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203K Rehab Loan Program .... How does it work?

I NEED HELP!

While working with my qualified buyer and pulling up available homes located in the Oakland, CA area and in his price range ~ we ran up on a home that my buyer is interested in! YEAH! Not a problem. The description of the home stated that it is 203K Program qualified.

So not knowing what this program is about, I began to look it up so that I would know what it is and how would my buyer go about getting qualified under this program.

I checked with some of my resources and all roads pointed to these groups where the experts are.......

To the experts: What is 203K Program, how does it work, who qualifies for it and what are the restictions. Oh how how long (estimated) does it take to get it approved. Does the repairs have to be done before or can they be done after close of escrow and how does that all work.

Meanwhile my buyer had his sights on another property that is a REO, in somewhat bad shape since the roof is leaking and we're not sure what other moisture damage is going on with the property. But the property has great potential and he wants to see if the 203K Program will work with that property although it is not mentioned in the description. Who does it work, is it with any property that need rehab? Or is there something else we need to do to find out if the property would even qualify?

I would appreciate as much information on this program as I can get, so I will know how to handle my buyer with these type of properties and for future use.

**********

Thought I would update this post to add in what I have found out about 203K Program. Since this was my first encounter with this program... I didn't know all the in and out of the program:

Here's a small checklist:

All work must be done by licensed contractors (not the homeowner).
The buyer is responsible for getting the general contractor lined up.
The repairs need to estimated not completed before the loan closes. The repairs are done after close of escrow- so there are no delays in the closing.
Repairs are for anything but luxury items (no pools--spas, etc). The FHA will focus on Health and Safety repairs and Termites which will need to be done first.
Funds are dispersed as repairs are completed. Monitored by FHA Consultant
PITI payments can be part of the loan if the property is uninhabitable until repairs are completed.
The is no class for the buyer on this program but a loan officer can educate buyer of the steps. May take about 1 hour to go over the rehab program and the credit approval flow
The pre-qualification for formal credit takes about 48 hours unless Underwriting gets back up (ya, that will happen in today's market). Credit requirements - 600+ FICO score
This is a full doc loan:
Things needed from borrower:

2 months bank statements (all pages)
1 months pays stubs
source of funds information or documentation proving it
2 years w2'w (1040"s if self employed or commissioned)
$18 for the tri merg credit report

HAPPY and SAFE HOLIDAY SEASON to you and your family & Friends!

the Mother and Daughter Real Estate Team ~ Short Sale Specialists

Perfect Financial Solutions - We care about our clients Real Estate needs
Tel.: 866-750-8282
Fax: 209-879-4601
http://www.motheranddaughterrealty.com

Rosemary Brooks

Patrick Williams & Associates

the Mother and Daughter Realty Team

PH: 866-543-0461

FAX: 866-815-1649

EMAIL: info@motheranddaughterrealtyteam.net

WEBSITE: www.motheranddaughterrealtyteam.com

the Mother

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Posted by Rosemary Brooks -Mother & Daughter (866)-543-0461 on 01/03/2008 02:41 PM

Comments (41)

reo, buyer, rosemary brooks, perfect financial solutions

Originally posted at: Mother & Daughter Blog: 203K Rehab Loan Program .... How does it work?

This post has been included in California Information San Joaquin County, CA Information
Post is included in group: REO
Post is included in group: The FHA Connection
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41 Comments on 203K Rehab Loan Program .... How does it work?

JAN

2008

GO TO THE FHA SITE AND YOU'LL LEARN ABOUT THE PROGRAM. YOU NEED ESTIMATES FOR THE WORK THAT NEEDS TO BE DONE, THAN THAT MONEY IS ESCROWED. REPAIRS HAVE TO BE COMPLETED IN A CERTAIN TIME. DEBRA

JAN

2008

Debra ~ thank you, I did and there was some information there and then I did a search and found out a little more. Then I was pointed towards an expert and he gave me great information.

