Easy question right? Full FHA 203K is over $35,000 in repair and the Streamline 203K under $35,000 in repair. Post over right? We can all go home now?

Not so fast. I get calls every daily from distraught home-buyers, distraught Realtors and distraught loan officers across the Florida, Georgia, Tennessee and Alabama markets I serve who’ve had a streamline 203K denied. Denied not because of the 203k renovation amount, denied because the scope of the work did not fall under streamline 203k guidelines.

Here are some of the biggest streamline 203k deal killers:

1.) Termite Damage — When I worked as a mortgage broker and didn’t have access to the full 203K this was the single biggest deal destroyer in the renovation loan market. A termite letter is not required by all lenders, but it is required by some. If you live in the South and are looking to buy an older home then there’s a good shot that house has had termites at some point. Termites eat joists, they eat subfloors, they eat things that are structural in nature. Any structural damage is automatically a full 203K, no exceptions. Be aware of this issue.

2.) Framing — Yeah, you might think taking out a wall to make the bathroom bigger is cosmetic, but you are not an underwriter. Moving a load bearing wall is structural and is not an eligible streamline 203k repair. But, but, this wall is not load bearing! Says who? Your contractor? Want to pay $400 for a Structural Engineer’s report to verify? I didn’t think so. Moving walls means you need a full 203K.

3.) Sub-flooring — Yeah, I love those houses built in the 20’s as well. We certainly have plenty of Atlanta neighborhoods full of them. Problem is, those houses have settled. Your indoor putting surface will take on a new level of difficultly in most of those houses. No problem, lets level this out! Nope, not with a streamline 203K. That is also structural, you’ll need a full 203K for that.

4.) Landscaping, Grading, Site Amenities — The drainage is bad and the driveway sucks, I want to fix that! Sorry, not on the streamline 203K. No landscaping and no site amenity improvements are allowed. You’ll need a full 203K for that too.

I guess you are out of luck buying that fixer upper. You’ll probably never get a loan. Your destined to be paying your landlord’s rent or hearing your upstairs neighbors playing Guitar Hero forever.  Don’t throw the towel in just yet though. When you are searching for a 203K Renovation lender just make sure they offer the full 203K as well. With access to both products you can eliminate any of the potential streamline 203K deal killers you may face. Luckily we have you covered, we can even help investors renovate via the Fannie Mae Homestyle. So get out there and buy yourself a heap, we’ll fix it up for you!

APPLY NOW for your FHA 203K Renovation Loan!!

Serving: Atlanta | Nashville | Memphis | Savannah | Birmingham | Charleston | Durham | Raleigh | Charlotte | Mobile | Huntsville | Greenville | Miami | Jacksonville | Orlando | Tampa | Tallahasse | Montgomery | AND MORE!!

Jonathan Blackwell FHA 203K Renovation Specialist Wells Fargo Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

Today we will discuss the topic of FHA gift money for homebuyers looking to purchase a home in Atlanta and the rest of Georgia via FHA or FHA 203K renovation financing.

Gift money for an FHA loans can be used to cover the down payment and closing costs.

Acceptable places to receive FHA Gift money from:

• Family Member
• “Documented” Close Friend
• Employer
• Church
• Non-Profit

Non-acceptable places to receive FHA Gift money from:

• FHA Lender
• Seller
• Agents / Loan Officers
• Any other party involved in the purchase transaction
• Business partner

Allowable FHA closing costs range from 3 - 6% of the purchase price, depending on the size of the loan.  Since FHA allows the seller to pay closing costs of up to 6%, it is highly likely that a borrower can have enough money to cover costs and buy a lower interest rate with the properly negotiated FHA deal.

Per 2009 Georgia FHA guidelines, the minimum down payment requirement on an FHA loan is 3.5% of the purchase price.

Frequently asked questions about FHA Gift Money:

Q:  What is the maximum amount of gift money that a borrower can receive?

A:  There is no maximum other than the 6% of the purchase price limit.

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Q:  Does the borrower have to pay the gift money back?

