inspector can determine if you may benefit from a 203(k) loan for the home being inspected.

Roofing, sidingRoofing, siding Plumbing repairs, heating-including replacement, electricalPlumbing repairs, heating-including replacement, electrical Interior repairs- windows, doors, flooring (carpeting, tile, etc)Interior repairs- windows, doors, flooring (carpeting, tile, etc) Kitchen and bathroom upgrade (complete remodeling)Kitchen and bathroom upgrade (complete remodeling) Major renovation- additions, re-design, complete remodelingMajor renovation- additions, re-design, complete remodeling

The only dumb question is?…

Carefully review all costs/fees with your real estate agent, consultant and lender before closing.

Take your time selecting a contractor – consultants may provide recommendations

Check with insurance company about coverage during renovation process.

Why Value Home Inspections?

• Professional Service

• Full Time Experienced 203(k) consultant

• All necessary reports provided for loan

• Fully staffed office – Monday to Friday 7am-7pm

• Going the extra step is our policy

Ask Questions…Get AnswersAsk Questions…Get Answers

Take time to do a pre-settlement Take time to do a pre-settlement

walkthroughwalkthrough

Work closely with your real Work closely with your real

estate and mortgage professionalsestate and mortgage professionals

value home inspections, inc. fha 203k inspections strike while the iron is hot…

Documents

inspections strike

value home inspections

family fha

hot slide

fha insured loans

mortgage slide

fha approved lender

important difference