JAN

2008

Wow in REO and you do not know how a 203k works. The product has been out there forever, how long have you been in business?

E Jeffrey ~ thanks for the question. I am NOT in REOs. I have sold any REOs and I have no listed any either. This 203K is a old loan program and from what I hear is not used that much at least in my area. I had heard of it but I have never worked one and just wanted to make sure I get the information and resources so that I can tell my client as much about it as I can find out.

I don't do loans and have never had the experience of doing a 203K or been asked about it. Haven't read the book "203K for Dummies" and everything has a first time, well this is mine. I do not claim to know it all and I do not mine asking. Do you have any suggestions of where I can find out information on the subject?

I have since I posted this found out a great deal and have also found a FHA consultant that is helping my client get qualified. I did this post in an effort to educate myself as well as some others that might need to know this information. Isn't that what the Rain is about?

I have been in the business for 5 years. Thanks for your comment.

Wow Rosemary -

You did some great gathering of information here!

E Jeffrey - that was a little harsh wasn't it? Rosemary works in a little place we like to call JumboLand - You might know it as California. FHA was and still is not able to do much for many of our households here. $362,790 doesn't buy much here. That might all change soon but for now - even people who have been around a while (like myself) haven't used FHA much.

Mike, thanks for the defense. I would only add that I work hard in this little jumboland. I do not assume to ever know it all. That is why I turn to people like you that if you don't know you will help me by researching and sharing. I appreciate you and others that have helped me along the way and I hope it will continue. Speaking of the $362,790 I hear we are going to get a lift to $417,000 soon. Yeah!

E Jeffrey I still love ya! I've been called a dummy once or twice, but then I've been called smart and helpful in other cases so its pretty even, I think.

JAN

2008

i guess i forgot california pricing, sorry, my bad, thanks for calling me on it Mike!

E Jeffrey ~ your question (harsh as it was) reminded me to add the update of what I had found out about the 203K so that I could possibly help someone else that is looking to purchase REOs or someone (in California) that maybe new to 203K rehab program and could use the information to possibly use or help a client. So in a weird sort of way, I appreciate the "push". I hope that the information will be valuable to someone.

Happy day.

JAN

2008

Rosemary, do a search on NAMP-National Association of Mortgage Processors. I received an informational e-mail today discussing this topic.

JAN

2008

Jacqueline ~ Thank you very much! I will check it out.

JAN

2008

I've been looking at several Rehab products for one of my clients. Scott McKay made a blog post on this issue the other day. I've also got an alternate program that may work. I'll send info as soon as I have it.

Kate ~ thank you. I think we will using these other options a lot more in 2008 than in the past years. I would appreciate any update on alternate programs.

JAN

2008

the streamline k is a lot easier to deal with when possible.

Jay ~ thank you. I check it out on www.hud.gov and it sounds like something one of my clients can use. The repairs needed are not major enough for the 203K program. Thanks a bunch. I will update my post to include the link to the Streamline K program.

JAN

2008

Rosemary,

you may be able to get more detailed info at www.hmbireo.com ; I don't think that this contractor is in your area, but there is a link to the 203k for ya!

Michele ~ thanks for the link. I found quiet a bit of information on the hud site. I will check this one out too. My buyer is excited at the possibility.

MAR

2008

I got a question. I'm going through my paperwork right now with a lender to include the 203k but it is set up on my form as a settlement amount which boost my closing. Is this correct. I thought that a 203k is a loan according to my lender so shouldn't it fall under the buyer section for loan(s) under the second section instead of the settlement portion?

Diana

Any help on this greatly appreciated. What puzzle me is that before I ask to get the 203k for 10g, my closing was only 4863 now there telling me that its 12g. that is a big boost.

MAR

2008

Diana - check with a title person on that. They will be able to explain it more clearly than me. In fact, I probably cannot explain it. Or go to the FHA group and ask one of the experts there. Sorry this is something that I am getting into so I don't want to guess for you. I hope my suggestions are in time. The FHA loan officer should really know how they put it on the HUD and how it affects the borrower.

