Handouts Webinar2

8/3/2019 Handouts Webinar2

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Renovation Lending:

FHA 203k Loans


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Testimonials

In my opinion, if you dont have the 203(k) loan in your arsenal when you are working with home buyers, you are missing the

boat. In one specific situation, my buyers had an appraisal that came in $5000 low on price. We tried to dispute the appraisers

valuation as we did not agree with it, but were unsuccessful. The sellers was unable to come down on price without putting

themselves into a short sale situation. By switching the buyers to a 203(k) loan, not only were we able to revamp the appraisal to a

subject to value, my clients were able to roll in the cost of a kitchen remodel and new hardwood floors into their loan. At the end

of the day, I had extremely happy buyers who thought I was a hero, plus a closed transaction for myself and the other agent. Thanks

Limetree Lending Group!

Oliver Frascona, esq.Limetree Lending Group is the perfect complement to any agent looking to

increase profitability, customer services & education while decreasing unnecessary fees, rates, and the timerequired when dealing with the vase sea of middleman that accompany most transactions. If Limetree Lending

Group says that they can get a loan close they can and on time!

203k Past Clients

BEFORE

Ira and Tegan Denison Ira and I are so

happy with our experience with Limetree

Lending Group and the 203k program!

The process was easy to follow and we

got our dream kitchen many years sooner

than we ever imagined. We live in this

room and without the 203k loan, it

wouldnt have been possible.

AFTER
http://yourdenverresource.com/


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I. Introduction:What is a FHA 203(k) Loan: allows people to customize their home leveraging the banks money,rolling in up to the countys loan amount.

For example: The loan amount for Denver County and surrounding areas is $368,000. A buyercould buy a home for $200,000 and roll in as much as $180,000. (after the 3.5% down of 380,000

they would be just below the loan limit of 368,000). Client could buy a house for 200k and roll in200k in renovation, repairs, etc. Can also be used to refinance!

Biggest Takeaway! NOT ONLY FOR REPAIRS!! Can be used for updates,

remodels

inspection issues can disappear low appraisals can be increased by 10%+ YOUR client could even scrape and rebuild a home YOU Close within 30 days Yes - even structural issues can be tackled Can be used in conjunction with first time home buyer programs such as CHFA, CHAC, HUD $100

Down, etc

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a. Types of 203k Loans and How They DifferentFHA 203K Streamline Full FHA 203k

Description Launched in 2005 by HUD to streamline thepaperwork and requirements of the Full FHA

203K program for smaller projects. This ismeant for small projects with no more than 3

specialty contractors.

Launched 30 years ago by HUD to revitalizeneighborhoods. This loan can tackle almost

anything your little heart desires.

Total Renovation Cost

(including repairs,

fees, contingency

account (10-20% of

total bids)).

No minimumMaximum = $35,000

Minimum = $5,000Maximum = no max

Ineligible Repairs All Full FHA 203k ineligible repairs +structural repairs

Major landscaping and Outdoor Luxury items e.g.pool

General Contractor Not Required Required

FHA Consultant Not Required Required

Additional Fees

(above non FHA 203K

loans)

$500 due at closing (can be covered by seller)

$300 rolled into your loan amountto cover inspections and title work

Due at Time of Service

$300 - FHA Consultant to provide inspection andfeasibility report (do not pay for 2 inspections).

Due at Closing

$500 Underwriting Fee due at closing (can be

covered by seller)

Included in Loan Amount

$1000 for inspections and title work

Supplemental Origination Fee (1.5% of total Bids)

FHA Consultant Fee$500-$1500 (depending on the size of the

project)

Time Required to

Close

30 days 30-45 days

Time Required to

Complete the Project(after closing)

6 months (no extensions) 6 months (30 day extensions allowed up to 12

months)

FHA 203K Streamline Full FHA 203kDraw Process Receive 35-50% of total bids 7-10 days after

closing.Up to 5 draws (including the final draw)

Money available 14-21 days after closing.


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Final money available 1-2 weeks after projectcompletion. 10% of every draw held into final draw. Final

checks cut 2-3 weeks after closing.

Work Must Start Within 30 days of closing and cannot stop formore than 30 days

Within 30 days of closing and cannot stop formore than 30 days

Occupancy Must occupy the property within 30 days(exceptions made up to 60 days).

Can occupy the property anytime, but required tooccupy the property once work is completed

Mortgage Payments Monthly payments start the month followingclosing. For example if you close in August,

payments due in October.

Monthly payments start the month followingclosing. For example if you close in August,

payments due in October.

