During the past two months I've been traveling around North and South Carolina speaking to Allen Tate Realtors about the benefits and processes of the FHA 203k Renovation Loan program; about 14 presentations to over 280 agents. The feedback has been great and our results are gaining traction. This month alone we closed 4 renovation loans. Each was a foreclosure sale; the average sale price was approximately $83k and the average amount of the borrower's renovation was $27k.
It is exciting to be a part of a buyer's vision for improving a property, making it their own, and turning a vacant REO property into a home all at the same time....one house at a time.
But remember, this loan program is NOT just for foreclosed properties. If you've found (or have) the perfect house that just needs updating, we can help! Call me today to learn how.
Wednesday, August 31, 2011
Friday, July 29, 2011
So, what is a renovation loan anyway?
An FHA 203k renovation loan is one FHA mortgage loan used to purchase (or refinance) a property and renovate it. The most common form of the loan is classified as a “streamline” 203k which caps the amount of the renovation at $35k and the scope of the work to non-structural & eligible improvements (eligible repairs below).
Let’s take a home purchase of $100k, for example. The buyer would like to remodel the kitchen, bath rooms, and flooring throughout the house for a total of $25k in improvements. The purchase contract is executed with the seller for $100k. The buyer would then apply for his/her mortgage with a renovation loan specialist (me). The interest rate is slightly higher than a regular FHA loan, a contingency reserve for potential cost over-runs is added and there are some other minor fees associated with the renovation aspect of the loan.
Contingency reserve & fees: $2,980
Total acquisition cost: $127,980
Eligible Repairs
• Repair/replacement of roofs, gutter and downspouts
• Repair/replacement/upgrade of existing HVAC systems
• Repair/replacement/upgrade of plumbing and electrical systems
• Repair/replace flooring
• Painting both interior and exterior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Purchase and installation of appliances, including free-standing ranges, refrigerators, washer/dryers, dishwashers and microwave ovens ($3k max)
• Accessibility improvement 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 not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement
• Minor remodeling, such as kitchens, which does not involve structural repairs
Let’s take a home purchase of $100k, for example. The buyer would like to remodel the kitchen, bath rooms, and flooring throughout the house for a total of $25k in improvements. The purchase contract is executed with the seller for $100k. The buyer would then apply for his/her mortgage with a renovation loan specialist (me). The interest rate is slightly higher than a regular FHA loan, a contingency reserve for potential cost over-runs is added and there are some other minor fees associated with the renovation aspect of the loan.
Purchase price: $100,000
Renovation: $25,000Contingency reserve & fees: $2,980
Total acquisition cost: $127,980
The borrower's required down payment of 3.5% of the acquisition cost equals $4,480. Assuming he/she negotiates with the seller to pay all or most of the closing costs, he/she won’t need much more money than that.
At closing, the seller receives their proceeds, ½ of the renovation is funded to the buyer and contractor jointly, and the renovation begins within 30 days of closing. The project must be completed within 6 months (generally done much sooner) and the final disbursement is made after a final inspection, title update, and loan review are complete.
These loans are for owner occupied borrowers with the expectation that the home will remain occupied by the owner for at least one year. FHA may be rolling out an option for investors in the near future.
Simple, right?
Call your Allen Tate Realtor and Mortgage Consultant for additional information and assistance!
Eligible Repairs
• Repair/replacement of roofs, gutter and downspouts
• Repair/replacement/upgrade of existing HVAC systems
• Repair/replacement/upgrade of plumbing and electrical systems
• Repair/replace flooring
• Painting both interior and exterior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Purchase and installation of appliances, including free-standing ranges, refrigerators, washer/dryers, dishwashers and microwave ovens ($3k max)
• Accessibility improvement 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 not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement
• Minor remodeling, such as kitchens, which does not involve structural repairs
Friday, July 22, 2011
Simple steps to a successful renovation loan
1. Get pre-qualified and consider a full pre-approval. This statement is true for any type of loan. If you are a well qualified buyer, a pre-qualification is sufficient from the right loan officer. But if you have a couple issues that require review from an underwriter (loan decision maker), get fully pre-approved. The difference is that with a pre-approval you supply your supporting documentation (W2's, pay stubs, etc.) and sign an application disclosure package. The result is a loan commitment and much stronger negotiating power with sellers.
2. Get organized. Once you find the right house and negotiate the contract the real work begins. For most buyers, you'll need to turn your pre-qualification into a loan approval/commitment and lock your rate. At the same time, you will need to begin working with your general contractor(s) to specify the scope of work and cost of renovations. These need to be nailed down prior to ordering the appraisal so we can determine the "after improved" value.
3. Give plenty of time. Try to negotiate a 60 day contract to close period to give yourself and us the time needed to coordinate the financing and renovation. We may be able to close faster but there are many variables at play and you don't need the extra stress of a quick closing.
