Transcript Understanding Streamline 203(k) Loans

Understanding the
FHA 203K
STREAMLINE
Before
After
Program Highlights
• FHA Renovation Program
• Simplified process!
• Up to $35,000 in repairs with no minimum!
• No consultant required
• No contingency funds required
• Up to 50% of materials can be disbursed after closing
to each contractor in order to defray cost
• Two draws per contractor
• No 10% holdback
Dec 2006
2
Eligible Properties
• 1-4 unit properties
• Town houses
• Condos (interior only)
• Row homes
• HUD Repos (single unit only)
• Purchase and Refi Transactions
Dec 2006
3
Eligible Improvements
• Repair/Replacement/upgrade of :
- roofs, gutters and downspouts
- existing HVAC systems
- plumbing and electrical systems
- flooring
• Minor remodeling, such as kitchens, which does not
involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors,
insulation, weather stripping, etc.
• Septic system and/or well repair or replacement
• Repair/replace/add exterior decks, patios, porches
Dec 2006
4
Other Eligible Improvements
• Purchase and installation of appliances, including freestanding ranges, refrigerators, washers/dryers,
dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of leadbased paint hazards
• Basement finishing and remodeling, which does not
involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall residing
Dec 2006
5
Ineligible Improvements
• Major rehabilitation or major remodeling,
such as the relocation of a load-bearing wall
• New construction (including room
additions)
• Repair of structural damage
• Repairs requiring detailed drawings or
architectural exhibits
• Landscaping or similar site amenity
improvements
Dec 2006
6
Ineligible Improvements
• Any repair or improvement requiring a work
schedule longer than six (6) months
• Rehabilitation activities that require more
than two (2) payments per specialized
contractor
Dec 2006
7
Who Can Do the Work?
• Borrower can select their own contractor
– Should be licensed and insured if required by
municipality
– Should be able to document qualifications
• Borrower can do their own work only if
they can document their qualifications
Dec 2006
8
Getting them Closed
• Borrower collects contractor bids
• Bids are used to order appraisal
• Appraiser will do a “subject-to-completion”
appraisal
• Borrower and contractor sign contract
Dec 2006
9
What Happens After Closing?
• Work begins
• Up to 50% can be paid to each contractor up
front
• Final inspection will be done to ensure
workmanlike completion of work
• Title update will be needed before final
disbursement
Dec 2006
10
Selling the 203(k) Streamline
• Much faster process to get to closing
• Includes appliances and cosmetics
• Less expensive (no contingency funds, no
consultant fee, fewer inspections, etc.)
• Up to 110% of after-improved value
• Overcomes borrower concerns about property
Dec 2006
11
Get the message out to those who
can build your
business with you
•
Realtors
• General Contractors
• Dealers
• Community Groups
Dec 2006
12
Don’t Miss an Opportunity!!!
Americans spend $165
billion annually in home
renovation
20% of the projects are
greater than $5,000
$35 million in eligible
rehabilitation projects
Dec 2006
13
The possibilities
and profitability
for Renovation
Lending are huge!
Dec 2006
14
Informational
Resources
on Section 203(k)
www.hud.gov
Dec 2006
15
Q&A
What is the minimum repair amount?
None
What is the maximum repair amount?
$35,000
Is a contingency reserve fund required?
No
How many draws are allowed per contractor?
2
Dec 2006
16
Q &A
Can funds be released to the contractor prior to work starting?
Yes- up to 50% of material cost
What are Ineligible Improvements?
Major rehab/remodel
New construction
Structural damage
Anything involving architectural drawings/exhibits
What is the 203k Streamline best used for?
Minor repairs
Appliances
Cosmetics
Dec 2006
17
Q&A
What is the time frame for completion of the rehab?
Max. 6 months
Are both Purchase and Refi transactions eligible?
Yes
Is an FHA Consultant needed?
No
Dec 2006
18