203k Realtor Guide[1]

2009: Year of the Renovation

Renovations: Double Your Volume!

FHA 203(k) Broker/Realtor Guide

•Introduction/How it Works•Contract Specifics•What I Can Do to Help Initiate One•Property Analysis•Eligible Property Types•Allowable Improvements•Understanding the Streamline•How to recognize a perfect opportunity•FAQ

Introduction/How it Works

• 30 year fixed FHA renovation program

• Buyer chooses contractors (no do it yourselfers)

• Seller gets paid agreed price

• Buyer’s loan includes rehab escrow account

• Work begins at closing

• After improved value used to approve loan

• Cost of work accounted for

• Program uses an easy FHA “subject to” appraisal

Contract SpecificsContract Specifics

Should state that buyer has applied for FHA Should state that buyer has applied for FHA 203(k) 203(k)

Buyer to get inspection within 10 daysBuyer to get inspection within 10 days Seller should allow buyer’s team of analysts Seller should allow buyer’s team of analysts

access to the property to summarize work and access to the property to summarize work and cost of work (buyer, contractors, HUD inspector, cost of work (buyer, contractors, HUD inspector, appraiser, etc.)appraiser, etc.)

If buyer is purchasing a HUD REO the contract If buyer is purchasing a HUD REO the contract has additional terminology has additional terminology

Home not quite right? Improve it w/FHA 203(k)!

What can I do to help initiate one?What can I do to help initiate one?

Understand cost/value approach to improvementsUnderstand cost/value approach to improvements Have contractors in your network that do free Have contractors in your network that do free

estimatesestimates Expedite the contractor estimate and help enable Expedite the contractor estimate and help enable

prompt property access (crack that whip!)prompt property access (crack that whip!) Persuade buyer to be prompt in their part (as Persuade buyer to be prompt in their part (as

always)always)

The FHA 203(k) home improvement mortgage: the most sensible way to “dump money into your house”!

Property AnalysisProperty Analysis

Buyer, you and contractor meet at propertyBuyer, you and contractor meet at property Summarize and itemize work and it’s costSummarize and itemize work and it’s cost Analyze feasibility & benefit to buyerAnalyze feasibility & benefit to buyer If viable, proceed with contractIf viable, proceed with contract Inspection should occurInspection should occur Contractor estimate sent to mortgage repContractor estimate sent to mortgage rep May require a HUD consultant to transfer into May require a HUD consultant to transfer into

HUD write upHUD write up Estimate or write up sent to appraiser by Estimate or write up sent to appraiser by

mortgage rep to determine AIVmortgage rep to determine AIV

Eligible Property TypesEligible Property Types

Owner occupied homes only Owner occupied homes only 1 – 4 unit homes1 – 4 unit homes Town HomesTown Homes PUDsPUDs Condos (interior only)Condos (interior only) HUD Foreclosures (special incentives apply)HUD Foreclosures (special incentives apply) Certain mixed use (usage criteria applyCertain mixed use (usage criteria apply))

My team and I use only the country’s premier lender of this type. If the FHA approved buyer is motivated, the seller agrees and allows ready access for property analysis then we can and will get them closed in under 45 days!

Protective Improvements Protective Improvements

Hazard remediation (mold, rot, missing or Hazard remediation (mold, rot, missing or damaged floor boards)damaged floor boards)

Required code upgradesRequired code upgrades Correction of structural deficienciesCorrection of structural deficiencies Fire/smoke detectorsFire/smoke detectors Lead based paintLead based paint

Bring a damaged home up to code! Improve leaks, cracks, remediate mold or other hazards! It’s all easy with the FHA 203(k) renovation loan!

Common ImprovementsCommon Improvements

AdditionsAdditions Flooring, carpeting or tileFlooring, carpeting or tile Complete kitchens including appliancesComplete kitchens including appliances Complete bathrooms including appliancesComplete bathrooms including appliances Roofing, gutters & downspoutsRoofing, gutters & downspouts Basement refinishing or remodelingBasement refinishing or remodeling Plumbing, electrical or HVAC Plumbing, electrical or HVAC Energy-efficient conversions or installationsEnergy-efficient conversions or installations Handicapped or disabled access conversionsHandicapped or disabled access conversions

Aging parent or in-law? Add ramps or widen doorways!

Common ImprovementsCommon Improvements

Structural repairs like foundations or load-bearing wallsStructural repairs like foundations or load-bearing walls Installation or repair of well/septic or hookupsInstallation or repair of well/septic or hookups New decks, porches, patiosNew decks, porches, patios Windows & doorsWindows & doors Interior & exterior paintingInterior & exterior painting Repairing an existing swimming pool (conditions apply)Repairing an existing swimming pool (conditions apply) Anything that improves a property and is part of the Anything that improves a property and is part of the

permanent structurepermanent structure

As you can probably imagine, 203(k) loans are most commonly used for kitchens; particularly flooring, counter tops, appliances and cabinetry. But remember, improvements of nearly any type are allowed!

The Streamline (k)The Streamline (k) Quicker to closing Quicker to closing Limited repair programLimited repair program Contractors receive 2 draws, half at closingContractors receive 2 draws, half at closing No HUD review or analysis neededNo HUD review or analysis needed Repairs under $35,000.00 in costRepairs under $35,000.00 in cost Minor to moderate repairsMinor to moderate repairs No structural repairs or jobs requiring plans, No structural repairs or jobs requiring plans,

specs or exhibitsspecs or exhibits

Aint she purdy? You don’t even want to see the “before” picture!

The Standard 203(k)The Standard 203(k)

Major renovations including structural Major renovations including structural Jobs in excess of $35kJobs in excess of $35k Up to 5 contractor draws occurUp to 5 contractor draws occur HUD consultant needed to review and HUD consultant needed to review and

transfer contractor estimatetransfer contractor estimate

FHA 203(k) home improvement loans are approved by using the same rudimentary, sensible and flexible FHA guidelines used on any FHA loan. Minimum credit score 620. DTI max 50%. (Nominal) PMI exists regardless of value or equity. Appraisals are FHA certified.

FAQ AnswersFAQ Answers

60 day contracts needed for purchases 60 day contracts needed for purchases No do it yourselfers allowedNo do it yourselfers allowed Energy-efficient improvements have extra Energy-efficient improvements have extra

incentives (HERS analysis required)incentives (HERS analysis required) Also perfect for many expired or withdrawn Also perfect for many expired or withdrawn

listingslistings ““Improve the home and re-list it”Improve the home and re-list it”

FHA 203(k) loans can be VERY rewarding! Adding certain improvements can net instant equity!

ConclusionConclusion Market has widespread thirst for 203(k)Market has widespread thirst for 203(k) Recognize one in the makingRecognize one in the making Seize the opportunitySeize the opportunity Gain new accounts, referralsGain new accounts, referrals Strengthen your position in the community and Strengthen your position in the community and

among colleaguesamong colleagues Double your volume by learning the fundamentalsDouble your volume by learning the fundamentals

My team and I are 100% committed to enabling your success! Call us any time with questions of any type!

~ Jamie (603)-965-8241

For more info contact:For more info contact:

Jamie Woods

Senior Loan Officer

FHA 203(k) Home Improvement Loans

Office: (603)-816-0255

Cell: (603)-965-8241

E-Fax: (801)-672-7916

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