Monday, April 16, 2012

FHA203K Loans

With all the research I did regarding Fannie Mae Homepath Financing (FMHF), I will not be financing my purchase with that type of loan - Instead, I'll be using FHA 203K Streamline. The only reasons why I will not be using FMHF is because they will only finance 75% of my home purchase due to it being a multi-family property.

My attention will now turn to 203k loans! These loans will finance repairs needed AND wanted on your new home! Luxury repairs such as a pool, spa, etc., are not allowed. You will also need a person who is licensed to do the repairs. This type of loan should definitely be considered when you walk into a house that needs a lot of repairs. A lot of buyers are turned off when they see an ugly house and simply just walk away. A savvy person will NOT be turned away mold this "ugly" house into something you love!

There are two types of 203k loans, standard and streamline. The standard loan is the more complex one since repairs will be over $35,000 with no limits! (The only limit will be how much you were approved for).
You will need a consultant for your 203k standard loan who will begin working after escrow closes. The second type of 203k loan is streamline. Streamline is for repairs between $5,000 and $35,000. A consultant is not required, but again, you cannot do the repairs yourself unless you are licensed.

I will be going with a streamline 203k loan and will be financing the major repairs that the house needs (roof, floor, plumbing, electricity). Anything in addition to that, I will repair with my own money instead of adding it to my loan as I do not want my monthly mortgage payments to be too high.

I've been in communication with my escrow officer and she is really good. I love when someone can respond to my e-mails the same day. My escrow officer replies to me in minutes! She leaves no time for me to worry about anything. I love it! I sent my $1,000 earnest check last week to open escrow and what they are waiting for now is the loan documents. What my mortgage broker said I needed to do was get bids from different contractors for the repairs required on the home. I am scared to know what damages this house has.

I am glad that the listing agent was kind enough to add in the addendum that Fannie Mae will pay up to $4,000 in repairs required by the lender. These "required repairs" are health and hazard issues such as:

1) Broken windows
2) Double strapped boilers
3) Rails missing in stairs
4) Visible flooring (such as rug missing, etc.)

The house needs to be "liveable" and therefor all utilities (water, gas, electricity) need to function properly.

I will be contacting 203k contractors this week to get bids on the work required and will be letting you know how that goes. Also, to save money, have a contractor tell you what is FHA required or what are "health and hazard" issues of the property instead of an inspector. An inspector will just pass through the house and call out all things that need to be looked by a professional, such as a plumber, electrician, etc., because "he" isn't one... You will then need to pay the inspector, all professionals he required (electrician, plumber, etc) AND in top of that you'll still need to get a contractor to see how much those repairs are going to cost! To make it simple just pay the contractor who will tell you what needs to be fixed AND give you a price of how much you can fix it for... so much more informative and valuable.

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