Can roll up to 6 months of mortgage payments(principal, interest, taxes, insurance) into the loan

amount

b. How is this Loan Different From OtherLoans:___________________________________________________________________________________________________

__________________________________________________________________________________________________________

c. How do the numbers work?Purchase Price: $150,000

Total Bids: $30,000

Contingency (10-15% of bids): $4500

Total Cost of Project: $185,000

Fees: $500

Client Down Payment = 3.5% * 185,000 = $6475

Any money left over once project is completed is removed from the principal balance of the

loan.


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EXAMPLES of HOW ISSUES ARE ELIMINATED with the FHA 203K Loan

ISSUE: I love that house, but the kitchen needs remodeled and I don't have the money.

Solution: Not a problem, you can gather a few bids and roll this cost into your loan - allowing you to

remodel your kitchen with the banks money, after your closing.

ISSUE: I love that house, but FHA financing is not allowed due to condition of property.

Solution: As long as you have access to the FHA 203K loan, there is not a condition that can't be tackled

on any single family or town home. Educate the listing agent.

ISSUE: inspection issues! Seller won't/can't pay. Client would be willing to tackle, but has no

money

Solution: Client rolls the cost of the repairs into the loan. For every $10,000 rolled into the loan, the

monthly payment goes up my only $55/month

ISSUE: Appraisal just came in low

Solution: Flop the loan to a FHA 203K loan, roll in a few bids of things to be updated, and re-

appraise. FHA 203K loans allow for a 10% "fudge factor" on top of the subject to appraised value. This

means your appraisal could come in lower than the cost of the project and the numbers still work!

ISSUE: Appraisal Conditions - house does not meet all FHA health and safety standards.

Solution: No PROBLEM! We call it a FHA 203K, throw in a few bids to fix issues after closing.

ISSUE: Can't sell a listing because of condition, it's outdated, OR people want another bathroom,

bedroom?

Solution: ADVERTISE that the new buyer can use the FHA 203K loan to ________.


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III. Process (30 minutes)a.Prior to Contract

i. When to Discuss this Program Option with Clients:Send clients towww.renovationloanexperts.orgfor 6 videos, 2 ebooks, Frequently

asked questions, etc.

__________________________________________________________________________________________________

__________________________________________________________________________________________________

________________________________________________________________________________________________

ii. FHA 203k Preapproval:__________________________________________________________________________________________________

__________________________________________________________________________________________________

________________________________________________________________________________________________

iii. Closing Fees:__________________________________________________________________________________________________

__________________________________________________________________________________________________

_________________________________________________________________________________________________

iv. Effectively Helping Clients Brainstorm the Scope of the Project:
http://www.renovationloanexperts.org/http://www.renovationloanexperts.org/http://www.renovationloanexperts.org/http://www.renovationloanexperts.org/


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Brainstorming Your Project

Remember the FHA 203K loan is not just for repairs. It can be used to update, customize or just redosomething to your liking. Here are a few possibilities. If something you want to do is not on the list, let usknow:

Purchase and install new appliances Repair/replace flooring Paint interior/ exterior Remodel kitchen, baths Finish/remodel basement Basement waterproofing Repair/install exterior siding Water heater Furnace Sewer Septic System/well repair or replacement Repair/Replace Roof, gutters and downspouts Weatherization: windows, doors, windows, insulation, weather stripping, etc HVAC systems Plumbing Electrical Stabilization or abatement of asbestos or lead based paint Exterior grading Repair/replace deck Transform into handicap accessible Build an addition Build a standalone/attached garage Scrape and rebuild property


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b.Making an Offeri. Contact Loan Officer

ii. What Amount to Offer in the Contract:__________________________________________________________________________________________________

__________________________________________________________________________________________________

________________________________________________________________________________________________

iii. What should the preapproval letter state?:__________________________________________________________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________________________

iv. Dates & Deadlines: 30 days to close from date fully executed contract is received 3 business days prior to closing date = loan conditions deadline 7 days prior to loan conditions deadline is the appraisal deadline 7 days prior to that we must have all bids and be able to order the

appraisal. This should also be your inspection resolution deadline.

c. Under Contracti. Inspection:__________________________________________________________________________________________________

__________________________________________________________________________________________________

________________________________________________________________________________________________

ii. Contractors and Gathering bids:__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

Required Repairs

Necessary Repairs/Remodeling

Ideal Repairs/Remodeling

iii. Bids to Appraiser, Appraisal toUnderwriter____________________________________________________________________________________

__________________________________________________________________________________________________

iv. Final HUD-1 Available to Clients a minimum of 48 hours before closing


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d.Closing/After Closingi. Expectations at Closing:

ii. Draw Process of Money to Vendors Draw process after closing? REMEMBER: work must start in 30 days!FHA 203K Streamline

Allows for 2 draws. Initial draw mailed within 7-10 days after closing for 35%-50% of the total

project costs.