A:  No, then it is not a gift, it is a loan.  Donors must complete paperwork stating no expectation of repayment. 

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Q:  Just to clarify, can a borrower receive enough gift money to cover  all closing costs and down payment, essentially allowing the borrower to move into a new property with no money down?

A:  Yes

Read all of our FHA advice to prepare yourself for your FHA purchase transaction!

APPLY NOW for FHA Financing!

APPLY NOW for FHA 203K Renovation Financing!

Jonathan Blackwell FHA 203K Renovation Specialist Wells Fargo Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

Turning a house into a dream home - that is the power of FHA 203K loans. From an extra bedroom to a bathroom update, a living room to a luxurious master bath, from a modest expansion to full on ground up remodel, FHA 203K loans offer homeowners an affordable way to fulfill their unique vision.

Today we explore some of the most frequently asked questions when it comes to FHA 203K loans…

Q: What is the down payment on a FHA 203K loan?

A: 3.5%, but you can put down as much as you like. The down payment can come from cash on hand, gift from a family member, relocation money from your employer, community grants or from your 401K.

Q: I want to do my FHA 203K renovations myself. Can I?

A: Sometimes. On very simple renovations with a low dollar amount you may be allowed to do the work yourself. However, on any substantial 203K renovation we will require a General Contractor. You can read more HERE

Q: Can I use FHA 203K to renovate a condo?

A: Yes, but restrictions apply as to the number of units in each building. FHA also has other guidelines on condo complexes. If the condo is eligible you will only be able to do interior work. For the most part, your condo will be difficult to get approved on a FHA 203K loan

Q: Can I be compensated for materials I purchased outside the work listed on the initial FHA 203K contractor bid?

A: No. Your 203K renovation escrow amount is established before the loan closes. In some rare cases you can request a change order after your closing to fix an issue that came up during the 203K renovation process. Be aware, however, that you must do this PRIOR to completing the work. Generally, any work performed outside the scope of repair as listed on the bid when your loan closed will be your responsibility to pay for.

Q: Do I need a home inspection? Do I need a special Inspector?

A: Yes! You should get a home inspection on the purchase of ANY home. The inspection will help ensure our 203K loan doesn’t encounter any unexpected problems during the renovation process. On most 203K loans you can use any certified home inspector to do your inspection.

Q: Can I get money before the 203k renovation begins?

A: There are no 203k upfront funds disbursed at most lenders with the exception money to order flooring, cabinetry and windows and other like materials that can sometimes take time to deliver and require an upfront deposit. For this reason we recommend your FHA 203K contractor have a line of credit so they can begin work immediately. You can read more about the contractor selection process HERE.

STAY TUNED for Part Two of my FHA 203K renovation financing FAQ.

APPLY NOW for FHA 203K Financing!

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

Thanks to my buddy Mark Madsen who I “borrowed” most of this post from. You can check him out, as well as me, at the best damn FHA blog on the net. Approval & Funding - NV FHA Purchase, is the original post. Cut me some slack on the borrowing, we’re busy and Mark doesn’t mind.

While the approval and funding process of a new Atlanta FHA purchase mortgage has several moving parts, this article should help you put the basic time line in perspective.

1.  Loan Application -

This is where the loan officer spends a little time over the phone or at the office with a potential borrower discussing their lending scenario, financial goals, and required documentation.  Depending on the amount of information requested by both parties, a typical loan application generally can take between 15 minutes to an hour.

2.  Pre-Approval -

A pre-approval lets the borrower know how much they can qualify for, and is issued once the loan officer has verified income, assets, and credit.  As lending guidelines continue to change, most loan officers will take the pre-approval a step further and run a full online Fannie Mae (DU) or Freddie Mac (LP)  automated underwriting approval to make sure the borrower has an additional layer of confidence prior to shopping for a new home.

