1 Financing Provided by: Family Finance FHA Streamline 203(k)
2 The Answer How many times have your customers said the following: 1. Needs carpet 2. Needs paint 3. Needs a new kitchen 4. Bathroom is ugly 5. This house is totally outdated, everything needs to go We here at Family Finance have put together the solution to these common questions. A Streamline FHA 203(k) which allows your borrowers to update and repair outdated and ugly homes into their dream home. This program allows the borrower to setup a escrow account at closing to perform and correct these issues with the home, and not have the issues of a normal 203(k) loan. This is also a one time close, so no waiting on your monies. You are paid at closing.
3 What is a HUD 203(k) Mortgage Loan The 203(k) Rehabilitation loan: HUD s primary program for rehabilitation, repair, and improvement of properties, helping turn fixer-uppers into dream homes. It is a fully disbursed loan which allows a borrower to purchase or refinance a property and establish an escrow account for the cost of rehabilitation. Because it is fully disbursed at closing, the loan can be insured by HUD as soon as the loan closes. Able to provide the funds for rehabilitation, by determining the mortgage amount on the projected value of the property with the work completed, taking into account the cost of the work.
4 Benefits of the Streamline 203(k) program Program for the Purchase orrefinance (Rate & Term only) of properties needing minor renovation, repair, upgrades and/or improvements. Costs of renovation, repairs, upgrades and/or improvements are included in loan. (minimum repair amount is $5,000.) Repairs are completed with loan proceeds after loan closing. Borrower can do repairs/improvements (if qualified). Down payment requirements are the same as for a regular purchase transaction.
5 Benefits of the Streamline 203(k) program No General Contractor required. No 203(k) Consultant required. Allows for modifications to property for disabled individuals. Provides ability to market properties that need updating. Increases property value.
6 Typical Streamline 203(k) Borrower Borrowers that are interested in purchasing a property needing repairs, so that they acquire the property at a reduced sales price and can have it repaired with personalized options. Existing homeowners who need funds to rehabilitate their property. Borrowers that may not qualify for a conventional loan due to down payment requirement and repairs needed to property. Borrowers that have limited cash for down payment and closing costs. Borrowers who wish to improve the energy efficiency of their home.
7 Typical Streamline 203(k) Market Properties needing renovation, repair, upgrades and/or improvements. REO s, short sales, home sold at auction, and estate sales. Incomplete renovations. Upgrades needed to kitchens, bathrooms, etc. Borrowers refinancing their existing home and able to include the costs of repairs into the loan. Can upgrade, improve, and increase the energy efficiency of their home, and remain in their home.
8 Streamline 203(k) Program Basics
9 Streamline 203(k) Program Basics Purchase orrefinance (Rate & Term only) transactions of properties needing minor repairs, upgrading and/or improvements. Only Fixed Rate Mortgages with 30 year terms allowed (Adjustable Rate Mortgages not allowed, and terms other than 30 years not allowed) Property must be 100% complete per Certificate of Occupancy, and at least 1 year old. Minimum of 1 year from date certificate of occupancy is issued to date of case number assignment.
10 Streamline 203(k) Program Basics Program is a true FHA loan program, and all of the following are the same as for any other FHA loan: Application and disclosures Credit report and credit documentation Income documentation and calculations Asset documentation Purchase contract and purchase contract disclosures (contract should indicate 203K financing though not required, however HUD REO Sales Contract [HUD-9548] must reflect 203K financing) Preliminary Title Report and title documentation Minimum down payment requirements Maximum LTV.
11 Streamline 203(k) Program Basics May be combined with the following HUD programs: $100 Down Payment Incentive Good Neighbor Next Door Energy Efficient Mortgage EEM may include Energy-Related Weatherization EEM may include Solar Energy Systems HUD REO with Lead Based Paint Stabilization HUD REO with Repair Escrow Ora combination ofany ofthe above programs.
12 Eligible and Ineligible Properties
13 Eligible Properties HUD and Bank owned REO properties SFR, PUD, Townhomes (attached and detached) 2-4 Unit Properties FHA Approved Condo Projects (Mortgagee Letter 95-40) Each buildings can only contain garden level condominium units. Each building must not contain more than four units per building. Maximum of 25% of all the units in the entire project can be currently in rehabilitation stage.
14 Ineligible Properties Second Homes Non-Owner Occupied Properties Cond, Hotels, Timeshares and Coops Historic Properties registered in the National Register of Historic Places Log Homes Homes that have never been completed (a recorded notice of completion may be required if in doubt of final completion) Homes that have been completely demolished including the foundation
15 Ineligible Properties Earth homes Properties on stilts, posts or piers Commercial properties Manufactured homes Unimproved land Properties with deed restrictions Properties on Indian leased land Properties appraised as Proposed construction, Under construction, or New construction (less than 1 year old).
