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The Costs Involved in Obtaining a 203K Loan

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The Costs Involved in Obtaining a 203K Loan

Every loan has costs; that is how the lender is able to have the funds necessary to process the loans. The 203K loan might seem like it has higher fees because of the extensive work involved, deterring some people from rehabbing their home this way, but the truth is that the fees are virtually the same as any other loan. You are not being charged extra for doing renovations on your home; you are strictly paying fees that are directly related to getting any home loan.

The One Exception

The one exception to the fees that are paid on a 203K loan is those that are paid to the HUD consultant. Because this is not directly tied into the loan, it is a separate agreement that must be drafted to determine what will be paid. This agreement should not only include the money that is to be paid for the services, but also what the services will entail.

Basic Loan Fees

After the loan consultant fee, the remaining fees are fairly basic for what you would pay on any loan including:

  • Appraisal – Every loan needs an appraisal in order for the bank to determine how much money they can lend you. Appraisal fees vary by area but are pretty standard for every appraiser in your area.
  • Inspection – Every home must also be inspected in order to ensure that it is up to code and is safe for you to live in. If it is not inspected, a loan will not be provided.
  • Credit report fee – This is the fee that the lender is charged to pull your credit, which gets passed down to you
  • Loan origination fee – This fee covers all of the costs that are necessary to process your loan on the lenders end
  • Title fees – The title company will need to search the history of your property to ensure that there are not any liens on the property
  • Title Liens – In addition, the consultant may need to perform certain tasks to ensure that you are not hit with mechanic’s liens on your property, which could incur additional fees
  • Underwriting – The bank or lender may charge an additional underwriting fee to evaluate your application and approve it

As you can see, the fees for the 203K loan are similar to a standard loan, with the exception of the loan consultant fee, which is very valuable to you and well worth the money. In the end, getting a 203K loan as opposed to any other type of financing after purchasing your home is much less expensive. The costs that you will be charged are the same as those that you would be charged if you were strictly getting a loan to purchase the home rather than rehab it. If you took a separate loan after the fact, you would pay the same fees over again, costing you almost double the amount on your mortgage just to update your home.

The 203K loan lumps everything into one loan and streamlines the process for you, even providing you the protection you need to ensure that you are not being taken advantage of or that you are not held liable for fees that are the responsibility of the contractor and not you. The costs can be paid by gift money from others or even the seller, if they are so inclined, at a maximum of 3% of the purchase price of the home. The 203K loan offers the FHA benefits with the additional benefit of fixing up a home that you desire to live in.

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Eligibility for the 203K Loan

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Eligibility for the 203K Loan

The FHA 203K loan is the perfect way to purchase a home that needs fixing up. Many people think that they would not need to qualify for such as loan, since they are helping the community by purchasing a rundown home, but the opposite is true. You do have to qualify for the loan, but it the requirements are not as harsh as they would be with a home that was not going through the rehab process. The basics of an FHA loan still exist for this loan and are rather flexible in the end, giving you more opportunities to purchase a home that you can fix up the way you want it to look.

Credit Reporting

Your credit scores will be pulled in order to determine your risk level. Unlike conventional financing, however, emphasis is not put on the score itself. In general, no lender will talk to you if your score is lower than 580, but an overall evaluation of your credit history will take place for every person. They are looking for responsibility when it comes to repaying your loans. If you have a low score, yet have a good 12-month mortgage history, you could be eligible.

Income Reporting

Just like any other loan, the lender will evaluate your income. They usually look at a 2-year history, taking an average of your income over that time period. They will document your income by your most current paystubs that covers a 30-day period as well as the last two years’ worth of your income tax returns. If you are self-employed or on a fluctuating income, your income that is used to qualify for the loan might be lower than you would anticipate, but this is to gauge for those times of the year that your income is lower than others. The lender wants to make sure you are not getting in over your head.

