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FHA 203k Streamline: How Much Money Can You Get?

August 25, 2009 1 Comment

The FHA 203k streamline program was designed for people who are interested in buying a home that is in need of a few repairs that are not “structural” and would require major work. The FHA 203k program is designed for homes in need of major work, the FHA 203k Streamline is just designed for work like carpet, paint, kitchen, gutters, etc.

Here are the most common FHA 203k Streamline repairs.

So how much money can you get for repairs with the FHA 203k Streamline program? A total of $35,000.

Total.

FHA 203k Streamline: How Much Money Can You Get? %spacebasename

Now, at first glance, that might seem like you can spend $35,000 on contractor labor and supplies – but that isn’t so. That $35,000 includes bank fees.

FHA 203k Rehab Cost Must Include ALL Of The Following AND Can’t Exceed $35,000:

  • Cost of the construction supplies
  • Cost of the labor of the contractor
  • 10% contingency fee
  • $100 final inspection fee
  • Up to 1.5% supplemental origination fee

If you add all of these together, you will get a number that says that the total cost of materials and labor can’t exceed $31,257.

So make sure that when you budget for the FHA 203k Streamline program, you know that $35,000 isn’t really $35,000 – it is really $31,257 after you subtract all of the fees.

Which is kind of the way everything seems to be. A fee here, a fee there… yeah, we have a fee for that.

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FHA 203k Streamline: Are Interest Rates For The FHA 203k Streamline Higher?

August 24, 2009 Leave a Comment

Question:

Are FHA 203k Streamline interest rates higher than “normal” FHA interest rates?

Answer:

It depends.

FHA 203k Streamline: Are Interest Rates For The FHA 203k Streamline Higher? %spacebasename

The truth is that it mostly depends on the lender. One of the biggest lenders in the US who did quite a few FHA 203k Streamline loans was Taylor Bean and Whitaker, and when they went under a few weeks ago, now the number of lenders who offer the FHA 203k streamline mortgage is fairly fragmented.

Some of the lenders do charge a slightly higher rate for the FHA 203k streamline loan, but some do not, it is different by lender. And although the most common loan program choice is the FHA fixed rate program, there are lenders who will also offer a FHA adjustable rate with their FHA 203k loan.

One thing that is also somewhat unknown about the FHA 20k3 streamline program with regards to interest rates – because it is a FHA loan program, you can use a 2/1 buydown program do “buy down” the interest rate which will lower your payment for the first 2 years of your mortgage.

FHA 203k Streamline Fees:

The FHA 203k streamline fees also somewhat vary by lender, but generally speaking, you can expect the “normal” FHA fees and something called a “Supplemental Origination Fee” or a “Rehab Admin Fee” which is usually about $350 up to 1.5% of the repair/rehab fee (or a max of about $500). In plain English, this fee is because the FHA 203k streamline loan requires the lender to do more work, so they charge more.

No matter how you add up the fees for the FHA 203k Streamline, it is difficult to say that they are too much different than a “regular” FHA loan – and certainly with the flexibility of getting money for rehab needed on a home, the slight increased fee of the supplemental fee is usually the last thing people worry about with the FHA 203k Streamline program.

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Obama 125% Refinance Now Available

August 21, 2009 3 Comments

Many people across Arizona have been unable to refinance their home because they owe on their mortgage than it is worth. For the first few months of the Making Home Affordable (aka the Obama refinance) program, the maximum loan-to-value that was allowed was 105%.

Then in July, it was announced that the new maximum loan-to-value under the Obama refinance program was 125%.

Then many people called in and asked about the Obama 125% Refinance being available — only to find out that lenders weren’t actually set up to do it yet.

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But we are now!

Today we got our first lender announcement that you can now refinance up to 125% of your property value under the Obama 125% refinance / Making Home Affordable plan.

So if you are one of the people who has been unable to take advantage of low rates, now is your time… and as luck would have it, rates are scraping the bottom of the range they have been in for months!

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Reverse Mortgages Lead To Financial Ruin?

August 19, 2009 Leave a Comment

There was a story about how reverse mortgages can lead to financial ruin that I found somewhat interesting – especially with the amount of seniors who are looking into getting an Arizona reverse mortgage.

Will a reverse mortgage lead to financial ruin?

According to Consumer Reports… maybe!

