HUD FHA 203k Investor program
This blog post will tell you about investor programs that include renovation money.
What are the basic investor programs
This is a program that lets investors "flip" properties, the same thing that FHA was condemning just a short time ago... like yesterday. Wow, I've received lots of calls and emails asking me what I thought of it.
- it hasn't happened yet
- when it does be ready for more work
- we already have an investor program for those investors who are savvy and know how to use OPM (Other Peoples Money).
I thought that more people should have been sent to jail in the 1990's when they investors ruined a great program by committing fraud but we see fraud all around us and many times by the very people who were supposed to be the lawmakers. I watched a couple of investors in the 1990's who were literally making the market go up by selling property to each other at inflated prices to create "comps". I had been hired to do an appraisal once when I caught it. When I turned my report in and reported what I saw in that market the lender just stopped using me and chose to use another appraiser who could be fooled more easily.
In any case getting the investor program back along with some legal flipping, should help the economy. We have been pushing to get them back for over five years so I'm glad to see someone in the government has finally agreed with the consultants around the country to get this going. If the "escrow commitment procedure" comes with it we will really have a great thing going.
The escrow commitment procedure was where the investor could actually put a loan in place for 96.5% of the "after improved" value when the purchase the home.
Example: Purchase price - $250,000, renovation cost - $150,000 but say it is worth $550,000 once the work is complete. The ECP would allow the investor to put a loan in place for $550,000 less 3.5% down. This is an FHA guaranteed loan and, as you should already know, all FHA loans are assumable so it is no stretch for the buyer to assume this loan once they qualify for the loan and put their 3.5% down payment in place.
The sweet thing is that there is no new appraisal, and the buyer merely waits for the construction to be completed then moves in. The loan assumption can happen when the work is being completed and closed upon proof of that completion. Investors using this program would actually start marketing the property during the construction phase to limit their carrying costs during the course of construction.
Important renovation loan for investors available right now
We already have an investor loan program with the FannieMae HomeStyle loan program. Investors can purchase a property with a minimum down payment, fix it up and either sell it or keep it.
What do I think about the FHA investor program? I'll believe it is back when I see it, they have been telling us it would happen for so long now and it is like crying WOLF. It is time they did it as it will stimulate the economy. If you cater to investors, you should be telling them about the program. If you want to hold some investor education seminars we are happy to work with you in that regard.