Down Payment and Leftover Funds

The FHA 203K loan is just like any other FHA loan; you need to put 3.5 percent of the purchase price of the home down. The good news is that this money can be gifted from a friend or family member, meaning that essentially, you do not have to put any of your own money down on the home that you are fixing up. If there are funds that are left over after the repairs are complete and the entire process is over, the money can be used to pay down the principal balance of your 203K loan, making it easier to gain back the equity in your home in the long run.

Property Qualifications

In addition to borrower qualifications are property qualifications. You must live in the property that you are taking the loan out on with the exception of a 6 month period where you can live elsewhere if the home is not livable during the process. The home can be a 1-4 unit property or a townhome, but must be at least 1 year old in order to qualify. The amount of the loan cannot exceed the maximum for your area, which differs for every state and county.

The 203K loan is not hard to qualify for as long as you have decent financial history and a stable employment/income history. Less emphasis is placed on your credit and more is on how risky you look now. The loan does take some more work and should be done in conjunction with professionals that have been through the process before simply to ensure that you are not being taken advantage of in the end.

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Role of a FHA 203(K) Consultant

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Role of a FHA 203(K) ConsultantWrapping the remodeling costs of your home into your first mortgage is possible with the FHA 203K loan. This program enables you to have the money necessary to purchase/refinance your home and make the changes you want to make, including structural changes all in one loan. If you want to knock down an entire room and make it something completely different – you can include it! There are very few restrictions as to what the 203K loan offers, but the one restriction is that you use a loan consultant. Many people look at this as a negative to the FHA loan process and opt for other avenues instead, but when you understand what the loan consultant can do for you, your mind might change quickly.

Negotiating the FHA 203(K) Loan Options

Negotiating is a large part of the remodeling process. You have several contractors, vendors, and other people to deal with on a daily basis. People are going to constantly be trying to get more money out of you or get you to agree to certain deals. If you do not have the expertise in building or remodeling a home, you might not know what is acceptable and what is not. This is where the loan consultant can step in and handle it for you. Once you know the changes you want to make for your home, the loan consultant negotiates with the various contractors to get you the best deal financially as well as the most experienced contractors available. An experienced consultant will have seen the good and bad in the industry and knows who you should steer clear of or what signs to look for in a scam. In the end, he has your back while he takes the job of negotiation off of your shoulders.

Create the Feasibility Analysis

The feasibility analysis is a necessary component of the FHA 203K loan. This analysis helps the lender determine the appropriate loan amount for you based not only on your qualifying factors, but on the changes that must be made to the home. The analysis, which is drawn up by the consultant, includes a list of repairs that must be done in order to make the home meet FHA’s code; for example, if there are termites or mold, these things will need to be rectified in order for the loan to go through. The consultant also includes repairs that he thinks are necessary based on his expertise. These are often structural or mechanical issues – such as replacing a faulty furnace or repairing the plumbing. For urgent plumbing emergencies in Portland, you can check this website. The final component of the feasibility analysis is the desired repairs which you discuss with the consultant. These may be structural or cosmetic in nature; they are not limited as they are up to your discretion.

This analysis is then provided to the lender who determines your loan amount. While you and the consultant still need to get contractor estimates for the work that should be done, the lender can use the analysis to determine the amount of money you will have available to you so that you can make adjustments accordingly. The changes that will bring the home up to code are non-negotiable, but beyond that the lender can decide which changes will take next precedence between what the consultant recommends and what you desire.

Helping you Make Decisions

Sometimes falling in love with a home can cloud your judgement. Even if the home is not worth the money or will not provide you with a decent return on your investment after the repairs are made, you might find yourself wanting it no matter what. You can use the loan consultant to give you a non-biased opinion on the home. His expertise in the industry can help you determine how long it will take you to make your money back and if it is a good investment based on your future plans – whether you plan on staying in the home long-term or not. In addition, he can help you decide which repairs are the most beneficial for your home. Even if you have your heart set on building a 3 season room, but the consultant thinks that updating the appliances and plumbing would be a better option, he can show the reasoning behind his choices and then you can decide from there. Basically, what the loan consultant does is prevent you from making spontaneous decisions that force you to have buyer’s remorse in the near future.

