FHA 203k

• 1. Increasing Your Sales WithFHA 203(k) Streamline Loans Brought to you by:

2. Why FHA?

• Recent surge in FHA loans. Some reasons are:

• • • Tightening of Conventional Underwriting Guidelines

• • • Increased Mortgage Insurance Costs

• • • First Time Home Buyer Programs Scaled Back

3. Typical FHA Borrower

• • • Family member allowed to sign as non-occupying co-borrower!

• • • May be a 1 sttime homebuyer

• • • May have bruised/lack of credit

• • • May have minimal down payment

4. Comparison of FHA andConventional Loans Stringent stand-alone ratios apply for primary borrower when non-occupant co-borrower is applicable No stand-alone ratios apply for primary borrower Stand-Alone Ratios: Ratio calculations more rigid. Ratio calculations more flexible Ratio Calculations: Household income calculations more rigid Household incomecalculations more flexible Income Calculations: Conventional: FHA: 5. FHA/Conventional Comparison continued Often 2-month PITI reserve requirement. Typically NO 2-month PITI reserve requirement. Reserve Requirements: May allow non-occupant co-borrowers but there may be additional qualifying restrictions (e.g. additional ratios for occupant co-borrowers). Allows non-occupant co-borrowers without additional qualifying restrictions. Non-occupantco-borrowers: Typically 5% must be from borrower's own funds unless 20% down. Down payment can be derived from gift.* Gifts: Required down paymenttypically higher than 3.5%. 3.5% down payment requirement Down Payment: Conventional: FHA: 6. FHA Overview Conventional: FHA: Less likely to qualify for Conventional loan than FHA More likely to qualify for FHA loan than conventional loan Bankruptcies & Less-Than-Perfect Credit: Typically more stringent guidelines. Typically more flexible guidelines Guideline flexibility: 7.

• More FHA Advantages:

• • Seller can pay up to 6% of closing costs and prepaids

• • Co-signers allowed, but may add an NOO individual for approval

• • No prepayment penalty

FHA Overview 8.

• More FHA Advantages (cont.):

• • More lenient underwriting

• • Compensating factors

• • Non-traditional credit

• • 7 rental property maximum versus 4 maximum on conventional

FHA Overview 9.

• • Fairfield Mortgage has Direct Endorsement Approval.

• • That means:

We have the highest level of underwriting approval.

• • Quicker Approvals

• • Quicker Closings

10. Standard FHA Terms

• • 30 year fixed

• • 15 year fixed

• • 1 year and 3 year ARMs

• • Owner occupied, primary residences only

• • *Note:203(k)

• • Streamline

• • Program:

• • 30 year fixed only

11. What is anFHA 203(k) Streamline Loan?

• the purchase of a property

• AND the cost of repairs or modernization of the property.

203(k) Streamline is a type of FHA mortgage that includes: 12. 203(k)Streamline: What are the benefits?

• Amount of repair escrow can range from $5,000

to $35,000

• Can finance repairs to update the home.

13. 203(k) Streamline: What are the benefits?

• Property may have deferred maintenance

• Property may be an REO, foreclosure or short sale

14. 203(k) Streamline: What are the benefits?

• Property may have incomplete renovations

• Property may have an outdated kitchen

• or bath

15. 203(k) Streamline: What are the benefits?

• Provides borrowers an affordable, stable financing solution that combines the purchase of a home along with the cost of improvements

& -all in a single loan. = 16. 203(k) Streamline: What are the benefits?

• Any left over funds are applied directly to the loan principal.

• Help borrowers find affordable financing and realize the dream of home ownership

17. What types of improvements are eligible for 203(k) Streamline?

• Kitchenorbathremodel (does not include structural repair)

18. What types ofimprovements are eligible for 203(k) Streamline?

• Flooringrepair/replacement

• Basementwaterproofing

• Repair/replacement ofroof ,guttersordownspouts

19. Eligible improvements (continued)

• Repair/replacement ofpatio ,deck ,porchorterrace

• Repair/replacement/upgrade of existingheating ,ventilationandair conditioningsystem

• Repair/replacement ofplumbingandelectricalsystems

20.

• Handicappedaccessibility improvements

Eligible improvements (continued)

• Purchase and installation ofappliancesincluding free standing ranges, refrigerators, washers and dryers, dishwashers and microwaves

21. Eligible improvements (continued)

• Exterior and interiorpainting

• Lead based paintstabilization or abatement of lead based paint hazards

22. What improvements areNOT eligible for 203(k) Streamline?

• Luxury items:

• swimming pools

• tennis courts

• Gazebos

• barbeque pits

• saunas

• hot tubs, or

• alterations to support commercial use

23. What improvements areNOT eligible for 203(k) Streamline?

• Landscaping

• Major remodeling or room additions

24. Ineligible improvements (continued)

• Improvements to detached structures

(such as garages) 25. Ineligible improvements (continued)

• Any repair or improvement requiring a work schedule longer than 6 months or more than 2 payments per specialized contractor

26. FHA 203(k) StreamlineApplication Process Realtor helpsborrower locate property. Borrower* and realtor determineimprovements basedon need orpreference. Borrower* obtainscontractor bidsand costestimates assoon as possible. *or Cost Consultant hired by borrower 27. FHA 203(k) Streamline Application Process Appraiser determines as-isand improvedvalues. Loan closes.Initial drawmaybe disbursed,@ 50% ofcontract amount. Loan isunderwrittenand approved. 28. FHA 203(k) StreamlineApplication Process Construction MUSTbegin AS SOONAS POSSIBLEAFTER closing, butno later than30 days from closing Work is completed; final inspection by appraiser; final draw disbursed. MUST BE COMPLETEDWITHIN 6 MONTHSOF CLOSING 29. Contractor & Sub-ContractorRequirements

• Must be licensed by state or industry board for each specialized repair or improvement

• Must sign Homeowner/Contractor Agreement and W-9 prior to closing. They will receive a 1099 reflecting amount paid.

• Must provide estimates for supplies and labor. Must agree in writing to complete work for the amount of the cost estimate and within the allotted time frame.

• Must be approved by our DE underwriter.

30. What is the contingency reserve?

• 10% of the cost of the rehab that is held in the repair escrow account. In certain circumstances, this can be 15% or even 20%.

• Can only be used on changes that affect health or safety, or an increase in cost due to a necessary item.

31. Contingency Reserve

• If reserve amount is insufficient, the borrower must place additional monies into the reserve fund.

• If the additional improvements do not meet the guidelines, borrower must pay for them, but not out of the contingency reserve fund.

32. Contingency Reserve

• Upon completion of the project, any remaining contingency reserve funds MUST be applied to the principal balance of the loan.

33. FHA 203(k) StreamlineProgram Summary

• Finance cost of home PLUS repairs/modernization

• Benefits buyer, realtor and lender

34. FHA 203(k) Streamline Program Summary

• Kitchen/bath remodel

• Painting

• Purchase/install appliances

• Repair/replace:

• • gutters

• • porch

• • roof

• • patio

• • heating/ac

• • plumbing

• • electrical

Includes:

• Luxury items

• Landscaping

• Detached structure improvements

• Major remodeling / additions

Excludes: 35. FHA 203(k) Streamline: Questions?