One of the most common questions I get from potential 203K loan customers is “do these loans actually close?” I like that question, it usually means the customer has done some research, they have read the horror stories on the internet and know the potential for disaster if a 203K loan is left in the hands of the wrong loan officer.

Are 203K loans helping home-buyers purchase and renovate a foreclosure? Damn straight. Check out the numbers below. FHA renovation program is still underused though. I can spread the word about the 203K, I can help other mortgage originators with the product, but there’s absolutely nothing I can do about the 80% of the real estate industry that is too lazy, too stupid or too greedy (I have to wait 45 days for my commission???) to tackle the 203K.

 Get a 203K Loan Pre-Approval!

Why So Few 203K Loans Closed?

We have how many foreclosures again? I’ve seen several estimates of a million with more to come in 2012. It is an absolute damn shame that only 22,430 203K loans closed last year.  People clearly need education, they need to read 203K Forum

It actually disgusts me a bit with the real estate industry. You have a mortgage product with a low downpayment, flexible credit that is absolutely perfectly suited for the foreclosure market.

A product that allows buyers to purchase and renovate with one loan. A renovation loan product that allows people to purchase a foreclosure, make it nicer and increase the value of the entire neighborhood. A mortgage product that allows buyer’s to include energy efficient renovations as part of their loan. A mortgage product that allows owners to save money on energy bills, better the neighborhood, avoid problematic repairs after closing and provides financing access to properties that would typically sit vacant waiting for a cash buyer without it.

Yet, the industry isn’t using the 203K mortgage to it’s full potential. Why?

If you’ve read my other posts you know my thoughts. This industry is full of suckers, chumps, laziness, greed and a whole lot of really, really unqualified people.

The barriers to entry into real estate, especially with real estate agents, is far too low. I still get realtors with day jobs at Enterprise Rent-a-Car. As far as mortgage lenders, if they work at a big bank then all they need to do is not have a felony charge.

I don’t know why I expect an industry full of incompetence to educate themselves on the products needed to effectively serve their clients. Call me a hopeless dreamer I guess.

Don’t get me wrong, the customers are not off the hook here either. They choose these people to assist them with one of their largest financial transactions of their life.

If you’ve gotten this far you have hope. You want to be educated, you want the best mortgage product for your situation, you probably understand that the best deals available are the properties that need a 203K, HomePath or HomeStyle renovation loan.

There’s a reason those properties are steals. You can thank the real estate industry for that and you can profit it from it just like I have.

Get a 203K Mortgage Quote!

Already have a FHA 203K loan? Want to take advantage of low rates? Check out Atlanta’s best FHA Streamline Refinance lender! No appraisal, no equity needed!

We have help for Atlanta’s 300,000 underwater homeowners too! Our friends at HARP-Refi.net are all over the Home Affordable Refinance Program!

What Type of Homeowner’s Insurance Do I Need for a Renovation Loan?

I am not an insurance agent, but I do have several excellent referral partners that have educated me on the differences in the insurance companies and their policies in relation to a standard home purchase and a purchase + renovation transaction.

My job is to understand every aspect of the 203K / Renovation Loan process, homeowner’s insurance is a key piece of the puzzle. So, like the rest of the renovation loan process I know the scoop.

I get asked a lot about this process. As you know from my previous manifestos, if I get ask more than three times then the topic is blog worthy.

Homeowner’s insurance is not optional if you have a mortgage. Lenders are not going to risk their collateral. If you have to have it, then be educated on the process.

Home-buyer’s will shop for a mortgage, they’ll shop for an agent, but I am constantly surprised at how few shop for their homeowner’s insurance. I get consistently sassed over .125 in rate. The difference between a 4% and 4.125% on a$200,000 mortgage is approximately$15 a month.

The difference between an$800 annual homeowners policy and a$600 annual homeowners policy is$16 dollars a month. Yet, for the most part, home-buyers call one insurance agent and their done. Why?

Home-buyers need to understand what drives the price differences.

First, many insurance companies are credit score driven. Not all of them though. If you are sitting at 660 mid score then you might see vast differences in price and, if you don’t research, then you’ll pay more. The insurance companies refer to this as “insurance scoring”.

You won’t find a lot of info about which insurance companies weight credit score more heavily. Since the hard data isn’t there, I’ll give you my observations based on seeing thousands of insurance quotes and my own personal homeowners insurance experience.

In general, USAA will often present some of the best hazard insurance rates. From observation, that isn’t true for lower credit score borrowers. Traveler’s appears to be the same. AllState, State Farm and Progressive also havetendenciesto price my lower score clients higher.

