FHA 203K Renovation Tips & Tricks
1.) Selecting Your FHA 203K Realtor -- When you want to create the most equity on your FHA 203K renovation you need to carefully choose two things: your Realtor and your property. A knowledgeable Realtor with experience making offers on foreclosures is a must. If you are searching for a HUD Home then you'll need someone with knowledge of the sometimes tricky HUD bidding process.
2.) Selecting the Right Property for FHA 203K Renovation -- With the help of your Realtor you need to look for properties that need just the right amount of repair. Some people like to choose the ugliest house in the best neighborhood and some like to go for the emerging neighborhood. Regardless, work out a strategy with your Realtor and Loan Officer so you can choose wisely. Keep in mind that FHA 203K Streamline loans (those for cosmetic repair under $35,000) are going to close faster, cheaper and at a better interest rate than the Full 203K will.
3.) Choosing Your FHA 203K Contractor -- When you are choosing a contractor the first questions you need to ask concern licensing and insurance. If either is inadequate drop that contractor NOW and go find another. I don't care if the guy is your brother's best friend, if he isn't properly licensed / insured then your loan isn't going to close. PERIOD!
4.) Tips for a Successful FHA 203K Closing -- DO NOT buy anything during the process. Don't buy furniture, don't buy a car, don't buy a new TV... just hold off on the purchases until you close on the house. Also don't change your job and don't quit your job either. Keep your financial position the same as when you applied for your FHA 203K loan.
HUD’s Section 203(k) loan is one of many FHA programs that make mortgage credit available to borrowers when buying or refinancing a house that is need of repair or modernization. Unlike conventional rehab programs, the 203k has the same relaxed credit and income qualifying and low down payment guidelines as other FHA loan programs. This program works great for those who may not otherwise qualify for conventional loans due to income, credit and/or down payment limitations.
Similar to conventional renovation loans, the 203k offers a solution that helps borrowers by providing a single, long - term, fixed - or adjustable - rate loan that can cover both the acquisition and rehabilitation of a property. 203k loans save borrowers time and money.
FHA 203K Features
- Higher level of supervision of homeowner than other programs
- Loan amount based on Completed Value but capped at FHA maximum mortgage limits in your county. *adjusted annually
- Very Low 2.75% minimum down payment
- Relaxed Credit and Income qualifying guidelines
- Some Limits on types of repairs
- Investors (non-owner occupied) prohibited
- Fixed or Adjustable rates (ARM’s) available
- Can be combined with FHA’s Officer Next Door and Teacher Next Door home ownership programs.
- Can finance up to six months of mortgage payments for owner-occupied properties to cover non-occupancy costs during construction. For example, if you have to spend six months renting an apartment while your home renovation takes place, you can roll those expenses into your loan
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A Streamlined 203K loan might be the answer.
How Does a Streamlined 203K Loan Work?
It used to be that you bought a home and then applied for a home equity loan to fix it up, resulting in two loans. But many lenders won't make rehab loans. Some won't fund equity loans at closing, especially if there is no equity.
- A Streamlined 203K loan is figured into the original loan balance, resulting in one loan.
- It can be an adjustable-rate or fixed-rate mortgage .
- The mortgage balance can exceed the purchase price of the property.
- Borrowers are not required to hire professional consultants, licensed engineers or architects.
- The appraiser or home inspector can put together a list of recommended repairs / improvements.
Eligible Repairs & Improvements
The Streamlined 203K loan allows for simple repairs that can be easily estimated and completed. Many are considered light cosmetic repairs, but some will require hiring a licensed contractor if it falls out of the borrower's area of expertise. Here is an approved list of repairs / improvements from HUD:
- Roofs, gutters and downspouts
- HVAC systems (heating, venting and air conditioning)
- Plumbing and electrical
- Minor kitchen and bath remodels
- Flooring: carpet, tile, wood, etc.
- Interior and exterior painting
- New windows and doors
- Weather stripping & insulation
- Improvements for persons with disabilities
- Energy efficient improvements
- Stabilizing or removing lead-based paint
- Decks, patios, porches
- Basement completion and waterproofing
- Septic or well systems
- Purchase of new kitchen appliances or washer / dryer
Special Conditions & Terms
- No minimum loan balance required.
- Borrowers must occupy the property.
- Property cannot be vacant for more than 30 days.
- Work must be completed within six months.
- Work must be professional.
- If job requires a permit, borrowers must get a permit and a sign-off.
- Work must commence within 30 days from closing.