Keep in mind, DU or LP approvals are not considered full underwritten approvals, unless an underwriter has physically analyzed the submitted documentation.  Every bank has their own quality control systems for this process, but the average time it should take for a full underwritten approval is 24 - 48 hours.  So basically, it is a good idea to get everything in and wait an extra day or so for an underwriter to issue a full approval.

3.  Loan Search / Good Faith Estimate -

Once a pre-approval has been issued, it is important that the lender and borrower agree on the actual terms of the new mortgage prior to submitting offers on a new property.  A Good Faith Estimate is a form that outlines the  interest rate, down payment, purchase price / loan amount, and other estimated closing costs so that the borrower can make an educated decision.

Even though the GFE is an “Estimate” based on the predisclosed costs of the new loan, there are several things that the loan officer doesn’t have control over.  Make sure you ask your loan officer what specific line items you can expect to be consistent or change prior to closing.

4.  Purchase Offer -

Depending on which market you are in, the purchase offer and acceptance process can be an entirely new beast to deal with.  Short Sales, Bank Owned (REO), and Rehab properties may take several weeks of negotiation before a perceived win / win deal is reached.  It is important to hire a full-time real estate professional who is familiar with the landscape and knows how to navigate these types of transactions.

Recent neighborhood sales, pending foreclosures, and the actual terms of the purchase agreement are a few things that you need to pay close attention to before you commit to putting a sizable earnest money deposit down.

4.  Due Diligence Period -

This is time, as defined in the purchase agreement, that the borrower and seller have to complete all inspections, appraisal, review HOA / Title documents, and anything else that may have an impact on the successful closing of the purchase transaction.

5.  Appraisals / Inspections Completed -

Typically, the appraisal and home inspection are paid for in advance by the borrower and have to be completed within 10 days of an accepted offer.  The mortgage company orders the appraisal, and the buyer’s agent generally handles the logistics of the property inspection.  Most borrowers like to be present at the time of the home inspection, however, the appraisal is handled privately by a third party appraiser.

6.  Final Conditions Submitted to Bank -

The appraisal, preliminary title report, and any addition borrower documents are submitted to an underwriter for final approval.  This process takes 24-48 hours and is the final step, other than a loan lock, needed to order closing documents.

Proof of hazard insurance is also required prior to ordering loan documents.  Some mortgage programs allow a borrower the option of including their quarterly real estate tax payments and annual hazard insurance premium in the monthly mortgage payment by establishing a separate escrow (impound) account.  Make sure you know what your total monthly mortgage payments include before ordering documents.

7.  Loan Lock -

Mortgage rates have a tendency to change a few times a day depending on market conditions and adjusting credit / bank guidelines.  It is important to regularly communicate with your loan officer to make sure you get the rate and closing cost scenario that you have budgeted for.

Some brokers have the ability to change banks or negotiate a lower rate if things change for the better, but you are ultimately putting full trust in your loan officer when it comes to the rate game.  Basically, make sure you work with a loan officer that believes in full disclosure, communication, and transparency.

Rates can be locked between 7 - 90 days.  A good rule of thumb, the shorter the lock period, the lower the interest rate.  Since a .125% adjustment in rate may only impact your monthly payment by a few dollars, it is a good idea to find a rate you are comfortable with and lock as soon as possible.  With the rapid fluctuations in pricing due to the turbulence on Wall Street, rates could move .5% in a matter of hours causing monthly payments and closing costs to significantly change.

8.  Final Loan Documents Signed -

The final loan documents are delivered to an escrow or title company for preparation.  The borrowers will either sign with an escrow officer, or meet an approved notary at a convenient location.  The signing generally takes about 1 - 2 hours, depending on the amount of questions the borrower has about the transaction.

If there is additional funds to close, like a down payment or closing costs not covered by the seller, the borrower will bring a certified check to the escrow company.  Make sure your loan officer knows where these funds are coming from so that there is a proper paper trail the underwriter will approve.