Paying for a loan consultant on a FHA 203K loan might seem like just another added expense, but there are many things he can do for you that can save you money in the long run. If nothing else, he can help take some of the burden off of you when it comes time to do the work on your home. The 203K loan requires plenty of paperwork, follow up, and discussions, all of which the consultant can handle for you if you wish.

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Learn About Disbursement of Funds During 203K Rehab Process

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A 203K loan gives you the money you need not only to purchase or refinance a home, but to make significant changes to it. Because you have to have a contractor perform the work, he has to be paid. Understanding how this process works can help you choose the right contractor that understands the nuances of the 203K process so that there is not unnecessary stress during the process, or worse yet, a hold up on the remodeling.

The funds involved in the 203K process are handled by the lender or the loan consultant, if you have one. Whether you have a full 203K or a streamline 203K, you will never have access to the funds yourself. The initial money is paid to the seller or to your previous mortgage company, as would occur during any normal closing. The remaining funds are placed into an escrow account. If you are using a streamline program, the lender handles the disbursement, which there are typically only 2 of during the process. If you are using a full 203K loan program, the loan consultant has access to the funds and determines when they get disbursed to the contractors. The periods that they typically get disbursed are as follows.

Up Front Disbursement

The first disbursement typically applies to both the streamline and the full 203K process. This is the disbursement that takes place at the closing or shortly thereafter. These funds are used to gather the necessary supplies to start the job as well as any necessary permits or other items that the contractors need to begin the job. Generally, the job must start within 30 days of the closing, which means the contractors have to have the time, supplies, and manpower ready to get started. The entire project must be completed within 6 months, so having everything ahead of time is crucial to the timeliness of the process. Before the funds are disbursed, the lender and the contractors must meet an agreement, which is subsequently put into writing so there are no issues down the road. The amount agreed upon is the only amount disbursed at the closing.

Periodic Disbursements

A streamline 203K loan will generally not have any periodic disbursements between the beginning and end of the project as these projects are much less costly and time consuming as they cannot be structural. A full 203K mortgage, however, can have periodic disbursements as long as they are agreed upon before the closing occurs. The contractor can request in writing to have disbursements performed at certain increments throughout the process. The exact process used is up to the lender, however. Some lenders will require inspections at each designated time slot to determine that the work is going according to plan before any funds will be disbursed, while others will simply disburse according to schedule. The draw schedule, as the disbursement agreement is called, will be strictly adhered to; the contractor cannot expect the lender to go in a different direction than the agreed schedule states.

Final Disbursement

The final disbursement is done when the work is completely finished, either on a streamline or regular program. If you have a streamline 203K, two things can happen: if the costs were less than $15,000, you can inspect the work yourself, giving the lender the okay to disburse the final funds if you are satisfied with the work; if the costs were greater than $15,000, the lender will have the final say in the quality of the work done and then determine if the funds should be disbursed. If you have a full 203K loan, an inspection of the work is mandatory. The loan consultant, lender, or professional inspector can go over the work to determine if it is satisfactory. The lender will also need to confirm that all subcontractors have been satisfactorily paid and that there are no mechanics’ liens on the property as a result of an unhappy subcontractor. Once everything is in the free and clear, the lender will disburse the final funds.

It is always best to work with contractors that are familiar with the 203K loan process as it is a lengthy and time sensitive process. If a contractor is expecting to receive all of the money up front, he will be disappointed come closing day and may cause problems with the remodeling of your home. If the contractor is not a timely person either, he could cause issues with the lender as all work needs to be completed within 6 months. Making sure everyone is on the same page during the entire process is crucial to the success of the 203K loan!

