All renovation projects begin with the same question: “How do I pay for my repairs?” Your first stop for long-term market rate financing should be the FHA 203k and the Fannie Mae HomeStyle loan. Both financing vehicles offer special features for both home purchases and refinance transactions. A borrower should compare these programs the same way one would compare carpet to wood floors or single-hung to double-hung windows. Details for both the FHA 203k and the Fannie Mae HomeStyle (some lenders call the HomeStyle product their “conventional renovation loan”) are listed above on the navigation bar, but I thought I would break out a few items that might help you initially address which program might be best for your renovation project.

203k and HomeStyle Renovation Credit Processing

203k and HomeStyle Renovation Property Standards

Remember: A more detailed description for each loan program is listed on the navigation bar above.

The guidelines listed above are generic, so consult your 203k or HomeStyle lender on their specific program parameters. Don’t forget that, in today’s lending environment, more and more lenders are placing overlays on their products. If you believe you fit within the one of these program parameters, don’t give up on your project after one negative lender conversation; make a couple of additional calls to confirm what you have been told.

Remember: I lend nationwide and can be reached by phone at 1-800-689-6001 or e-mail at info@203kkc.com.

Renovation Loans: FHA 203k or Fannie Mae HomeStyle?

Prefab Homes Are Allowable Renovation Projects For FHA 203k loans.

When you are buying a home, you might hear the terms modular homes and manufactured homes, it is critical that you understand how these prefab homes differ. The FHA 203k mortgage program allows for both modular and manufactured homes. The differences can affect a home’s price and its resale value, and even dictate  your financing options.

I receive a lot of calls from prefab home buyers that start with an extended conversation on the specifics of the home in order to arrive at the structure’s true identity. A borrower can purchase an existing prefab home or refinance their current home with a 203k mortgage. Many lenders will not allow a manufactured home with a 203k mortgage, however we do.

What Are Modular Homes?

• Modular homes are built in sections at a factory.
• Modular homes are built to conform to all state, local or regional building codes at their destinations.
• Sections are transported to the building site on truck beds, then joined together by local contractors.
• Local building inspectors check to make sure a modular home’s structure meets requirements and that all finish work is done properly.
• Modular homes are sometimes less expensive per square foot than site built houses.
• A well-built modular home should have the same longevity as its site-built counterpart, increasing in value over time

What Are Manufactured Homes?

• Formerly referred to as mobile homes or trailers, but with many more style options than in the past.
• Manufactured houses are built in a factory.
• They conform to a Federal building code, called the HUD code, rather than to building codes at their destinations.
• Manufactured homes are built on a non-removable steel chassis.
• Sections are transported to the building site on their own wheels and then the wheels are removed. This is often the quickest means to identify a manufactured home: did the home have wheels or no wheels?
• Multi-part manufactured units are joined at their destination.
• Segments are not always placed on a permanent foundation, making them more difficult to re-finance.
• Building inspectors check the work done locally (electric hook up, etc.) but are not required to approve the structure.
• Manufactured housing is generally less expensive than site built and modular homes.
• Manufactured homes sometimes decrease in value over time.

Manufactured Home Criteria

To obtain a FHA 203k mortgage on a manufactured homes a borrower must be ready to supply additional documentation. A few items that will need immediate attention is the length of time on the home site, proof the home was new when delivered to site and no renovation will disturb the homes structural conformity to national manufactured housing codes.

The 203k program allows for renovation on manufactured homes when they meet all of the following requirements:

• Built after June 15, 1976
• On a permanent foundation for over one year, can be renovated, or
• A manufactured home that  not has been on a permanent foundation but has been located on the property for over a year and will be placed on a permanent foundations as part of the 203k process. Additional steps will apply to all homes that are not on a permanent foundation prior to closing, call me to discuss your situation.
• The unit must have been new when delivered to the property with no prior occupancy.
• The renovation must not effect the structural integrity of the home that was designed and constructed in conformance with the Federal Manufactures Construction and Safety Standards.
• Each foundation must meet HUD standards and must be certified by a licensed engineer.
• The unit must be titled as real estate at or prior to closing, this is a biggie on refinance loans, so dig out your paperwork from your original purchase, I see many homes that are still titled as a trailer and a piece of land.

203k Renovations For Manufactured Homes

Use the HUD $100 downpayment to buy your dream home

HUD announced today that effective immediately all offers accepted on HUD Homes after 10/19/2011 and located in one of the following states will qualify for the $100 downpayment sales incentive.  The respective HomeOwnership Center has implemented the incentative for the next 12 months.

Arkansas, Colorado, Iowa, Kansas, Louisiana. Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Utah, Wisconsin and Wyoming

What are HUD Homes?

A HUD Home is the result of a foreclosure on a FHA Home Loan.

When someone with a Federal Housing Administration (FHA) insured mortgage can’t make the payments, the lender forecloses on the home. FHA pays the lender what is owned and then the United States Department of Housing and Urban Development (HUD) takes ownership of the home.

What are the requirements for this incentive?