Repairs Not Permitted
- Landscaping or yard work
- Major remodeling
- Moving a load-bearing wall
- Room additions or add-ons to the home
- Fixing structural damage
Requirements to Perform the Work
- Borrowers can select among licensed contractors.
- The lender will review the contractor's experience, background and referrals.
- The lender will want a copy of the contractor's estimate and the agreement between the contractor and borrower.
- Borrowers can also arrange to do some or all of the work under a "self help" arrangement.
- Do-it-yourself projects require providing the lender with documentation supporting the borrower's knowledge, experience and ability to perform the necessary work.
Disbursement of Payments
- Maximum of two payments to each contractor, including the borrower, providing the borrower works under a "self help" plan.
- No more than a 50% advance is allowed.
- Do-it-yourself allowances do not include labor; only materials costs are allowed.
- Final payment is paid after submission of evidence of payment to sub-contractors / suppliers or other possible lien claimants.
Reasons to Apply For a Loan Below $15,000
- The lender is not required to inspect the completed work.
- The lender is not required to authorize a third party to inspect the completed work.
- A letter from the borrower or copies of contractor receipts will suffice as notice of completion, providing the lender has no reason to determine a third-party inspection is necessary.amount.
RECIEVABLES FUNDING
Our Receivables Funding (Accounts Receivable Factoring) service means that we can help you improve your cash flow by providing an immediate advance of cash against the value of your outstanding invoices. Then as you raise an invoice, we can release up to 90% of the value of that invoice within 24 hours. The remaining 10% is paid to you, less a small service fee, once we have received payment from your customer.
This means your business has access to an ongoing supply of cash directly linked to your sales. So as your business grows so does the amount of funding we can make available to you allowing your business to constantly be able to meet increasing demand.
You remain in control by working with a dedicated team of people who ensure your customers are as happy to deal with us as they are with you.
Most Fortune 500 companies have used Accounts Receivable Funding to improve cash flow and enhance growth.
The Benefits of our Accounts Receivable Funding Service
The principle benefit of Accounts Receivable Funding is the increase in working capital available to your business without needing to borrow (receivables funding is not a loan, it's an advance), tie up your business or personal assets, or give up equity. This boost to your cash flow positively impacts your profitability, allowing you:
- to take advantage of discounts on bulk purchases and early payments with your suppliers
- to stop offering early payment discounts to customers
- to extend credit to customers on large orders
- to pay back taxes and liens and fund payroll
- access to the necessary funds for growth
In addition to the cash that we provide, we can also free up valuable management resources. We manage your accounts receivable by going after and collecting outstanding invoice payments from your customers on your behalf so that you have more time to concentrate on generating new business. We will prepare and send out statements, telephone all your customers, collect payments for you and maintain professional and detailed accounts of your transactions.
EXPORT Receivables
Our export finance service helps you develop your overseas business profitably and with confidence.
Not only do we provide an advance of cash against the value of your outstanding export invoices but then as you raise an invoice, we can release up to 90% of the value of that invoice within 24 hours. The remaining 10%, less a small service fee, is paid to you once your customer pays. This means your business has access to an ongoing supply of cash linked to your sales. So as your overseas business grows so does the amount of funding available to you.
In addition to the cash flow funding that we can provide, we also remove the hassle of dealing with overseas customers by going after and collecting outstanding invoice payments from them for you. Working with you, we decide whether to use the services of our in-house multilingual team or to use our worldwide network of associated factoring companies, always ensuring the smooth flow of business over differences in laws, customs and language.
We will prepare and send out statements and telephone your overseas customers, in many regions communicating with them in their language. We will collect payments for you and maintain professional and detailed accounts of your transactions.
We can also help in smoothing out the problem of fluctuating exchange rates by offering multi currency facilities. We have overseas bank accounts for fast, low cost receipt of payments.
You remain in control by working with a dedicated team of people who ensure your customers are as happy to deal with us as they are with you.
How Does it Work?
- We jointly advise your trading partner that you intend to use our export funding services, so that the customer's cooperation can be expected when we contact them.
- When we receive your application, we will assess the creditworthiness of your customer and define a line of credit for them. An agreement will then be signed between you and us.
- To help with your cash flow, we will provide a cash advance against the value of your outstanding export invoices with that customer.
- You complete your business transaction and create an invoice for the goods.
- You send us your export invoices for funding and we verify that the goods were received.
- We will release up to 90% of their value within 24 hours.
- We include our details on your invoice and send it to your customer so that they can easily follow the instructions and make payment to us.
- On the due date, we will collect payment from your customer and pay you the remaining 10%, less a small service fee.