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Things you Need Before Choosing a Contractor for FHA 203K Renovation Work

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Things you Need Before Choosing a Contractor for FHA 203K Renovation Work-FHA203KMORTGAGE.COMIf you are looking to get a 203K loan, whether streamline or standard, you need a contractor to the work. The only exception to this rule is if you have the experience yourself to do the job and you can prove it. But you also have to prove that you have the time to complete the work in less than 6 months. If you have a full-time job and the repairs are extensive, this could be hard to prove, which is why most homeowners use a contractor for the job. Before you hire just any 203K contractor, however, you need to know what they need to provide in order for the process to run smoothly.

License

Every contractor needs to provide proof of proper licensing for his profession. Every state and even county within that state will differ in what is required, so make sure that the contractor meets the minimum needs of your area. Hiring a contractor that is licensed works to your advantage anyways as it allows you the peace of mind knowing that the person has sufficient experience in the job he will perform as well as in business management. Since time and organization are crucial to the success of the 203K project, using a licensed contractor makes the process much less stressful.

Insurance

The contractors you use will also need to provide proper proof o insurance. This means liability, workmen’s compensation, and/or property damage insurance. This protects the lender as well as yourself in the end. For example, if a subcontractor were to get hurt on the job, he could come after you as the homeowner for the costs of his medical bills and loss of wages if the proper insurance is not in place. Another example occurs when the contractor makes a mistake during the remodeling process and causes damage to your property. If he does not have insurance, you would be responsible for the damages, which could make it impossible to finish the work, putting the 203K loan at risk. At a minimum, lenders need liability and workmen’s compensation insurance to protect everyone involved.

References

If the work being done on the home is extensive, the lender might want to confirm that the lender can do a satisfactory job by contacting business references. Typically lenders ask for around 3 references. These can be other contractors that have worked with the one you are trying to employ or past customers that have had work done by the contractor that can vouch for his ethics, quality of work, timeliness, and organization. The lender is protecting you and themselves when asking for references, so don’t be offended when you have to ask the contractor for them. Most reputable contractors will have references ready to go – if you come across one that does not have references and does not want to provide them, you should proceed with caution.

Cost Estimates

Everything that is done with the 203K loan needs to be in writing, including the estimates for the work to be done on your home. A verbal agreement with the contractor is not enough as the lender needs to see line by line what the contractor is charging and what he agrees to do to the home. Because you are going to have to supply several estimates, the lender will be able to compare them side-by-side to see who is offering the best deal and what work they are offering to do. Some contractors will try to pull the wool over your eyes and only do a so-so job on the home while charging you full price. The lender and/or loan consultant, if you are using a full 203K will oversee the process so that you do not get taken advantage of during this overwhelming process.

Homeowner/Contractor Agreement

Once the 203K contractor is chosen, an agreement needs to be drawn up and signed by both parties. This agreement will show the work that will be done, the timeframe in which it should be completed, the materials needed to complete the job, and the process for any change orders that may come up. When everything is in writing and submitted to the lender, everyone has to abide by the agreement in order to ensure that the process goes smoothly.

Shopping for a 203K contractor can seem like a lengthy process, but it is worth it in the end. There are many contractors out there that run scams, taking advantage of unsuspecting homeowners. The lenders that offer 203K loans will not allow that to happen to you though, which is why they are so strict with the entire process, requiring the five items above before approving anyone to do the work on your home with a 203K loan.

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Three Reasons “Bad” Credit May Still Qualify you for a 203K Loan

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Three Reasons “Bad” Credit May Still Qualify you for a 203K Loan- FHA203KMORTGAGE.COMGetting a loan today is tough business. Lenders want to see perfect credit, long standing employment histories, and steady income, not to mention a low debt to income ratio and high down payments. In a perfect world, we would all have this, but unfortunately, that does not happen. So how do you get a loan, such as a 203K loan without having perfect credit? There are ways – you just have to know the ins and outs of this popular FHA program.

