Wednesday, November 20, 2013

FHA 203K Mortgage Process

FHA 203K Mortgage Process

Before I get into the seven steps you need to know, there are two types of FHA 203K mortgages to choose from. The type that suits your needs best will depend on the type of improvements the home you’ve selected needs. The FHA 203K Traditional can be used for major improvements; moving load bearing walls; repairs crack foundations and much more, usually they involve expenditures over $35,000.  The FHA 203K Streamline is for cosmetic repairs and great for things like updating kitchen appliances, installing some energy efficient improvements, carpet replacing and  things you‘d like to see repaired or replace to make the your home purchase a dream home to enjoy for years to come.  The FHA 203K Streamline is for home repairs under $35000, have less paperwork and designed for home improvement that take 30 days or less to complete.  That pretty much let you know the difference, so let get moving on your Seven Steps Program to home ownership!
Step 1: 
Having a pre-approved loan will: 
• Ensures you know the price range  you can afford to not only purchase but renovate your home and you’re comfortable with the monthly payment, down payment and costs to close.
• Helps you understand the more the financing process and roles of your real estate agent and general contractor need to play in your path to home ownership.
• Puts you at the top of the list when your real estate agent presents your offer.
• Expedite your closing process and close on schedule.
Step 2: 
Searching for a Property and Begin Interviewing Real Estate Agents and General Contractors 
I’ve included some valuable primary links for you to begin your home shopping at “247 Realty Service”.  Once you’ve found the right professional give your real estate agent a copy of your pre-approval, so you can seriously begin your home shopping and have your general contractor contact your loan officer to insure they meet your lender general contractor requirements.
While you’re home shopping take some time to include a visit to businesses like Home Depot and Lowes, local kitchen and bathroom re modelers and local hardware and lumber stores.  Here you can research home improvement possibilities and do comparative pricing for appliances for things you’ve always wanted in a home.
While your looking for just the right home remember the FHA 203k can be used to purchase and renovate single family homes, 2 to 4 units , condo approved by HUD and a Planned Unit Development or Townhomes aren't issue either.  Different loan limits will apply from county to county and the number of units a property might have and change your pre-approval, so check with your loan officer if is you find something a little different from what you had originally considered. 
Step 3: Have Your Real Estate Agent Present Your Offer 
After you’ve pared down you home selection you’re ready to make an offer.  You need to figure out what would be an acceptable proposal and a process your real estate agent is the expert to assist you with.  
While you’re contemplating an offer it’s best to create a list of renovation options you think you’ll want and need.  I’d recommend you create two. 
• Must DO List 
This list needs to address any health & safety issues you and the real estate agent notice when inspecting a potential home, so remember to always have your notebook with you at all times.  Don’t over do it, remember it just a list, be practical and take notes about each home.  Any obvious issues you see or disclosed about need to be put on this list.  It could be something big like a broken septic system or small like missing window screens.  Making a list and checking it twice helps you to make the right decisions! 
Next the Fun List or Wish List 
• The Wish List 
This is a list of creature comforts you might have seen while shopping at your local home improvement stores.  Many homes today haven’t been updated in years and a wish list may seems much more like a necessity.   Being a savvy home buyer mean understand how to keep your wish list within reason.  Your real estate agent can be your most valued resource for keeping your Wish List in prospective.  You don’t need gold leafed toilets when one that very attractive and energy efficient creates more value for your home improvement dollars. 
Let your real estate in on what you’re planning to do with the home you’re considering and use the advice they offer.  Your Real Estate Agent  will know about the homes in the neighborhood and can help you avoid great looking stuff that has little or no resale valve. 
Now you’re ready to make an offer.  You know about what you’ll need to spend in renovations and your real estate agent can give you good advice on after improved values estimates your home improvements could create if you renovate wisely.
Step 4: Congratulations! The offer has been accepted 
The clock is ticking, so lets get started getting to understand the financing.  The first thing you’ll want to do is order a property inspection.  I  recommend your property inspector be certified as an FHA 203K Consultant if possible.  You may or may not use them for anything more or you might find them useful for additional services.  Often enough you’ll start off with an FHA 203K Streamline and find the need to transition to an FHA 203K Traditional for reasons as simple as exceeding FHA $35000 renovation limit.  If you do transition or decide you need a Feasibility Study having your home inspector who was certified as an FHA 203K Consultant simple prevents a delay in adding someone else in your path to home ownership. 
Meet with your general contractor and FHA 203K Consultant (required on FHA 203K Traditional mortgage only) to go over the estimate of all the  repairs, updates and remodeling work to be done. FHA 203K Streamlines doesn’t require this, however it does require a home inspection by a FHA 203K Inspector and you general contractor knows by contacting your loan officer the documents to be provided. 
Step 5:  Your Lender Orders the Appraisal 
Once your  inspection has  been completed and your general contractors provided your  mortgage lenders all the estimates and bids they can order the appraisal.   When your getting an FHA 203K Renovation Loan the  appraiser will  inspect  the property and review your general contractor’s bids, as well as other documents like your sales contract.  With that and locating some comparable and recently sold homes they’ll provide your mortgage lender both an “As Is” and  “After Improved” Certificate of Reasonable Value.
You lender will also be working to package your loan submission for both final credit and property approval by the underwriter.   A lot is going on you’ll never see.  Your lender’s underwriter is almost always going to want additional documents to complete the file and your loan officer’s staff is going to need to work with you, your real estate agent and general contractor on a host is issues in the submission process.  Don’t be concern about anything at this point other than getting your lender the documents they need and making sure your real estate agent and general contractor stays on the same path and regularly updated on your progress. 
Step 6:  Loan Approval & Closing 
The loan package has now been completed, you have final approval from your lender and off your  file goes to Title to close on your home.  When your signing your closing documents your title agent will explain all the documents you’re about to sign and what  they’re for, as well as the important part being the escrow account your lender set up to fund your home repairs. 
Step 7: Inspections and Draws 
Your first disbursement on an an FHA 203K loan is often provided at closing  and more likely if your lender has an in-house draw department.  Otherwise it might be a few days or more  before you get a draw check to begin repairs.  Asking your lender about their draw process is very important early in process and shared with your general contractor. How and when you begin your renovation depends on when the renovation check gets in your contractors hands, so getting the details early makes for a great renovation experience.  
Often the first draw will be between 35% to 50% of the estimated renovation cost and sufficient to get your project started.  After your general contractor has completed your renovation your lender can order a final inspection.  If all goes well your general contractor will get their final check and now your done.  It just that easy.
If your loan happens to be doing an FHA 203K Traditional there will be an up-front disbursement check and up to four inspections; depending on how big your renovation project is.  So that’s all it takes. Ready to get started?