The final property inspection is also completed during this time.  If there are things that still need to be fixed before the you agree to close on the purchase, let your loan officer know to hold off on funding.  Unless the rate or documents are set to expire

9.  Funding / Recording-

Once the final documents have been signed by the borrowers they are shipped back to the bank for a quick inspection and then set in line for funding.  A wire is sent from the lender through a few places and eventually ends up at the escrow company.

Since this process may take a few hours, it is common to hear about a delay between the time a bank “Funds” a loan and an escrow company “Records” a closing.

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

Atlanta | Little 5 Points | Kirkwood | Edgewood | Grant Park | Candler Park | Inman Park | Midtown | West End | Buckhead | College Park | East Point | Lithonia | Newnan | McDonough | East Lake | Oakhurst | Decatur | Vestavia Hills | Hoover | Birmingham | Stone Mountain | Villa Rica | Carrollton | Peachtree City | Montgomery | Auburn | Mobile | Dothan

Here are the 10 things you need to know about these changes to your Georgia FHA Refinances:

1. The max LTV for rate & term refinances (including streamlines WITH an appraisal) is 97.75%*

2. The max LTV for cash-out refinances is 95%* for loan amounts less than the conforming limit and 85%* for loan amounts at or above the conforming limit. (Must have 12 months seasoning and no 30 day late payments)

3. Two appraisals will be required for all cash-out refinances with an LTV above 85%.

4. The mortgage must be current for the month due.

5. New or current 2nd mortgages are eligible with no maximum CLTV.

6. Loan amount for streamline refinances WITHOUT an appraisal cannot exceed the original loan amount.

7. UFMIP rates: 1.75% for all rate & term and cash-out refinances AND 1.5% for all streamline refinances.

8. The FHA Secure refinance will be terminated.

9. Loan amount CAN include: Closing costs, discount points, current interest, prepayment penalties, prepaids, late charges, and escrow shortages.

10. Cash back on rate & term and streamline refinances CANNOT exceed $500.

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

If you are in the FHA 203K Renovation Loan business you inevitably deal with a LOT of foreclosures. There are a lot of myths out there about buying a foreclosure, but none so prevalent as the myth perpetuated by foreclosure listing agents looking out for the interest of their clients rather than the interest of the buyer. I understand, the client does pay the bills for them and provide them with that never ending REO gravy train. So what is that myth?

You Have to Get Your Financing Through a Certain Lender

No, you never are required to use the recommended lender. Some listing agents will insinuate that to make an offer you’ll need to use their preferred lender. This is NEVER true and steering you to a lender is actually ILLEGAL. You always have the right to choose the lender that presents the best option for your transaction. In some cases you may be required to be pre-approved by the foreclosure bank, but you DO NOT have to get financing through that bank. Keep in mind a couple of things though, when your choice is between a big bank with lots of advertising and loan officer salaries to pay or between an independent mortgage broker working on commission only, who do you think will be cheaper?

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

I get a lot of calls from Georgia Realtor’s about the FHA 203K program. There’s a lot of bad info floating around out there as well as a number of misconceptions about how 203K Loans work. The following post is for my Realtor friends to help you when you are guiding your buyers through the Atlanta market looking for a property that is perfect for 203K financing.

Step 1 — Finding the Property

When you are property hunting with your clients and you will need to keep a few things in mind. First, is the scope and type of renovation that property will need. If the property requires a major rehab be aware that the process of getting that loan into submission will take a good bit longer. For renovations over $35,000 or with anything structural (like removing walls or whole additions) you add a few more steps to the process which lengthens the 203K process quite a bit. There is a specific flow that has to be followed on the full FHA 203K and it normally looks like this:

1. Home Inspection by FHA 203K Consultant
2. FHA Consultants Write-Up
3. Meeting with Architect & Architectural Drawings (not needed on ALL Full 203K Loans)
4. Architectural Drawings Provided to Contractor for Contractor Bids
5. Contractor & Consultant Work to Match Renovation Costs
6. Final Contractor Bid & Drawings Provided to Appraisal for After Repair Value (or Subject To) Appraisal.
7. Loan Submission

Not until each one of those steps has been completed can submit the loan. As you can say, that is a lot of third party stuff which can put a drag on the process. If you want to shorten the process then you will need to look at properties that need only cosmetic work that will total less than $35,000 which will qualify for the FHA 203K Streamline. On the Streamline 203K the process is more manageable, it looks a little like this:

1. Home Inspection
2. Contractor Bids
3. Final Contractor Bid to Appraiser for ARV Appraisal
4. Loan Submission

On that scenario you don’t need a consultant or an architect, that speeds up the process quite a bit and makes it possible to close in 30 days or less.