Several years ago the FHA started a program called the “Back to Work Program.” This new program was put together to help people that suffered a negative impact to their credit due to issues that were not their fault. Because the economy as a whole went down the tubes, many people suffered even though they did not do anything to jeopardize their job. These people were left without their standard income and were forced to file for bankruptcy and some even had to give up their homes. In such cases, people can consult a leading law firm like Karen Ann Ulmer, P.C., who will give guidance and assist these people through the process of filing bankruptcy. P.C.Rather than leaving these people homeless or forcing them to rent, the FHA created the “Back to Work Program.” This program enables people to get a mortgage just 12 months after their negative financial issues, but there are stipulations to this rule. Here are 3 reasons you can get a FHA 203K loan just 12 months later. Here are the firms filing for a bankruptcy cases that you need to have a look at and get help with financial aid.

You Lost 20 Percent of your Income

You have to be able to document that you lost at least 20 percent of your income. This is fairly easy to prove with W-2s from the time period that you lost your job or were downsized. If you cannot provide W-2s, many lenders will accept a verification of employment from your previous employer showing the decrease in income and the reason. The most typical reasons are a company closing or the need to downsize. Maybe you did not lose your job, but you were given a lower paying job just to keep you employed. Regardless of the actual event, you need to prove that your income was decreased by 20 percent and that it lasted for at least 6 months. If you can tie the decreased income into the time period when you suffered bad credit, whether a bankruptcy, foreclosure, or just late payments, you might be able to get a FHA loan sooner than you thought. If you got a lawyer’s help with filing for bankruptcy, a lawyer can help you with the remaining procedures as well. Make sure you get legal guidance in every step.

You Filed for Bankruptcy

If your bills got to be too much and making ends meet was near impossible, bankruptcy was probably your only option and it has become so difficult to find lawyer for bankruptcy cases these days. While it might make you feel guilty or as if you are chained to your bad credit for the next 7 years, there is light at the end of the tunnel. With the acquaintance from the Philladelphia law firm helping clients with bankruptcy, all the bankruptcy issues will be solved before you know it as they handle the client’s problem as their own to fight for the good cause. You can purchase a home that needs fixing up and finance it with a 203K loan just 12 months later as long as you can prove that the BK was a result of the bad turn the economy took; this ties into the need to prove that you had a 20 percent decrease in your income. If the two issues took place simultaneously, then you can typically get a 203K loan just 12 months after the discharge date. It is best to work hard to bring your credit score back up so that you can get a lower rate, but generally, FHA loans are not incredibly expensive, which means even with a BK in your past, you can still get a decent rate.

You Lost your Home

Losing your home is something no one wants to experience, yet thousands of Americans suffered from this issue not too long ago. If the bank had to take your home back, you are not stuck being a renter for the rest of your life. The FHA 203K loan is available just 12 months after the foreclosure if you are able to prove that the foreclosure was out of your hands. If you were not directly responsible for losing your home, which means things like getting fired or mismanaging your money, then you can get some reprieve in order to be a homeowner again. Because the 203K loan enables you to fix up a home with the first mortgage, you can purchase a less expensive home that needs some work in order to save yourself some money as you try to build yourself back up.

The 203K loan is a great way to get back into the swing of things as a homeowner without a huge commitment. Yes, you are taking on a new mortgage, but it is one that will allow you to fix up a home, which means your ability to purchase a less expensive, run down home is greater. You can purchase the cheaper home and fix it up for less than what a home that does not need any fixing up would require. As long as you have the proof that the bad credit you have was no fault of your own, getting a new FHA loan is not impossible.

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The Most Important People Involved in your 203K Loan

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The Most Important People Involved in your 203K Loan-FHA203KMORTGAGE.COMWhen you decide you want a renovation loan so that you can purchase a less expensive home and fix it up the way you want it, you have several choices. The FHA 203K loan provides the most flexibility and ease of the entire process. Even though it might seem like there are a great number of people with a say in what and how you do things, it is a seamless process that goes off without a hitch when you use professionals that are experienced with 203K loans. Following is a list of the most important people you want to make sure you use during the process for a successful outcome.

