FHA 203k Inspections Changing climate in home buying markets: FHA 203k Inspections. FHA 203k Inspections. FHA 203k Inspections. FHA 203k Inspections

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1 Changing climate in home buying markets: Mortgage qualifying still a challenge 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 Continuing Education Unit 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 LOW credit score requirement- less than perfect credit o.k.* Only 3.5% 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 CY2014 basic standard mortgage limits for FHA insured loans are: One-family Two-family Three-family Four-family FHA $417,000 $533,850 $645,300. $801,950 High cost area limits are subject to a ceiling based on a percentage of the Freddie Mac Loan limits The ceilings for CY2012 are: One-family Two-family Three-family Four-family FHA $625,500 $800,775 $967,950 $1,202, 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 d and/or HUD Handbook ) (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. (800)

2 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 loadbearing 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 (800)

3 FULL 203(k) VS. 203(k) Streamline 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 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 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 203k Independent 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 borrower 1. Identify the want a 203k mortgage 2. Complete the consultant request form 1. Borrower schedules a feasibility analysis 1. Establishes whether property will meet minimum property standards 2. Consultant helps borrower decide on repairs/improvements to be done 2. Borrower gets contractors to bid- finalizes work to be done in a Specification of Repairs report 3. Go to closing 4. Work begins and consultant performs draw inspections throughout work Educational Presentation For Buyers Please feel free to schedule meetings using this presentation (800)

4 And get it fixed up the way YOU want it 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. Homes needing at least $5000 in repairs Property values are higher than sale price Homebuyer qualifies for cost of house + 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.?ask yourself the question: Would I buy the home if was new? (fill in the blank) Find out what the homes in area are selling for.? Is there room for you to add the cost of repairs to the asking price and still be at or below market value? Get understanding of seller s s intentions if repairs are 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. (800)

5 Roofing, siding Plumbing repairs, heating-including including replacement, electrical Interior repairs- windows, doors, flooring (carpeting, tile, etc) Kitchen and bathroom upgrade (complete remodeling) Major 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. (800)

6 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 Answers Take time to do a pre-settlement walkthrough Work closely with your real estate and mortgage professionals Before bath? After BATH! (800)

7 Before loft bedroom? After LOFT BEDROOM! Before finished attic? After FINISHED ATTIC! Before kitchen? After KITCHEN! (800)

8 Before bath? After BATH! Before.. Kitchen (really)? After KITCHEN to die for! Before..A very nice house After..An AMAZING home! (800)

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12 Why Use Value Home Inspections Customized Online Reports /Digital Photos 203k Inspectors FREE 30 day Home Inspection Program Estimated Life Expectancy/Replacement Cost Guide 24 Hour Scheduling (Office hours 8 am- 10 pm) Free 90-day Home and Termite Warranty E & O Coverage for Referring Agents CEU Training Classes for Agents ( hrs of training) (800)