Step 2 — The Offer

When you make the offer on a property that needs renovation financing it is important to ask for extra contingency periods to allow for time let the Home Inspector, FHA Consultant (if required) and Contractor do their thing. I usually get my Realtors to try for 21 days so we can make sure all the numbers work together.

If you are doing the full 203K then the contract period will need to be 60 days most likely, if doing the Streamline 203K then 30 - 45 will usually work. As ALWAYS consultant your lender before making an offer to determine how long they will need.

As with any FHA loan, the FHA 203K will require some specific disclosures (FHA Amendatory Clause) that will need seller and agent signatures. They should be presented during the offer process. You also need to indicate that you are using a FHA 203K loan.

Step 3 — Under Contract, Time for Loan Submission

On a FHA 203K transaction you may need to be available a little more than you normally would to let the buyer into the property. On typical transactions you may just need to be available for the home inspection, but on 203K transactions you’ll have contractors and possibly FHA consultants and architects to let in the property as well. All of these things need to be done as fast as possible so the loan can close on time. Let me say from experience that it can sometimes be a tedious task getting contractors to complete the needed paperwork after they walk through. The quicker you can get them in to to do that walk through the better.

Hopefully, you won’t have much to do for a couple weeks while the lender gets the loan clear to close. There are a lot of details to coordinate for us when we submit a 203K Loan and sometimes we may call for you help with getting a slow contractor to turn in some paperwork. Two people nagging is always more successful than one!

Step 4 — The Closing

Closing is just as it would be on any other transaction. You’ll get your paycheck as will I. We DO NOT have to wait until the renovation is complete and all the back end work will be handled by the company servicing the loan.

I know that some Loan Officers and some Realtors don’t like FHA 203K loans because they are a little more complicated, a little more work and takes a little more time. However, on quite a few of my 203K loans the home buyer is walking into 20% or more equity with only 3% down. That makes for a HAPPY home buyer and happy home buyers make for referrals. They understand the effort that we put in on that transaction for them and they will reward us for our hard work. You’d be surprised how eager home buyers are to talk of their success in creating a ton of equity in what all their friends think is a down market. You’ll be getting calls in no time from them wanting to do the same exact thing!

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

This is the first in a series of posts outlining the basics of FHA loans. What you qualify for, how much the down payment is, underwriting and documentation along with tips and tricks for a smooth closing will all be covered. Feel free to contact me directly with any specific questions.

How Much Can I Borrow?

How much do I qualify for is ALWAYS one of the first questions I’m asked. There are two things to consider when you are looking to purchase via FHA in Georgia. First, you’ll be limited by FHA loan limits. These are county specific. For example an Atlanta FHA loan is limited to 2009 Metro Atlanta loan limits of $320,850 for single family residences. The rest of Georgia, including Savannah, are limited to $271,050.

The second thing to consider is debt to income ratio. FHA guidelines like for you to use no more than 31% of your income for housing. It is possible to exceed this amount with compensating factors such as a high credit score or plenty of assets. As far as your total debt to income ratio, FHA would like you to spend no more than 43% of your total income on debt. Of course, the same compensating factors listed above apply to this ratio as well so you can exceed that guideline in some instances.

What is the Down Payment Required?

The down payment requirements are changing to 3.5% in 2009 for traditional FHA purchases. However, FHA 203K Loans, along with FHA 203H loans for disaster victims and FHA Energy Efficient Mortgages, are not affected by the change and will remain at 3% down. One note is that on the FHA 203K and other FHA specialty products requiring the lower down payment, you can still include the appraisal and a portion of your closing cost in the down payment.