FHA Lender

The first step is finding a lender experienced with 203K loans. Not every FHA approved lender deals with a large number of the rehab loans, so make sure you ask before you start the process. Just because a lender is approved to offer the loans, does not mean that they have a lot of experience in them. If you find a lender that has only a little experience, it is best to shop around to find one that knows all of the nuances of the process so that you can ensure a seamless process.

FHA Inspector

You need an inspector that is going to inspect the property not only for things that are wrong with it that prevent it from meeting the city or county code, but also things that you may want to change to make them more convenient. According to my friend, who runs a mold removal Maryland company, the inspector will let you know major things like, if you have termite or mold damage or if there is a crack in the foundation. He can also let you know things like the plumbing is rather aged and will need to be replaced soon by an emergency plumber, or the windows are not very energy efficient. These are things you will want to know so that you can ensure that you use your 203K loan funds wisely.

203K Consultant

If you are using a full 203K loan, which means the rehab costs are more than $35,000 or you are making structural changes, then you need a 203K consultant. You should use this professional for his purpose to get the most out of the process. He is your eyes and ears throughout the entire process and he has your back the entire time. If you use him to his full extent, he can do things like negotiate with contractors, help you pick the most reputable contractor, provide opinions on changes you wish to make on the home, and help you decide if certain changes are worth the money. This professional will oversee the funds on your loan, disbursing them as necessary and will also do the legwork to ensure that there are no liens on your property before the contractor receives his final payment.

Contractors

The contractors are a necessary component of your 203K loan as well. Unless you have adequate experience in the type of work you wish to do to the home, you are not able to do it yourself. The lender requires the use of a reputable contractor with the appropriate credentials and experience. It is best to run a few contractors past the lender so that he can help you choose the one best suited for the job based on the charges he provides and the experience he brings to the table. Remember that you are on a time schedule with this type of loan – all work needs to be started within 30 days of the loan closing and finished within 6 months of that date. If you choose a contractor that does not understand the 203K loan process or does not have good references that can attest to his timeliness, you could run into problems, so make sure you choose wisely.

These 4 people are the crux of the 203K loan process. They are the people that can make or break the loan for you, so make sure you do your research and shop around. Don’t just settle for anyone that says they can get the job done for you – make sure they are reputable and experienced in this loan type to ensure the outcome you desire.

203K Loans can Provide you with Quick Equity

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203K Loans can Provide you with Quick Equity- FHA203KMORTGAGE.COMWhen you purchase a home, you do so in the hopes that you will have a great return on your investment. Because the economy and the housing industry are so volatile, you never know what you are going to get. Some areas continue to rise in terms of value, while others are still struggling to get out from the dark hole they fell into during the economic down turn. The good news is that 203K loans can help you get that value back, whether you plan on moving in a few years or you are going to keep the home long-term. In the end, you are left with an incredible return on your investment, making the 203K process a very profitable one.

How 203K Loans Work

203K loans provide you with the ability to renovate a home right after purchasing it. You do not need to secure separate financing – it is all tied into one loan. The best way to do this is to purchase a bank owned property or one that is deeply discounted because of the amount of work that needs to be done to it. You use the 203K loan to purchase the home and the remaining funds that you are eligible to receive are used to fix the home up with both necessary and desired changes. You do not get the funds in your own hands, but the lender holds onto them and pays the contractors as they complete the work on your home.

How you Gain Equity

Some equity might be instant, depending on the value of the home you purchase. If you are making drastic changes to the home, the change in value may be drastic. For example, if you purchase a bank owned property, it is likely deeply devalued because of the work that needs to be done on it. Typically, foreclosed homes are unkempt and even destroyed, depending on who lived there prior to being evicted. When you purchase the home and immediately make improvements to it, the value instantly increases, giving you equity in the home. Even if you do not purchase a bank owned property, but just a home that needs a lot of TLC, the value can increase right away as the work needs to be started within 30 days of the closing and completed within 6 months. That is a short amount of time to see a great increase in your equity.

