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Published by: Jocelyn Javernick Predovich on Nov 27, 2011
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Renovation Lending

:
FHA 203k Loans






Who Are We?















Jocelyn Predovich
President/Licensed Mortgage Banker
Jocelyn@limetreelending.com
303-325-3578 x1
Colorado & NMLS Licensee: LMB100010141,
278104
Universal Lending Corporation NMLS # 2996

Check the license status of your mortgage loan originator at
http://www.dora.state.co.us/real-estate/index.htm

Nicky Hungerford
Licensed Mortgage Banker
Nicky@limetreelending.com
303-325-3578 x7
Colorado & NMLS Licensee: LMB100026831, 278328
Universal Lending Corporation NMLS # 2996

Testimonials

“In my opinion, if you don’t 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 appraiser’s
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 time
required 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
wouldn’t have been possible.”

AFTER



I. Introduction:
What is a FHA 203(k) Loan: allows people to customize their home leveraging the banks money,
rolling in up to the county’s loan amount.
For example: The loan amount for Denver County and surrounding areas is $368,000. A buyer
could 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 in
200k 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
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________


a. Types of 203k Loans and How They Different
FHA 203K Streamline Full FHA 203k
Description Launched in 2005 by HUD to streamline the
paperwork and requirements of the Full FHA
203K program for smaller projects. This is
meant for small projects with no more than 3
specialty contractors.
Launched 30 years ago by HUD to revitalize
neighborhoods. This loan can tackle almost
anything your little heart desires.
Total Renovation Cost
(including repairs,
fees, contingency
account (10-20% of
total bids)).
No minimum
Maximum = $35,000


Minimum = $5,000
Maximum = 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 amount
to cover inspections and title work

Due at Time of Service
$300 - FHA Consultant to provide inspection and
feasibility 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 203k
Draw 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.

Final money available 1-2 weeks after project
completion.

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 for
more than 30 days
Within 30 days of closing and cannot stop for
more than 30 days
Occupancy Must occupy the property within 30 days
(exceptions made up to 60 days).
Can occupy the property anytime, but required to
occupy the property once work is completed
Mortgage Payments Monthly payments start the month following
closing. For example if you close in August,
payments due in October.
Monthly payments start the month following
closing. 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 Other
Loans:___________________________________________________________________________________________________
__________________________________________________________________________________________________________
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.





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 ________.





II. Guidelines
a. Loan Type & Terms: _____________________________________________________________
b. Interest Rates:
Interest rates are at most .25% higher than a regular FHA loan (this would be a difference of
28/mos on a 200k loan)
c. Maximum Loan Amounts: _________________________________________________________
d. Eligible/Ineligible Properties:
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
e. Eligible/Ineligible Repairs:
__________________________________________________________________________________________________________
_________________________________________________________________________________________________________
f. Borrower Qualification
Requirements:_________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
g. Minimum Down Payment Requirements:
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
h. Time Allowed for Project Completion:
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________






III. Process (30 minutes)
a. Prior to Contract
i. When to Discuss this Program Option with Clients:
Send clients to www.renovationloanexperts.org for 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:












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





b. Making an Offer
i. 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 Contract
i. Inspection:
__________________________________________________________________________________________________
__________________________________________________________________________________________________
________________________________________________________________________________________________
ii. Contractors and Gathering bids:
__________________________________________________________________________________________________
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Required Repairs
Necessary Repairs/Remodeling
Ideal Repairs/Remodeling
iii. Bids to Appraiser, Appraisal to
Underwriter____________________________________________________________________________________
__________________________________________________________________________________________________
iv. Final HUD-1 Available to Clients a minimum of 48 hours before closing

d. Closing/After Closing
i. 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 be
mailed 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).







Contractor Requirements
Please provide us with a list of contractors you will be using. It’s 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 are
having difficulties finding contractors, we can help you find qualified contractors who will meet the FHA 203K loan
requirements. 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


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 haven’t 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?


Marketing Made Easy
Done For You Collateral
• Listing Flyers: email us with the MLS data and a picture of the property
• Yard Signs, Sign Riders: how many do you need let us know
• Story Boards for Listings by contractors: contact us for details
• Brochures available for buyers with everything they need to know about FHA
203k Loans: send us your address and we will drop to your office
• 2 ebooks (for buyers): www.renovationloanexperts.org

Educational Videos – Check us Out on YouTube www.youtube.com/limetreelendinggroup
• How to market your listings for 203k using video and QR Codes.
• What is an FHA loan and How Does it work (for buyers)
• 6 Videos on educating buyers on FHA 203k opportunities
• What is an FHA Loan and How is it Calculated
Additional Strategies
• Online
• Facebook, blogs, website
• Social Media Awesomeness:
• Before and After pictures are key
• Home buyer seminar
• Reason to Contact your Investors

• 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




Questions?

Contact Us!

Jocelyn Predovich
jocelyn@limetreelending.com
303-325-3578 x1
Nicky Hungerford
nicky@limetreelending.com
303-325-3578 x7

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