16 Eligible Work Items
17 Eligible Work Items Add, repair, replace and/or upgrade: Roof, gutters and downspouts Existing HVAC systems Plumbing and electrical systems Exterior and interior painting Weatherization, including storm windows and doors, insulation, weather stripping, etc. Windows and doors Flooring Exterior wall re-siding Decks, patios, porches
18 Eligible Work Items Additional eligible work items: Minor remodeling (such as kitchens, and not involving structural repairs) Purchase and installation ofappliances may include the following: Free-standing ranges Refrigerators Dishwashers Microwaves Washers and Dryers
19 Eligible Work Items Additional eligible work items: Exterior and interior painting Basement finishing and remodeling, which does not involve structural repairs Basement waterproofing Repair and/or replace septic systems Repair wells Lead-Based Paint Stabilization or Abatement of Lead- Based Paint Hazards Mold remediation is allowable on a case by case basis. Minor mold remediation is usually acceptable, major mold causes and cures will most likely need a full 203K
20 Eligible Work Items Additional eligible work items: Pool repairs permitted for functionality, health and safety issues, not to exceed $1,500 may be financed into loan. Any amount in excess $1,500 will be required as additional cash to close from borrower. Improvements for accessibility for persons with disabilities (such as ramps for wheelchairs, enlarging doorways for wheelchairs, special smoke alarms with strobe lights and door bells with flashing lights for the hearing impaired, etc.).
21 Ineligible Work Items
22 Ineligible Work Items The following are ineligible onstreamline 203(k) program: Major rehabilitation or remodeling (such as 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 Add, repair or replace fence Required repairs arising from the appraisal that do not appear on the list of eligible work items.
23 Ineligible Work Items Additional ineligible work items: Items that will not become a permanent part of the property Add, repair or replace driveways and sidewalks Luxury items, such as a swimming pool, in-ground spa, etc. Any repair or improvements requiring more than 6 months to complete Rehabilitation activities that require more than 2 payments per specialized contractor
24 Work Timeframes
25 Work Timeframes The work must begin within 30 days of funding The work must not cease prior to completion for more than 30 consecutive days The work is to be completed within the timeframe in the Agreement not to exceed 6 months
26 How the Streamline 203(k) works
27 Here s how the Streamline 203(k) works It starts with the borrower who wants to make repairs and/or improvements to a house. Process: Borrower selects contractor for desired work. Contractor visits the property and prepares work estimate (contractor bid). Loan is approved by underwriter with repairs and/or improvements as approved by underwriter. Appraiser is provided copies of underwriter approved work estimates and prepares appraisal based on repairs and/or improvements to be completed on property (as if all repairs have been completed).
28 Here s how the Streamline 203(k) works Process (continued): Loan closes/funds. Contractors receive Initial Draw to begin work (50% of total contractor Work Proposal). Repairs and/or improvements work begins. Changes needed to work as listed on the original underwriter approved work estimate: all work must stop, contractor to submit to Stearns Rehab Dept., detailed description to include costs of needed changes. description of needed changes must include explanation of the unforeseen Health & Safety issues (such as hidden damage caused by termites, mold or water damage) that were previously unknown but were discovered during rehabilitation process. changes approved by Stearns Rehab Dept., contractor continues work (the requested changes cannot be completed if the requested changes are not approved by underwriter).
29 Here s how the Streamline 203(k) works Process (continued): Contractor completes repairs and/or improvements: contacts Stearns Rehab Dept., informing that all repairs and/or improvements have been completed. provides copy of final invoice signed and dated by contractor and borrower. Stearns Rehab Dept. completes final disbursement process: orders final inspection, acquires title search, prepares documentation for contractor and borrower to sign, requests documentation from contractors and borrowers, reconciles final invoice (work completed, costs, etc.), requests final payment to contractor. Escrow account is closed and balance of 203K Repair Escrow Account is applied as principal reduction to borrower s current mortgage loan.
30 Before & After Pictures Before & After Pictures of repairs and/or improvements completed with 203K loans funded by our lenders in the year 2012
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38 Resources Streamline 203(k) Loan Program: Mortgagee Letters: , , HUD Handbook , Chapter 1, Section 1.C.5.b hud.gov FHA Outreach FAQ s: HUD REO and Good Neighbor Next Door Programs: Mortgagee Letters: , , , HUD Handbook , Chapter 6, Section 6.A.10.a Energy Efficient Mortgage (EEM) Mortgagee Letters: , HUD Handbook , Chapter 6, Section D1 thru D-4 Weatherization, Solar Energy Systems, and other Financeable Repairs: HUD Handbook , Chapter 2, Section 2.A.5