Not a House Flipping Program

It is important to realize that 203K loans are not meant for flipping houses, though. Because it is an FHA program, you are only eligible for this program if you are purchasing an owner occupied property; it is not eligible on investments. This means that flipping the house for a serious profit is not going to happen – you have to live in the home. Of course, if you sell the home shortly after purchasing it, you may be able to make a decent profit; however, you will not be very likely to be able to get another 203K loan any time soon since it is meant for primary residences only.

A Great Investment

Overall, the 203K loan program is a great investment. It enables you to purchase a home that you would otherwise not be very fond of and make it look just how you desire. If you stay in the home for a few years or many, many years, you are going to be able to make a decent profit on it while living in a home that you love for those years. The 203K loans give you the best of both worlds and helping to ensure that you have a great return on your investment in the end.

5 Things Homeowners do not Know about 203K Loans

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5 Things Homeowners do not Know about 203K Loans- FHA203KMORTGAGE.COM

FHA 203K loans are not as widely recognized as regular FHA loans and it is unfortunate since this great program makes it very easy to afford the changes you want to make to your home. You can choose from the streamline 203K program, which allows changes up to $35,000 that are non-structural or you can opt for the full 203K loan which does not have a flat dollar amount maximum, but rather focuses on the future value of the home after the changes are made; once that value is determined, your maximum loan value becomes 110 percent of that value or however much your individual qualifying factors enable you to receive. Following are five things that you might not know about this great program that may convince you to give it a try.

 Termites are OK

For most loan programs, having termites in a home would be a deal breaker. The home would not pass inspection and the financing would fall through. The opposite is true for 203K loans, however. The inspection can show proof of termites and the financing could still get approved. A contingency in the financing would be that the termites are removed and the damage repaired, however. A part of the process of the 203K program is to bring homes up to code using the funds provided by the loan and pest control – termite infestation is one of those items that could be done. To get rid of pests from your space, the pest control minneapolis can help!

You can Refinance your Existing Home in a 203K Loan

FHA 203K loans are not just for home purchases; you can use them to refinance your existing home as well. They serve as a great alternative to home equity loans because they provide the financing you need to make changes to your home without the need to have a second lien on the property or even to qualify for a second mortgage. Calling in experts when in search for a home loan broker Hobart is what you need to do in order to not lose money and time unnecessarily. Everything is done with one mortgage with the 203K program. The largest difference between this loan and a home equity loan is that the funds are not disbursed to you at the closing; they are kept in an escrow account that the lender holds onto until the disbursement dates arrive that are predetermined at or before the closing.

The FHA Back to Work Program is Allowed in the 203K Program

The FHA Back to Work Program was recently set up to help people that suffered financial destruction during the downturn of the economy purchase a home. Because so many people suffered bankruptcies and foreclosures as a result of losing their jobs, they are unable to purchase homes today without waiting the long periods required by each program. The FHA typical waiting period is 2 years from the date of a BK discharge and 3 years after a foreclosure, but with the Back to Work Program, you can wait just 12 months and purchase a home, including purchasing a home with a 203K loan. All you have to do to qualify is prove that you lost at least 20 percent of your income because of a company closing or downsizing as well as prove that you have since increased your income and made good on your debts moving forward.

No Specific List of Approved Contractors

Because with 203K loans, you have to have contractors do the work, most people assume there is a list of approved contractors they must go through o find someone to do the work on their home. This not true, though. While it is true that you have to have a contractor do the work on your home, there is not a HUD approved list or anything of the sort. You can choose whichever contractor you feel comfortable using as long as they have the credentials to show the lender that they are qualified for the job. These credentials may include proof of licensing, insurance, experience to handle the designated jobs, and proper referrals if the lender requires them. The lender will also need to approve the job estimates that the contractor provides, which must be in writing.