4. Be decisive. If you have trouble picking the toppings to put on your pizza, this may not be the right loan program for you. Identify what you want to renovate and make it happen.
5. Consider hiring a HUD consultant. Usually HUD consultants are used for larger renovations and ones that include structural items. However if you could use help identifying the scope of work and working with contractors, a HUD consultant may be right for you.
Most importantly, work with a real estate and mortgage company that is committed to your success now and in the future: The Allen Tate Company.
Call or email me if you are interested in learning more about our renovation lending program.
2. Get organized. Once you find the right house and negotiate the contract the real work begins. For most buyers, you'll need to turn your pre-qualification into a loan approval/commitment and lock your rate. At the same time, you will need to begin working with your general contractor(s) to specify the scope of work and cost of renovations. These need to be nailed down prior to ordering the appraisal so we can determine the "after improved" value.
3. Give plenty of time. Try to negotiate a 60 day contract to close period to give yourself and us the time needed to coordinate the financing and renovation. We may be able to close faster but there are many variables at play and you don't need the extra stress of a quick closing.
4. Be decisive. If you have trouble picking the toppings to put on your pizza, this may not be the right loan program for you. Identify what you want to renovate and make it happen.
5. Consider hiring a HUD consultant. Usually HUD consultants are used for larger renovations and ones that include structural items. However if you could use help identifying the scope of work and working with contractors, a HUD consultant may be right for you.
Most importantly, work with a real estate and mortgage company that is committed to your success now and in the future: The Allen Tate Company.
Call or email me if you are interested in learning more about our renovation lending program.
Sunday, July 10, 2011
Financing a Distressed Sale
Depending on which news story you read on which day, somewhere around 30 percent of today's sales are classified as distressed. A distressed sale is a foreclosure or short sale and often in some form of disrepair. As a buyer you may be able to buy the property at a substantial discount to other sales in the neighborhood.
But how do you finance the fix-up on your fixer-upper?
Consider an FHA 203k loan. This renovation/rehab loan program combines a traditional home mortgage with a home repair loan, giving you the flexibility to buy a property that needs repair and fold the cost of those repairs into a single mortgage.
With a Streamline 203(k) loan, you can borrow up to $35,000 for improvements such as repair/replacement of roofs, flooring, siding and windows; electrical, plumbing, painting, weatherization, basement finishing and appliances. You can even use the money to improve energy efficiency or to make a home accessible for a disabled person.
Work must begin within 30 days of closing and be completed within six months. Funds are placed in escrow and contractors are paid as the work is completed.
To get the most from your 203(k), it’s important to find the right property as well as a Realtor who knows and understands the program. At Allen Tate Mortgage, we’ll help you navigate the renovation loan process and turn that fixer-upper into your dream home.
But how do you finance the fix-up on your fixer-upper?
Consider an FHA 203k loan. This renovation/rehab loan program combines a traditional home mortgage with a home repair loan, giving you the flexibility to buy a property that needs repair and fold the cost of those repairs into a single mortgage.
With a Streamline 203(k) loan, you can borrow up to $35,000 for improvements such as repair/replacement of roofs, flooring, siding and windows; electrical, plumbing, painting, weatherization, basement finishing and appliances. You can even use the money to improve energy efficiency or to make a home accessible for a disabled person.
Work must begin within 30 days of closing and be completed within six months. Funds are placed in escrow and contractors are paid as the work is completed.
To get the most from your 203(k), it’s important to find the right property as well as a Realtor who knows and understands the program. At Allen Tate Mortgage, we’ll help you navigate the renovation loan process and turn that fixer-upper into your dream home.
Friday, April 8, 2011
The Shirmeyer Report / Sigma Research Inc.
My company subscribes to David Shirmeyer's daily market report which provides commentary on mortgage interest rates and the news and political events that affect them. His style is sometimes brash and to the point. After almost 4 years of reading his twice daily reports, this has got to be my favorite paragraph read during that time:
The Fed messed up under Greenspan keeping rates too low for too long triggering among other things the sub prime mortgage collapse that brought the US at the door step of depression. Bernanke seems to be headed down the same road, he admits he didn't get it that making mortgages to anyone breathing would be a problem. The end of it all has torn the mortgage markets apart and lead to the government telling private businesses how much they can pay employees."
If you're interested in more from Mr. Shirmeyer, here is his web site: http://www.shirmeyer.com/
"Still no budget agreement but getting closer; apparently the main issue now is Republicans wanting to end funding for Planned Parenthood while Democrats stand firm that America needs abortions paid for by tax payers. The fumbling in Washington should make all of us wonder if our "leaders" actually have a clue about what their jobs are and the increasing need to cut spending and increase revenues. According the latest news both have now agreed to cut $38B from the budget, a pittance compared to what has to be cut in 2012. We continue to believe the government will not shut down, that a deal will be met at the 11th hour; its what politicians do---play with themselves."