So what company is better for lower score home buyers? From my experience, Hanover Insurance is typically a price leader for my clients with less than stellar credit.

So what else plays heavily into your homeowner’s insurance rate? Proximity to fire and police is a huge factor. If you live in the sticks then you’ll get the house for cheaper, but expect to pay more for homeowners insurance.

So, we’ve discussed the insurance basics let’s talk about the specifics when you are buying and using a FHA 203K, HomeStyle or HomePath Renovation loan.

Where Standard Homeowner’s Insurance Fails for Home Renovations

Nearly all of the big insurance provider’s either charge a lot more if you or renovating or flat out tell you no deal. Why? Easy, they want the upsell into an expensive builder’s risk policy.

Don’t get me wrong, builder’s risk coverage is a MUST if you are doing a 203K or Conventional renovation loan. Standard policies have gaping holes in coverage during the process.

You need the coverage, you just don’t have to pay more for it. Their are insurance providers that, for the same price as a traditional homeowner’sinsurance policy, will offer a temporary period of builder’s risk coverage.

The cost is about the same as a standard purchase policy and once the renovation is complete the insurance converts into typical hazard insurance.

I’ll recommend Hanover again, they are my go to insurance provider for renovation loan policies.

In conclusion, spend just a small fraction of the time you spend shopping me on rate and apply a little bit of that effort to shopping for the right homeowners insurance, you’ll be glad that you did.

Protect Your Investment With the Right Homeowner's Policy

Although FHA 203K and Fannie Mae Homestyle loans are mostly based on after repair value, they still have a caveat that prevents many homeowners from utilizing them for refinances.

Renovation loans – the FHA 203K and the HomeStyle both require TWO values to work. They require the after repair value AND the AS-IS value.

Homeowners need to be at 95% loan to value or less on the as-is and 97.75% after repair value on the FHA 203k loan and typically (depending on lender) at 95% as-is and 90% afterrepairvalue on the Homestyle renovation loan.

If you are exploring either option for a refinance you need to research and pay close attention to BOTH values, AS-IS and AFTER REPAIR VALUE.

What Do I If I Have No Equity?

Well, you have several options. Some of which may not be ideal. However, this a financialdecision, you need to be smart and look at all the options. So, what ARE my options?

• Hang Tight – Don’t do anything, chill out, stay in you house and focus on other things
• HARP 2.0 Refinance – If you are upside down then your options are limited. You can’t sell, you can’t do a 203K, but you can still lower your interest rate if you have a conventional loan. Loan to value is NOT APPLICABLE for HARP 2.0. Regardless of how upside down you are, Obama’s Refinance plan can probably help!
• Not Eligible for Harp | DU Refi Plus? – Those that have a FHA, VA or USDA mortgage are not eligible for a Home Affordable Refinance Program. If you are upside down then you need to consider other options like a short sale or staying put.
• Short Sale – NEVER go with foreclosure, get an excellent Realtor and SHORT SALE instead
• HAFA – Government version of a short sale, you owe it to yourself to see if you qualify before you go into foreclosure.

Tired of Talking to 203K Pretenders Who Can't Answer Your Questions? Stop Guessing and Start KNOWING!

HomeSteps vs. HomePath – What’s the Difference

Clearly, we have delved into Fannie Mae HomePath and HomePath Renovation loans in depth, but this is the first time I have stepped into Freddie’s HomeSteps program. So, what is Homesteps?

Not sure why it has taken this long, maybe because Freddie themselves lacked articulation on exactly what the heck they are offering. Who runs Freddie Mac? How can you be such an afterthought to Fannie Mae?

I expect that question to remain unanswered, since nobody seems to know anything about Fannie’s red headed stepchild, Freddie Mac.

So, if you have missed a few posts and are not up to speed with Fannie Mae’s foreclosure incentives the HomePath and the HomePath Renovation, simply click on the links below and read up.

Once you’re done, bring it on back here and let’s talk about what Freddie Mac is offering for their properties.

HomePath

HomePath Renovation Loans

Now, that you have gotten that out of the way, on to THE TOPIC AT HAND…

Freddie Mac Homesteps

HomeSteps SmartBuy^SM

HomeSteps SmartBuy is our exciting home purchase program that offers:

• A limited two-yearHomeProtect Home Warranty*[PDF]
• Up to 30% savings* on new appliances

Homebuyer Incentives**

• Up to 3.0% buyer’s closing cost

**HomeSteps homebuyer incentives are available to owner-occupants purchasers only.

Selling Agent Incentive

• $1,000 Selling Agent Bonus Offer***

DURATION OF OFFER:Offers received between November 15, 2011 and January 31, 2012 with escrow closed on or before March 15, 2012.