The Funds are not Disbursed at Once

Once you close on your 203K loan, the funds are not immediately disbursed. The only funds that go out are those to the seller if you are purchasing a home or to the previous first mortgage holder if you are refinancing. The remaining funds go into an escrow account. If the chosen contractor has requested a portion of the funds up front in order to purchase supplies and/or permits, those funds will be released as agreed upon in the contract drawn up by the lender and contractor. The remaining funds stay in an escrow account provided by the lender. It is only upon inspection of the completed work that the remaining funds are disbursed. If you have a streamline 203K loan and the costs are under $15,000, you can perform the inspection yourself and let the lender know if funds should be disbursed. If the costs are over $15,000 and/or you have a full 203K loan, you have to have either the lender or a loan consultant perform the inspection before any funds are released.

203K loans offer incredible flexibility in fixing up your existing home or a home you wish to purchase. Most FHA lenders also offer these loans, which means there are plenty of lenders you can compare costs/rates amongst to find the best deal. Because it is an FHA loan, the program is typically easy to qualify for and can provide you with the amazing results you desire in your home.

Simple Ways to Use the 203K Streamlined Loan

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Simple Ways to Use the 203K Streamlined Loan

You found a house you want, it is in good condition, yet there are just some things that are not jiving with you. This is the perfect example of a great home for a 203K loan. The streamlined loan does not require nearly as much work as the standard 203K and it allows you the opportunity to change those little things that you do not like!

What is the 203K Streamlined Loan?

The 203K Streamlined loan is a simpler version of the standard 203K. The stipulations are a little different, namely how much you are able to borrow. The standard 203K allows you to borrow as much as 110% of the projected value of the home, which is the value after the work is completed. The streamlined version is maximized at $35,000 in repairs, which if you are making minor repairs, is more than enough! Another major difference with the streamlined version is the lack of a need for a loan consultant, which you can decide if you want or not. This professional is required in the standard version because of the major work that is completed, but with the streamlined version it is not a necessity because there are not architects, engineers, and structural changes involved in the plans.

Ideas for a Streamline 203K

There are many ways that you can use this version of the FHA loan. It is mostly used for cosmetic changes. For example, if you love the layout of a home and it does not need any rehab work, yet the paint colors make you cringe, you can use this loan to have the entire home repainted – either inside, outside or both! Other ideas include changing out the flooring, new appliances in the kitchen, lighting changes, adding a porch or deck, finishing a basement (non-structural changes) or changing the windows.

Each of these ideas will make the house exactly what you want and not require you to have two separate loans or come up with large amounts of cash. As you can see, the changes do not need to be major, but can still qualify you for these great FHA loan.

This opens up many opportunities for home buyers that would otherwise walk into a home and hate one thing about it, forcing them to pass on the home because they cannot afford to make the desired changes with money out of their pocket at the moment. With the streamlined 203K, you are able to roll the cost of the repairs into the loan, allowing you to pay it off over the life of the loan, which is typically 30 years. With low interest rates and minimal closing costs, this turns out to be the most effective way to rehab a home, making it exactly what you desire.

No Structural Work

The largest caveat with this loan is that no structural work can be completed. This means no tearing down walls, fixing damage that affected a structure, room additions, or having any type of work done that requires an architecture or engineer. The work should be simple in nature and simply enhance the cosmetic appearance of the home.

If you are shopping for a home, don’t forget about the 203K streamline process. It is a great way to make changes to a home that you would otherwise love if these minor cosmetic issues were changed. It is amazing how much a coat of paint, a new floor, or new lighting can change the entire appearance of a home, and if you’re looking for a professional in painting, commercial painting Manchester is the best choice for you. Try to overlook the minor things and think of the big picture – if the layout and structure is suitable to you, the rest can be changed with the streamlined 203K loan.

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