When You Find The "Almost" Perfect House, But Want To Make It Home.

Great post Jason, Realtors out there need to know about this product indeed!  We are the resident experts for our bank and the local experts on this program and have been doing realtor seminars/trainings at title companies and realtor offices in our area trying to get the word out and get agents as excited as we are about the program!  We have gotten very busy over the last month or so as agents are finally figuring out what a great loan this is!   We are the lender that hosted the combo open house & 203K Rehab seminar with Stephanie Edwards-Musa (comment above) and she pointed us toward the blogs here on Active Rain.  We have never posted here before but felt compelled to do so on this program (and hope we are not breaking any type of rules in the process.)

TWO DIFFERENT TYPES OF THE FHA 203k:  One thing I would like to point out because it is very confusing to agents in our area right now is that there are actually TWO 203K product versions available and they are very different!   There is the FULL 203K loan which has been around for many, many years (since 1938 I believe), and then there is the newer 203K Streamline version  - which was created to try and streamline the process and make it easier for clients and lenders.  SOME of the lenders out there who say they do the 203K loan, only do the Streamline version and do not even know about the FULL 203K and they do not do it well (kind of giving the program a bad taste in some mouths).  So, we get into the problem of lenders who don't know the difference telling clients and agents that certain things can not be done with the program when in fact, the FULL 203K allows much more than the Streamline version and has completely different guidelines for how the program is run.

Jason, it sounds to us like you are talking about the FULL 203K here which, if we had our druthers, would be the ONLY version available!  As mentioned it has been around for many, many years and has had it's really popular times but over the past several years has almost become extinct because with all the crazy loans lenders were doing, it wasn't really necessary.  Now, as many readers have stated, with all of the HUD foreclosures and REOs out there, it has come back full force and thank God for that!  As previously mentioned also, this is the PERFECT loan to help revitalize our communities and improve market values!!!! I know we need it here in Texas and I would venture many other areas need that as well.

THE DIFFERENCES BETWEEN THE TWO:  I mentioned that if we had our druthers, the FULL 203K loan would be the only version and I want to state a couple reasons why and see if you agree.  The FULL version allows for FOUNDATION REPAIR! And with all the HUD homes and REOs sitting out there here in Texas, we are finding that most of them do need foundation repair!  (The Streamline version does not - matter of fact, the FULL 203K is the ONLY financing available that will finance a home with foundation issues!) 

The FULL version is much better/easier/safer for the client because a consultant is used with the program.  Our consultant has been doing these for 22+ years and he is fantastic - A good experienced consultant is key to this program.  He does the inspections in the beginning and during the construction, he writes up all the HUD paperwork that is required, he supplies the client with a list of repairs and any upgrades or renovations they would like to do with a good estimate of the cost and gives them a blank list for them to give to contractors for bids, he inspects and does the draws and lien waivers as work is completed and he also does the final inspection and release of funds.  A good consultant is an advocate for the client and will be with them from start to finish making sure the work is being done in a timely and professional manner (the Streamline version does not require a consultant or a general contractor so you can imagine the issues with clients trying to figure out the bidding process and keeping an eye on the contractors - it doesn't work well!!)

The FULL version has a minimum of $5,000 in repairs and no max (of course the client has to qualify for the amount of the loan plus construction costs and the house will have to appraise - but in all our experience we have not had one issue with appraised value since it is done "as completed!").  The Streamline has no minimum but it has a maximum of $35,000 and is more limiting in what it allows.  FULL allows for up to 5 draws - Streamline only 2. 

DETAILS:  Buyer must plan to Occupy the home (no investors), FHA loan limits apply, min. 3.5% down payment, seller can assist up to 6% of sales price (3% on a HUD home), min credit score of 620 and we like to see at least a couple months worth of reserves, no self help projects - must use a general contractor.  When closing takes place, the seller and agent walk away with their money and construction begins.  The agent pretty much does exactly what they do on any other type of financing transaction - they find the client and the house, close and get paid, the lender, consultant and client does the rest.  I will say that typically closing takes 45-55 days from date of executed contract to closing table and this is generally due to the client taking their time deciding on what they want to do to the house and which contractor they choose - a good lender will have an approved contractor list and supply the client with a few names and help them move the process along!

Forgive us for the long post but we absolutely love this program and like Jason, we want everyone to know about it!  Be sure to do your homework when finding a lender who does the program (preferrably a bank that handles the file inhouse through completion) and make sure they work with a really good consultant!!

Have you ever had a client walk into a home and say "This is THE PERFECT house, I wouldn't change a thing!"  Probably not, there is always something and this is the program for buyer's agents and listing agents alike!

Jaon, you are clearly way ahead of most lenders out there pushing the 203k. Glad to make your aquaintance. It should also be noted that the FHA Maximum Mortgage limits have increased dramatically and are no longer considered "low income" buyers. Most any buyer may find it to their advantage to use the 203k on their next purchase.

There is still some confusion about the streamline 203k with regards to using a consultant. If a streamline is over $15,000 it requires a "plan reviewer" which is also known as a "consultant" and they can provide the draw inpections.You are doing a fantastic job promoting the "k"