Please up me or this post with your findings. Good luck.

MAR

2008

I am hearing from several 203k consultants in CA that say the 203k has returned now that the sub-prime market has dried up. FHA has stepped up to fill the void. With home values in CA dropping substantially and more REOs coming on the market we find that the homes being sold that need a little repair are prevelant. If you go to https://entp.hud.gov/idapp/html/f17cnsltdata.cfm then input just your state... you will get a list of all consultants in your state then go down the list to find one close to you. If you input the city you may restrict yourself too much and miss a potentially good consultant. The streamliine 203k doesn't require a consultant but the work should be simple, at least not complicated, most lenders would like the services of a consultant to view the work upon completion. The 203k program started in 1961 and when HUD realized it was being underutilized they created consultants to help the public access this great program (late 1994) and it has been going much stronger since then.

MAR

2008

hi, my name is Felipe im a financial planner. I just wanted to share some financial concepts with you. let me know if you'd be interested in chatting!

APR

2008

Does anyone know whom does the FHA 203k Loans on the Wholesale side of things, I am having problems finding a lender.

-Bryan

APR

2008

These wholesale lenders will underwrite and fund the 203(k) and 203(k) Streamline:

Freedom Mortgage, www.freedomwholesale.com

Bankers Capital, www.bankercap.com

PMAC, www.pmac.com

Freedom is licensed nationwide; I'm not sure about the other two.

Bankers Capital was supposed to be BROKER CAPITAL! www.brokercap.com

Sorry about that...

I am pretty well versed on these renovation loans. I'm not a lender, rather a "facilitator"; I help borrowers and loan officers/processors gather the bids and create the supporting documentation for the loan file.

The standard 203(k) loan can be arduous. It requires a "K" consultant, of which there are few. If one checks the HUD website for consultants in one's area, one may find most phone numbers disconnected. Consultants may be coming back with the re-emergence (in California) of the FHA products but, the truth is, a consultant can't make a living at it.

Which brings me to the 203(k) Streamline. The Streamline "K" allows a borrower to add up to $35,000 to the loan for cosmetic improvements. A general contractor is not required, nor is a "K" consultant. Nothing structural, nor any improvement that requires blue prints or architectural drawings, is allowed; it's strictly cosmetic, e.g. paint, carpets, kitchen and bath cabinets and fixtures, roofs, etc.

It is presumed that the borrower can occupy the property, so PITI cannot be financed.

There's more, obviously, but you get the picture.

My company "facilitates" the Streamline "K", as well as the FHA Energy Efficient Mortgage. If you have any questions about either, please feel welcome to contact me.

Tom

I guess you can tell I'm new to Active Rain. I offered assistance then didn't leave my contact info.

I'm still learning...

Tom@eemhelp.com

APR

2008

Rosemary,

If you are on LinkedIn, look up a lady by the name of Lindy Pond. As far as 203(k) is concerned, she is *the* expert. She was the 203(k) guru at American Home Mortgage and before that she was with Columbia National before AHM bought them. From what I understand, she was responsible, either directly or indirectly, for training -- at one time or another -- hundreds of loan officers to do 203(k) loans. If you can find any former AHM employees there in CA who were certified to do 203(k)'s such a person would be a good one to have in your rolodex as the 203(k) training was comprehensive. I was getting ready to take the certification test there myself, but alas, good ole AHM fell victim to the liquidity crisis before I could do so.

Best of luck!

Juan Boldizsar

MAY

2008

I am learning about the 203(k) streamline loan as well to use in the Metro Atlanta area. We have so many foreclosures that just need minor repairs - carpet, paint, appliances, etc. It seems that this program is perfect for this but I am gathering information. Are the consultants necessary for the streamline program and what is their function?

This is probably an easy process once you understand the details.