Yeah, I copied that directly from the HOMESTEPS website, shoot me I get lazy too from time to time.

So, while Fannie created an unique financing program, HomePath, Freddie added some incentives to buy with HomeSteps. Putting my sarcasm aside, it is actually a reasonably good incentive. It’s not a unique financing program with no mortgage insurance, but this is Freddie were talking about.

There are plenty Homesteps properties available and they are selling cheap. You can also pursue FHA 203K financing if you want, which has become a problem with Homepath properties as they typically want Homepath or Homepath Renovation financing.

Wondering where you find these properties? Need more info on HomePath and HomeSteps? Well guess what, they pay me to answer your questions. So fire away.

So, fill out the form to the right or call the number above and either myself of one of my team will break it down for you in minute details. If it’s me (I like to talk) I’ll give you more information on these two programs them you could ever want.

Click IT!

Hey! What Happened to MY Earnest Money?!

Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

What? Just trust us right? Absolutely not, know, check and follow where your purchase earnest money goes, stays and is held.

I don’t know a first time home buyer who does not ask this question. Heck, many multiple time home purchasers STILL ask this question.

According to Wikipedia:

Earnest Money – an earnest payment(sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.

When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.

An Earnest Money Deposit (EMD) is held by a third-party escrow company according to the terms of the executed purchase contract. Well, sometimes at least. The fiduciary responsibility is to deposit the money in the right place, doesn’t always happen, so watch your back.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

1. Earnest Money is submitted to an escrow company with the accepted purchase contract
2. At the close of escrow, the EMD is credited towards the down payment and / or closing costs
3. If there are no closing costs or down payment, the the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

• Selling Real Estate Agent – A conflict of interest
• Sellers – Too risky
• Buying Agent – They shouldn’t have your money in their account

Just $100 Down Payment? YES!

This HUD 203K special is perfect for the Atlanta Braves fan. This home is located near one of Atlanta’s most desirable neighborhoods, historic Grant Park. Walking distance to Turner Field

Even if you hate baseball, it”s a pretty sweet deal for everyone in fact. Check out the specs.

• $99,000 List Price
• 3 Bedrooms / 2.5 Baths
• ~1600 Square Feet
• Built in 2008

So How Would I Use the 203K Loan on This Home?

However the heck you want to! Fresh coat of paint on the outside to liven up the place, some energy efficient stainless steel appliances for the inside, maybe some granite counter’s if that’s how you roll. That’s up to you.

The HUD REQUIRED repairs are pretty minimal. You could have them done and be in your new home before Christmas!

• REPAIR /REPLACE PLUMBING — $640.00
• REPAIR/REPLACE WATER HEATER — $500.00
• REPAIR/REPLACE ELECTRICAL — $640.00
• REPLACE MISSING HVAC — $2,800.00
• ESCROW CONTINGENCY — $458.00

Whatever else you want to do is completely up to you and EVERY DOLLAR can be financed into the loan at $100 dollar down payment for buyers purchasing as a owner occupant.

Just so we are clear on what an amazing deal this is; you can purchase and renovate via FHA 203K, finance all the renovations and do it all for $100 DOWN!

Sounds too good to be true right? It isn’t. If you want more info on how you can make this YOUR reality simply click right here on our ATLANTA 203K HUD INFO page and we’ll walk you through the process!

 

Designed by HUD as a way to add incentives for home-owners to pursue GREEN and ENERGY EFFICIENT improvements on their next home purchase or home refinance, the EEM (Energy Efficient Mortgage) was created.

An energy efficient mortgage recognizes that by increasing the overall efficiency and lowering a home’s energy consumption that the monthly energy savings actually increase HOME AFFORDABILITY!

Because the home is energy efficient, you will save on utility costs and, thus, be able to devote more income to your mortgage payment / mortgage balance. What a concept right? Why is every mortgage NOT ENERGY EFFCIENT?!

EEM improvements can include energy saving appliances, windows, HVAC systems and even SOLAR technology.

Under the FHA energy efficient mortgage program, a borrower can finance into the mortgage 100 percent of the cost of eligible energy-efficient improvements, subject to certain dollar limitations, without having to worry about dollar for dollar return when it comes time to get the home appraised.

To be eligible for inclusion into the mortgage, the energy-efficient improvements must present energy savings throughout the life of those improvements. How the heck do you measure that?

Simple, you get a Home Energy Rating Report (HERS). Not simple? Have no idea WHERE to get a H.E.R.S report? RESNET is the source I use and is a GREAT place to find all things GREEN HOME related.

Find a HERS Consultant and more by clicking the link.