Reverse Mortgages Lead To Financial Ruin? %spacebasename

From the story:

Ads for reverse mortgages sound pretty enticing. Use the equity in your home to pay off debts or make a big purchase. You’ll still be able to stay in your house and even have some money to leave to your heirs.

At 83 years old, Arlene Schwemmer is no longer able to live on her own and has had to move. She’s worried that she’ll get nothing from the sale of the home she shared with her late husband for 49 years.

Arlene’s daughter says that’s because a broker persuaded her parents to take out a reverse mortgage four years ago. The terms were complicated and hard to decipher.

“The decision on the reverse mortgage was one of the worst decisions I think my folks had ever made. It was tragic,” Diane Zaugg said.

The Key To Not Letting A Reverse Mortgage Ruin You

If you are a senior who is thinking about a reverse mortgage, there can be far better financial alternatives for you than getting a reverse mortgage. It all depends on your financial situation. The only way that a reverse mortgage can really “ruin” you is if you had a better option and didn’t take advantage of it.

But for many, many seniors who are currently thinking of taking advantage of the FHA reverse mortgage program – they really have no other alternative to accessing money they need to live on.

And if it is your last resort, can you really say that it was a bad decision?

I don’t see how.

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Manufactured Home Loans With FHA: Still Available

August 19, 2009 3 Comments

With the downfall of Taylor, Bean and Whitaker recently, many loan officers have been scrambling for lenders who will underwrite FHA loans on manufactured homes.

Manufactured Home Loans With FHA: Still Available %spacebasename

The good news is that there are still lenders underwriting these loans, so if you are in a manufactured home and need to refinance or purchase a home, there are still FHA loan programs available that lenders will lend money on.

There aren’t many lenders still lending money on manufactured homes, but there are a few… and lucky for all of us, we have more than one that is still lending money for FHA loans on manufactured home properties.

Of course, the same FHA guidelines still apply and just as a reminder, here are the general FHA rules for manufactured homes to be considered eligible for FHA financing:

  • have a floor area of not less than 400 square feet;
  • be constructed after June 15, 1976, in conformance with the Federal manufactured home construction and safety standards, as evidenced by an affixed certification label in accordance with 24 CFR Section 3280.8; (manufactured homes produced prior to that date are ineligible for insured financing);
  • be classified and subject to taxation as real estate;
  • the mortgage must cover both the manufactured unit and its site and shall have a term of not more than 30 years from the date amortization begins;
  • built and remains on a permanent chassis;
  • designed to be used as a dwelling with a permanent foundation built to FHA criteria; and
  • the finished grade elevation beneath the manufactured home or, if a basement is used, the lowest finished exterior grade adjacent to the perimeter enclosure, shall be at or above the 100-year return frequency flood elevation.

Will manufactured home loans that are insured by FHA go away completely?

Maybe.

But they are still available as of today.

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Will The $8000 Tax Credit Be Extended?

August 19, 2009 22 Comments

Will the$8000 tax credit for first time home buyers be extended?

Yes.

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What the heck – with the start of the football season, I am in a betting mood and this seems like as good of a bet as any.

Now, keep in mind — it is just a prediction, because believe it or not… no one from Washington actually calls me and asks for my opinion about these kinds of things – no matter how many letters I write that start with “Dear President Obama”.

4 Reasons The $8000 Tax Credit Will Be Extended

IF the real estate market of the US has turned the corner (if), it just barely did – and it needs a little while to pick up some more steam.

  1. There are still more foreclosures coming – which will increase inventory.
  2. There are programs such as the Neighborhood Stabilization Program that has enough money to run into next year.
  3. The decision whether or not to extend it will be made by Congress and we all know that they are going to cater to what the masses want.
  4. There is currently at least one bill that not only extends the credit, but allows more people to actually claim it:

“H.R. 2801 (111th Congress) 2009-2010 Home Ownership Moves the Economy (HOME) Act of 2009, is a bill sponsored by Howard Coble, a U.S. Representative from North Carolina’s 6th District. Representative Coble’s bill’s goal is to extend the tax credit into 2010 as well as allow all home buyers take advantage of the tax credit.”

Don’t think that the $8000 tax credit will be extended? Leave a comment and I will bet you a Diet Pepsi it gets extended!

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FHA 203k Streamline: How Do Payments Work?