JUN

2008

as the total offer? If so, then I presume I would have to have a contractor view the property I currently have a client who wishes to utilze this lending program. This is my first experience and I have much to learn and this blog has been extremely informative (my client found it)....I did have one question which didn't find answered, or missed it. When a buyer wants to do a Nehemiah loan plus the 201K.....do I include the cost of the FHA program for the Nehemiah and the estimate for repairs prior to making the offer? Any assistance is appreciated. Thanks

Marilyn, Your offer is for the amount of money your buyer wishes to pay for the property, with proper provision for closing cost concessions and Nehemiah money. I would suppose that for your mortgage congingency you would use a figure that reflects 97% of the purchase price plus cost of repairs.

I would suggest that you get your buyer in touch with a 203(k)-qualified loan officer and work things out before you submit the offer.

MAR

I was under the impression Nehemiah was no longer available or no longer available for FHA? Are you still able to use that avenue? Thank you.

as of 6/23/08 when I posted my comment, they still were. as we all know, they're not anymore.

There is another renovation program - HomePath Renovation. Have your heard anything about this one? Fannie Mae is backing this program. See HomePath.com

I thought I heard something on Wells Fargo Home Mortgage and a renovation loan, but I have not been able to find anything on that one yet.

I haven't heard of homepath is it new or could it be the FannieMae Home Style Loan? Wells has had their own in-house rehab program for some time but I don't know if they are shying away from it at this time or not. Maybe someone has some input on that one.

Here is the site address and it is HomePath -- http://reosearch.fanniemae.com/reosearch/

HomePath^® Renovation Mortgage Financing

OK time to post on this one!

Homepath appears to be Fannie financing for Fannie owned homes (REO's). The link for HomePath Renovation lists only three lenders participating.

I spoke to my rep at Freedom Wholesale and they no longer fund the Fannie HomeStyle revovation loan. He said he thinks Flagstar still is.

Anyone approved with Flagstar could confirm that and respond here.

Thanks,

Tom

MAR

Keep in mind if your client is very close to qualifiying but the ratios are just a little off... add into the 203k the EEM (Energy Efficient Mortgage) features and they may very well come back into line. On a streamline you can count up to $2000 and on a full 203k consultation up to $8000 for energy related items. M

MAR

For an FHA Streamline refinance (without an appraisal), the borrower can add up to $4,000 to the loan. The proposed P&I may exceed the existing P&I as long as the net present value of the energy savings exceeds the increase to the P&I.

Tom Caruthers

Federal Energy Services, Inc.

Tom, you are always on the cutting edge. I wasn't aware of that. I was looking farther up the list here and Rosemary I believe is in a "high cost" area on the HUD mortgage limits so she can do jumbo 203ks up to $729,750 and over $1.4MM on 4-plexes.

That may be true but I suggest anyone considering a jumbo 203(k/ks) confirm that their lender is underwriting/funding these. Some lenders have put caps on the loan amounts for renovation loans. Make sure you can get the loan before you go into contract.

JUN

earlier in this blog someone asked about any wholesale lenders for the 203k. I have several listed on my website that most are aware of but there is a new guy on the block. He asked me to hold off for a week or two before opening it up as they got real busy when they first announced opening and are in the process of ramping this up dramatically. They have a winnder. I will tell you this... they are experienced in the 203k have run one of the largest 203k departments in the land and only wholesale loans, and only the 203k... they will be a factor. I recommend that all of you who use a wholesale lender get approved by them and at least be on their mailing list. It has been a week so in another week. We'll post it.

JUL

WE ARE EXPEIENCED 203K LOAN CONTRACTORS. WE PROVIDE A HONEST AND RELIABLE SERVICE IN THE ATLANTA GEORGIA AREA. WE PROVIDE A COMPLETE PROFESSIONAL SERVICE FROM A-Z. CALL TO SCHEDULE YOUR FREE ESTIMATE (678-886-7878)

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