How could you not love this guy?
Here is the rest of his commentary from this afternoon:
"The stock market didn't appreciate the foot-dragging, the bond market also with increasing interest rates. The third week in a row that interest rates have moved higher.The dollar is taking a hit on the way our leaders lead and that most all countries have now or will shortly begin to increase rates. IN the US Bernanke and the Fed still hang on QE and are sending the message that it will not increase rates because Bernanke doesn't believe inflation is an issue now or in the near term. Meanwhile gold continues to increase as a hedge against inflation and crude oil continues to increase. Crude now at $113.00 and gold at $1474.00.
If you're interested in more from Mr. Shirmeyer, here is his web site: http://www.shirmeyer.com/
Tuesday, March 29, 2011
Homebuyer Financing Methods
I received an interesting newsletter from a real estate agent partner the other day. It was Campbell/Inside Mortgage Finance's Housing Trends Update and it contained a graph depicting how buyer's paid for their homes (nationally) over the past 12 months; cash, FHA, or Conventional Conforming loans (Fannie/Freddie).
Cash Buyers:
Feb 2010 -- 27.5%
Feb 2011 -- 33.7%
FHA Loans:
Feb 2010 -- 33.3%
Feb 2011 -- 27.8%
Fannie/Freddie Loans:
Feb 2010 -- 14.2%
Feb 2011 -- 13.6%
The article makes a couple points. One, there are more investors in the market paying cash for distressed properties. And two, mortgage financing is becoming increasingly difficult.
In my last blog post I discussed how FHA was increasing fees in an effort to promote a more balanced mortgage market. However, Fannie and Freddie also continue to raise fees and tighten lending restrictions hindering any market share increases in Conventional/Conforming lending and doing little to improve the real estate market.
If you are a real estate agent and would like more information about the article you can go to www.campbellsurveys.com.
Cash Buyers:
Feb 2010 -- 27.5%
Feb 2011 -- 33.7%
FHA Loans:
Feb 2010 -- 33.3%
Feb 2011 -- 27.8%
Fannie/Freddie Loans:
Feb 2010 -- 14.2%
Feb 2011 -- 13.6%
The article makes a couple points. One, there are more investors in the market paying cash for distressed properties. And two, mortgage financing is becoming increasingly difficult.
In my last blog post I discussed how FHA was increasing fees in an effort to promote a more balanced mortgage market. However, Fannie and Freddie also continue to raise fees and tighten lending restrictions hindering any market share increases in Conventional/Conforming lending and doing little to improve the real estate market.
If you are a real estate agent and would like more information about the article you can go to www.campbellsurveys.com.
Tuesday, March 1, 2011
FHA is increasing the monthly mortgage insurance charges...again
Back in October I posted a positive blog about FHA's increasing charges and the hope that they would lead the mortgage industry back towards a more balanced market. Well apparently the increases were not enough.
Effective with FHA case numbers issued on and after April 4th, 2011, FHA is increasing the rate of monthly mortgage insurance.
For a typical 30 year borrower that is putting the minimum allowable down payment, the current factor used to calculate the fee is going from 0.9% per year to 1.15% per year.
Let's look at the monthly payments that would have resulted during 3 time periods: before 10/4/10, present time, and on or after 4/4/11 (assuming equal interest rates of 4.75% and 5.547% APR, 30yr fixed mortgage, 3.5% down payment, $150k purchase price, excluding property taxes and home owner's insurance).
Before 10/4/2010: Principal & Interest = $772.07
Pmi = $ 66.34
Total = $838.41
Present: Principal & Interest = $762.63
Pmi = $108.56
Total = $871.19
April 4, 2011 & After:
Principal & Interest = $762.63
Pmi = $138.72
Total = $901.35
Stay tuned, I'm sure more changes are coming.
Effective with FHA case numbers issued on and after April 4th, 2011, FHA is increasing the rate of monthly mortgage insurance.
For a typical 30 year borrower that is putting the minimum allowable down payment, the current factor used to calculate the fee is going from 0.9% per year to 1.15% per year.
Let's look at the monthly payments that would have resulted during 3 time periods: before 10/4/10, present time, and on or after 4/4/11 (assuming equal interest rates of 4.75% and 5.547% APR, 30yr fixed mortgage, 3.5% down payment, $150k purchase price, excluding property taxes and home owner's insurance).
Before 10/4/2010: Principal & Interest = $772.07
Pmi = $ 66.34
Total = $838.41
Present: Principal & Interest = $762.63
Pmi = $108.56
Total = $871.19
April 4, 2011 & After:
Principal & Interest = $762.63
Pmi = $138.72
Total = $901.35
Stay tuned, I'm sure more changes are coming.
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