• HUD Foreclosed Homes Only! This FHA $100 Down Payment incentitive is for the purchase of HUD foreclosure homes.
• Home must be financed with an FHA mortgage which includes the FHA 203k. You cannot use conventional financing.
• This program is for Owner-Occupants only, not for private investors. You have to sign a form at closing stating you are going to live in the property and not use it has an investment such as a rental property.
• You can ask HUD to pay for closing costs up to 3% of purchase price of the HUD Home.
• Allowable only on full price contracts

Please note that the loan amount cannot exceed the full list price of the HUD Home; therefore, a sufficient amount needed to cover upfront MIP must be included in the sales contract or the buyer will have to pay that amount out of pocket at closing.

The $100 downpayment is a nationwide program but is only active in certain states. If you live in a state not noted above please contact your state’s FHA HomeOwnership Centers and inquiry as to their policy for HUD Homes.

HUD Homeownership Centers (HOCs)

Atlanta FHA Resource Center at: (800) CALLFHA (800) 225-5342

HUD Homes $100 Downpayment Is Back!

Politics has to big of a role in the 203k debate

In October 1996, HUD placed a moratorium on 203k loans to private investors after an audit found abuses and risks to the insurance fund. With the recent onslaught of foreclosures, 203k advocates nationwide felt that leaders within the industry would be able to re-engerize the private investor debate and see the guideline restated. However, earlier this week Department of Housing and Urban Development chief  Shaun Donovan said  that  the private investor will not return to the 203k anytime soon.

When the question was asked by the new Mortgage Bankers Association chairwoman Debra Still, CEO of Pulte Mortgage, Donovan responded,  ”I’m open to looking at expanding 203k. I think there are ways to do it safely and avoid some of the changes in the past. The problem is that we would need legislation to do this, and unfortunately, I don’t think it would be something that would move quickly given some of the disagreements we’ve had in Congress.”

Fannie Mae HomeStyle Renovation is the investors choice for rehab

Like the 203k, a HomeStyle Renovation Mortgage provides a convenient way for borrowers to make repairs, or improvements totaling up to 75 percent of the as-completed value of the property with a first mortgage, rather than a second mortgage or home equity line of credit. The funds can be used for any repairs or renovations that are permanently affixed and add value to the property including luxary items such as a new pool. The current condition of the home or the “As-Is” value is not an issue with a HomeStyle mortgage.

Eligible borrowers include individual home buyers, investors, nonprofit organizations, and local government agencies. Yes, you read that correctly private investors are allowed to apply for a HomeStyle mortgage. An investor can use a HomeStyle to purchase or refinance a one-to four family unit. A refinance can be either a rate & term or cash-0ut. Loan-to-values vary with location, FICO scores, the use of subordinate financing and type of structure. A standard single family unit purchased by a private investor will, in most locations require a 80% LTV and a minimum FICO score of 680.

FHA 203k or Fannie Mae HomeStyle?

Both programs have there positives and negatives but only the Fannie Mae HomeStyle allows private investors. With the third quarter figures reflecting a resurgence in foreclosures more investors will be looking for a alternative tools to finance their next acquisitions, the HomeStyle mortgage will be one of those alternatives.

Feel free to call 1-800-689-6001 or email me info@203kkc.com with your questions concerning either the 203k or the HomeStyle.

No FHA 203k Investors Says HUD Secretary

Tailor your renovation project with a Fannie Mae HomeStyle Renovation or FHA 203k

I love the FHA 203k but if you are really looking for a lender that can tailor your renovation loan to meet your needs you need a lender with the Fannie Mae HomeStyle Renovation program and the 203k. HomeStyle Renovation allows for investors, second homes and no mortgage insurance (under certain loan-to-value standards). These three items along with several other small but unique program guidelines opens ups my business to a broader spectrum of potential homebuyers and homeowners that would otherwise not fit the parameters of the 203k loan. 

New Products, New Opportunities

As most of you know I moved over to Wells Fargo Home Mortgage this week. I will miss my colleagues at BNC especially my lending partner Estella Moll who is one of the most conscientious and knowlegable renovation lenders that I have ever had the privilege to work with. However, in today’s market product availability rules. Not only will I add the Fannie Mae HomeStyle Renovation program to my list of products but home equity lines of credit and new construction funding is also available. I am even picking up a few 203k program add-ons like manufactured homes and mixed-use properties.

Mark my word, Energy Efficient Mortgages are here to stay

This coming week the National Energy Retrofit Institute (NERI) located at the University of Central Missouri will be kicking off their marketing campaign to support NERI’s first graduating class. Although the program has been around for years, I truly believe that the Energy Efficient Mortgages is right on the cusp of being one of the most talked about and participated in loan program for the remainder of this decade.  My experience and that of many other lenders, establishes a repetitive story of finding that the cost of the requested energy repairs exceeds the allowable EEM finance cost and borrowers just abandon the process of improving their home’s energy thermal rating. However, that should not be the end of the story but rather successful EEM lenders should take take these loans and roll then from the EEM add-on phase into a renovation product like the the Fannie Mae HomeStyle Renovation and the 203k. I have been putting weatherization packages, heating and air systems, windows and water heaters in my 203k loans for year. It has only been over the past year that I have become more energy conscious and have discussed the benefits of obtaining an energy audit.

Over the next few days I will be creating a HomeStyle Renovation tab on my home page that will explain more about the program as well as layout the basic guidelines and parameters. Until them just pick up the phone and call me: 1-800-689-6001 or email: info@203kkc.com your questions on either program.

Fannie Mae HomeStyle Renovation Loan Has Arrived!

FHA 203k & Fannie Mae HomeStyle can help rescue REO’s