What Paperwork Will I Need?

When applying for your Georgia FHA loan you’ll need to fully document your income and assets along with providing full explanations of any credit problems in the past 2 years.

1. Two Years W2 & Two Most Recent Paystubs.
2. Tax Returns generally only needed for self-employed borrowers, borrowers with rental income and borrowers using commission income to qualify.
3. Two months full bank statements. Must be “official” statements and must include ALL pages.
4. Most recent statements for retirement and investment accounts.
5. Color copy of Driver’s License and Social Security Card.
6. Credit explanation letters, bankruptcy papers, divorce decrees, child support documentation, leases on rental properties, etc are required if applicable.

What Credit Score do I Need?

FHA and lender guidelines generally require a 580 mid score or above to qualify. However, 620 or above should get you the best FHA rate available. The higher the better though and home buyers with excellent scores will generally be required less documentation and have faster underwriting turn times.

How Long Does the Process Take?

That depends on a number of factors, but 30 days or less should be the goal on a purchase. Borrowers with lower credit scores will generally be required to document more and therefore can sometimes take a little longer than borrowers with excellent credit. If you are doing a FHA 203K Renovation Loan then 30 days is still reasonable on the 203K streamline version, but plan for 45-60 on the full 203K due to the additional third party items needed. FHA Streamline refinances should be the quickest to close because of the reduced documentation requirements.

How Do I Get Started?

The first step is ALWAYS to call an experienced FHA loan officer to help you determine what you are qualified for so you can get a pre-approval. You should also be prepared with you income and asset documentation. The speed in which we can close you loan often depends on you more than anyone else.

Apply for Your Georgia FHA Loan

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

The Housing & Economic Recovery Act of 2008 made quite a few changes to the mortgage industry, but none so important to home buyers looking to purchase in Atlanta with a FHA loan as the revision to the FHA required down payment and how it is calculated.

Under current FHA guidelines, borrowers need to come up with 3% for the down payment. This 3% could include closing costs, appraisal fees, earnest money and cash-to-close. Under the new requirements the down payment for Atlanta FHA home buyers has increased to 3.5% and you are no longer allowed to include closing costs or appraisal fees in the calculation. So when many loan officers and home buyers heard that the 3% down payment was moving to 3.5% their reaction was muted. However, when you get down to the facts of the increase you realize that this apparently small down payment increase is actually larger than you think.

There is a bright side to the changes Georgia FHA 203K Renovation Loans, Georgia FHA Energy Efficient Mortgages and Georgia FHA 203H Loans for Disaster Victims ARE NOT AFFECTED! That’s right, it requires LESS down payment for you to purchase and renovate than it does for you to simply purchase. Here’s the text from the Mortgagee Letter issued by HUD:

Specialty products with higher LTVs: Section 203(k), Section 203(h) for disaster victims, and FHA’s Energy Efficient Mortgage (EEM) programs are not affected by the LTV limit. All existing policy guidance regarding the rehabilitation program under Section 203(k), including streamlined (k), mortgage insurance for disaster victims, and the EEM program remain in effect.

If you are looking to simply purchase a property that isn’t needing repair you can still get in under the old guidelines if you call us before Jan. 1st, 2009. In other words, get to it! You don’t have much time.

Jonathan Blackwell

Hometown Lenders

404-551-3845

EMAIL

The Fed, in a much anticipated move, slashed the target rate .75% to 0.25% in an all out effort to stimulate the US economy. That wasn’t the only big news coming from the Fed though, they also announced they’d be buying mortgage backed securities in a BIG way! What does that mean to you? It means that your Georgia FHA mortgage rates in Atlanta are going to be going DOWN! When the price of MBS increase, interest rates decrease.

Your FHA 203K Renovation Loan rates have come down as well! Call us today to see what you qualify for!

Jonathan Blackwell

404-551-3845

EMAIL