Once project is complete and passed final inspection the final draw will bemailed for 100% of the project and will be made payable to client and

contractor.

Must complete project within 6 months (no extensions).Full FHA 203K

Allows for 5 draws (including the final draw). FHA Consultant will facilitate all draws. Must complete project within 6 months (may have 30 day extensions if not

completed within 6 months).


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Contractor Requirements

Please provide us with a list of contractors you will be using. Its important we have a discussion with your

contractor(s) as they may not be comfortable with the way they are paid per the FHA 203K program. If you arehaving difficulties finding contractors, we can help you find qualified contractors who will meet the FHA 203K loanrequirements. The below information is for the contractor.

We will need to prove that the selected contractor(s) runs an actual business. We do this by:

Verify business name registration with the secretary of state Reference website

Documentation Required

Liability insurance License (there are exceptions to this) References of 2 or more suppliers where contractor may have a credit account or work history Signed waiver of lien Homeowner/contractor agreement per contractor any changes to this must be approved through a

change order request

W9 Permits if no permits are required, please provide a letter of explanation Tax documents may be required to prove that the contractor has filed taxes under a business

Bid Requirements

Overall description of project Only need 1 bid per contractor (do not need 3 bids to compare pricing) Must be broken out into materials and labor Must be a specific dollar amount Make sure bids include: taxes, delivery/installation fees, cost per permit, etc

Examples of bid details needed:

Appliances need make, model and cost Fixtures need brand, model number, and cost Flooring need type, brand, style and cost Counter tops need type, brand, and cost Furnace need make, model and cost

Air Conditioner need make, model and cost


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Top 10 Frequently Asked Questions by Borrowers

1. How long does it take to close?2. Can this be used on foreclosures, short sales, HUD homes?3. What is the eligible work?4. Can I use my own contractor?5. Are there income restrictions with FHA loans?6. Do I have to be a first time home buyer?7. Is there a minimum or maximum I can roll in to my loan?8. Can this be used as a refinance?9. Can I or a family member do the work?10. If this loan is SO GREAT why havent I heard about it?

Frequently Asked Questions by Real Estate Agents

1. What other loans do you offer?2. What about Home Path Renovation Loans?3. Does VA have a 203k loan?4. What extra work do I have on my plate?5. What happens if I need to flip a loan to a 203k loan?6. Can you do with CHFA?7. How does this work with HUD homes?8. How is mortgage insurance calculated?9. What about inspections/appraisals?10.Seller paid closing costs?


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Listings and Open Houses Developing referral sources Going green

Other RESOURCES You Need!

Ongoing content and marketing ideas Technology tips for building a successful business Resources for your buyers and sellers To stay apprised on the critical lending updates To know of upcoming classes for CE credit online loan preapproval for your clients

Bookmark these sites!

www.LimetreeLending.com

www.COMortgageResource.com

www.renovationloanexperts.org

www.facebook.com/limetreelending
http://www.limetreelending.com/http://www.limetreelending.com/http://www.limetreelending.com/http://www.limetreelending.com/http://www.comortgageresource.com/http://www.comortgageresource.com/http://www.renovationloanexperts.org/http://www.renovationloanexperts.org/http://c/Users/Jocelyn/Desktop/backup/STARTING%20FRESH/Business/Limetree%20Lending%20Group/Events/Video%20Marketing/Webinar/www.facebook.com/limetreelendinghttp://c/Users/Jocelyn/Desktop/backup/STARTING%20FRESH/Business/Limetree%20Lending%20Group/Events/Video%20Marketing/Webinar/www.facebook.com/limetreelendinghttp://c/Users/Jocelyn/Desktop/backup/STARTING%20FRESH/Business/Limetree%20Lending%20Group/Events/Video%20Marketing/Webinar/www.facebook.com/limetreelendinghttp://www.renovationloanexperts.org/http://www.comortgageresource.com/http://www.limetreelending.com/http://www.limetreelending.com/


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Questions?

Contact Us!

Jocelyn Predovich

[email protected] x1

Nicky [email protected]

303-325-3578 x7
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

Documents

Handouts Webinar2