August 19, 2009 1 Comment

When getting an Arizona FHA 203k streamline loan one of the more popular questions I am asked is “how does the payment process work?” and when outlined, it isn’t all that complicated (or at least it doesn’t seem like it…)

With the FHA 203k streamline program the repair funds are held in escrow by the lender – and the borrower has 3 months from their closing date to complete all of the work on the project. There can be no more than 2 payments (called the First payment and Final payment) and the must be paid directly to the contractor who performed the work. The first payment (sometimes called a draw) is limited to a maximum of 50% of the total repair cost.

FHA 203k Streamline: How Do Payments Work? %spacebasename

For the First Payment at Closing:

When requesting the first payment at closing to be disbursed, the following will be required:

  1. Initial disbursement forms
  2. 203k maximum mortgage worksheet
  3. All bids and estimates for the project
  4. The name of the contractor to be paid and the exact amount of each check to be disbursed at closing. The underwriter will review and approve this.
  5. All signed homeowner/contractor agreements (or a self help agreement if the borrower is doing the work)

Once you have all of this information provided, typically the closing/construction department will require at least 24 hours to review the request — which means leave a little leeway on your closing date, it can be somewhat fluid.

For the Final Payment

  1. All loans require a final inspection regardless of how much repair money was allocated.
  2. Before the final release, the borrower must sign a completion and affidavit for disbursement form.
  3. Final payment is disbursed upon completion of all work – can’t disburse if work is still “in progress”

So with the FHA 203k streamline loan, there are two payments — the first and the final.

Easy enough, right?

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FHA 203k Streamline: Contractor Requirements

August 19, 2009 2 Comments

When using the Arizona FHA 203k streamline to finance your home, you will usually need to get a contractor to perform the work. The general process of finding a contractor and working with the lender and contractor looks like this:

  1. Lender reviews the contractors license, bonding, insurance and credentials
  2. Contractor estimates and provides the lender estimates that clearly state the nature and type of repair cost for labor and completion of the work.
  3. Lender reviews the estimates. The lender may call the borrower, loan officer and/or contractor to discuss the estimate and ask any additional questions they may have.
  4. Lender then can accept the estimate or ask for more estimates.

FHA 203k Streamline: Contractor Requirements %spacebasename

While it may seem like a long process – it really isn’t all that bad. Most lenders require that you use contractors to complete the rehab work unless the borrower can provide proof that they can perform the work (for example, if they are a general contractor, that is always a good sign they are capable…) but when the borrower is the one who completes the work the following apply:

  • Borrower must provide documented proof of expertise required to complete the work
  • Borrower ensures that the work will be completed within a “timely manner” (generally no longer than 3 months)
  • Borrower must execute a “self help” agreement
  • Borrower provides written estimates of supplies required to complete the work and must include labor in cost estimate in case a contractor is hired to complete the work.
  • Borrower may not be compensated for his/her labor. No “sweat equity” is allowed.

Is it possible for a borrower who is capable of doing the work be allowed to do the work?

Yes.

And now you know the rules of what will be required by the lender!

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FHA 203k Streamline: Why Choose The FHA 203k Streamline?

August 19, 2009 1 Comment

As more and more bank owned properties are bought here in Arizona, many people are starting to become aware of the various loan programs designed for homes that are in need of repair. The most popular ones are the FHA 203k Streamline, the FHA 203k loan and the Fannie Mae HomePath loan programs.

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When it comes to the two FHA loan options, many people ask me “why would someone want an FHA 203k Streamline loan vs. a FHA 203k “regular” loan? And the simple answer that I give is this: if the cost of repairs is anywhere close to the $35,000 allowed by FHA for the FHA 203k streamline program, go with the streamline.

If it is much, much more than that – you will need to pick the “regular” FHA 203k loan program.

But the answer is really slightly more in-depth than that — and here are just a few other reasons people choose the FHA 203k streamline loan program:

  • Architectural exhibits are not required with the FHA 203k streamline
  • The lender is responsible for making sure the cost to repair is reasonable
  • General contractors and/or consultants are not required
  • Some lenders don’t require that you get at least $5,000 in repairs (some do)

Now there are certain situations where it is clear that you are going to need far more than $35,000 to rehab a house – but I have found that in most cases, the $35,000 for repairs is more than enough – which makes choosing the FHA 203k streamline an easy choice.

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Filed Under: Buying a New Home in Arizona, FHA Loans Tagged With: , , ,
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