FHA 203K Streamline. Why FHA 203K Streamline? Through the FHA 203K Streamline program, borrowers can purchase or refinance their home and include the.
Post on 14-Dec-2015
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Why FHA 203K Streamline?Why FHA 203K Streamline?
Through the FHA 203K Streamline program, borrowers can purchase or refinance their home and include the costs to renovate and repair the
home in the same loan.
If you need work done to a home and have no equity available,If you need work done to a home and have no equity available,THIS IS THE PROGRAM FOR YOU!THIS IS THE PROGRAM FOR YOU!
Target MarketsTarget Markets
Borrowers purchasing a home in need of renovationBorrowers purchasing a home in need of renovation- REOs, Foreclosures and Short Sales- Incomplete Renovations
Borrowers refinancing existing homeBorrowers refinancing existing home- Improve instead of move- Out-Dated Kitchens, Bathrooms, etc…
Program HighlightsProgram Highlights
Up to 96.50% LTV For Purchases
97.75% Maximum LTV on Rate & Term Refinances
640 Minimum FICO
Finance up to $35,000 in Renovations Costs
Program HighlightsProgram Highlights
All Work Must be Done by a qualified, and experienced, contractor
Can Not be Used for Structural Improvements or Repairs
Same Underwriting logic as a Standard FHA Loan
ImprovementsImprovements
Improvements are eligible as long as they become aImprovements are eligible as long as they become apermanent part of the property and add value, for instance:permanent part of the property and add value, for instance:
- Roofs, gutters & downspouts- Heating and Air Conditioning- Upgrade/Repair plumbing, septic, well and electrical- Replacement of flooring, windows, doors and siding- Weatherization, painting, basement waterproofing- Purchase and installation of appliances- Elimination of Health and Safety Hazards
ImprovementsImprovements
Luxury Items Are Not EligibleLuxury Items Are Not Eligible
- Swimming pools & Hot Tubs- Tennis Courts- Gazebos- Barbecue Pits- Structural Changes
Determining the ValueDetermining the Value
The LTV is based on the lesser of:
- The Sales Price or “As Is” Appraised Value PLUS the total renovation costs, or
- 110% of the “After Improved” Appraised Value (includes all work done)
PurchasePurchase
Determining Max Loan Determining Max Loan AmountAmount
EXAMPLE: Purchase of a 1-Unit Property with a 96.50% LTV/CLTVEXAMPLE: Purchase of a 1-Unit Property with a 96.50% LTV/CLTV
Purchase and Renovation Costs
Sales Price $ 120,000
Labor/Material $ 24,500
Soft Costs (permits, inspection fees, etc…) $ 2,420
Contingency Reserve (10% of non-soft costs) $ 2,450
Total for Purchase and Renovation $ 149,370
“After Improved” Value (determined by appraiser) $ 160,000
Value to use for LTV calculation must be the lesser of the total cost of renovation or the “as-completed” value.In this example, $149,370 is less than $176,000 (110% of $160,000). Therefore, the value used is $149,370.
Maximum Loan Amount at 96.50% of $149,370 $ 144,142.05
Determining the ValueDetermining the Value
The LTV is based on the lesser of:
- The unpaid principal balance, plus total rehabilitation costs, or
- The “As-Is” value of the property, plus the total rehabilitation costs, or
Rate & Term RefinanceRate & Term Refinance
- 110% of the “After Improved” appraised value.
Determining Max Loan Determining Max Loan AmountAmount
EXAMPLE: Refinance of a 1-Unit Property with a 97.75% LTV/CLTVEXAMPLE: Refinance of a 1-Unit Property with a 97.75% LTV/CLTV
Purchase and Renovation Costs
Unpaid Principal Balance $ 120,000
“As-Is” Appraised Value (determined by appraiser) $ 130,000
Labor/Material $ 24,500
Soft Costs (permits, inspection fees, etc…) $ 2,420
Contingency Reserve (10% of non-soft costs) $ 2,450
Total for Unpaid Principal and Renovation $ 149,370
“After Improved” Value (determined by appraiser) $ 160,000
Value to use for LTV calculation must be the lesser of the Unpaid Principal + Renovation, the “As-Is” Appraised Value + Renovation, or 110% of the “After Improved Appraised Value. In this example, UP+R = $149,370,AIV+R = $159,370 and 110% of AIV = $176,000. Therefore the value used for LTV/CLTV calculation is $149,370.
Maximum Loan Amount at 97.75% of $149,370 $ 146,009.17
Draw ProcessDraw Process
Within 30 days after loan funding, 50% of the funds are disbursed.
Included with the disbursement is an instruction letter that explains how the final disbursement works.
The remainder of the funds is disbursed once ALL work is complete.
Inspections (or Certificates from Municipalities), to verify the work, may be required depending on the number of contractors working on the renovations.
Contingency ReserveContingency Reserve
10% of the cost of renovation must be put into a Contingency Reserve.(15% if utilities are not on, or if property is vacant)
The Contingency Reserve is used to cover health, safety and unplanned issues that arise during the renovation process.
If not used (after all construction is complete) the remaining amount can be applied to the principal or used to make other improvements
(additional approval is required).
GFE DisclosureGFE Disclosure
Fees must be properly disclosed on the GFE
A Supplemental Origination Fee is to be included in Block 1 of the GFE:1.50% of the renovation amount, or $350, whichever is more
(recommend disclosing the max $525).
Inspections and Title Updates:Disclose a minimum of 1 each; Inspection - $110 and Title - $150
Change of Circumstance can be done when bid is received and more thanone inspection is required.
Helpful HintsHelpful Hints
Make sure that ALL parties understand the draws, how they happen and when they happen.
Title must be clear before final payment is made.
The most common cause for a delay in draw is missing a W-9.
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