The EEM is not the only mortgage product you use to go green. In fact, you can use the EEM in conjunction with FHA’s popular (and AWESOME) 203K Renovation loan.

You can also use the 203K Loan own its own without having to get a HERS report and green your home to your heart’s desire. Heck, go off the grid entirely if you want to, it’s perfectly doable with a 203K loan.

So, are you tired of throwing all of that money out the window (pun intended) on your monthly energy bills? I won’t even get into the saving the planet part, but if your interested in that kinda thing then a GREEN RENOVATION loan can help you do your part.

Click IT!

Looking for more info before you decide?

FHA 203K Streamline – What Repairs Can I Do??

Ten Ways RENOVATION Loans Create HUGE Value

Using GREEN Renovation Loans – Buy Cheap, Renovate Green & Save 

203K Loans – Basics and Guidelines 

I Can Buy THIS for $100 Down??

Investor Renovation Loans

2011 and beyond presents an amazing opportunity for real estate investors. Whether you are buy and hold or fix and flip, whether you are in Alabama, Georgia, Florida, South Carolina or Tennessee – it doesn’t matter, the market is RIPE!

If you are a cash investor then have at it, the world is yours. If you need mortgage financing then you need to know your options, the guidelines, the pitfalls and the benefits of going that route.

In some cases you may have the cash to buy outright, but it may be more beneficial to get a mortgage. After all, in this market you will find multiple investment opportunities, why not leverage those opportunities?

To get the most out of this fantastic, once in a lifetime market, financing may be your best option. What are your Investor Renovation Loan options?

Jonathan, I thought banks weren’t lending to real estate investors? Not true, banks are lending to you, but be prepared to work for it. Investors, just like owner occupants, need to understand the 2005 cakewalk days are OVER.

Getting a Mortgage in 2011 is TEDIOUS

If you aren’t prepared for some documentation and a little work then stop reading and step back into your cash / hard money world. This post isn’t for you.

So, what are the investor loan options these days? Let’s go over the renovation loan options. BUT FIRST, let’s go ahead and get one option out of the way. I get calls everyday about this. What is it?

FHA 203K Loans

FHA 203K loans are for owner occupants ONLY. Period. Don’t call me and ask if you can flip a property with a 203K. Don’t think you can trick the system either.Mortgage lenders and underwriters are very sensitive to the FHA occupancy guidelines.

You MIGHT be able to get away with it once, but chances are we’re going to catch it and you are going to waste your earnest money, home inspection money and whatever other money you have invested. Let me repeat, 203K loans are for OWNER OCCUPANTS ONLY!

Hold on though, that doesn’t mean that investors don’t have a use for the product. Investors can buy a property wholesale, market it 203K and sell it to an owner occupant.

BEWARE and understanding FHA property flipping guidelines though. I don’t have the space to go into them here, but you’re going to have to hold the property for 90+ days before you can sell it.

HomePath and HomePath Renovation Loans

If you are in the real estate market you have run across HOMEPATH properties. HomePath properties are Fannie Mae foreclosures, in order to move the homes off their book Fannie created a special loan products available ONLY on their foreclosures.

Traditional HomePath loans are straight purchase loans. Available to investors at 10% down with NO MI! Yep, only 10% down and no mortgage insurance. I want to mention something else, but it needs emphasis

Traditional HOMEPATH Loans DO NOT Require an Appraisal

You save money, you save time and you avoid property condition issues that plague the foreclosure market. You can have FOUR financed properties at 10% down, after that you’ll need 25%. Other guidelines apply, talk to an experienced LO.

HomePath Renovation Loans

Some HomePath properties areeligible for HomePath Renovation loans ONLY. The listing will indicate whether the listing is available for HomePath, HomePath Renovation or both.

If the listing iseligiblefor HomePath it is automatically available for HomePath Renovation, but not vice versa. HomePath Renovation listing are NOT eligible for anything BUT the HomePath Renovation loan.

HomePath Renovation loans require a 15% down payment. MAXIMUM renovation amount is$35,000. COSMETIC renovations only. No structural renovations allowed.

HomeStyle Renovation Loans

The HomeStyle is Fannie Mae’s non property specific renovation loan. Renovations are not limited to$35,000 and structural renovations are allowed.

However, this product is HARD to find. If you have more than 4 financed properties then you are out of luck.There’s no mortgage insurance for this product so you’ll need minimum of 20% down.

Other Options

The other options don’t make me any money so I’m not interested in explaining them in much depth. You can use hard money, you can buy cash, you can use a traditional purchase loan or some fancy assignment contract or other garbage that real estate investors who are stuck in 2005 still try.

Want to Give It a GO? Click HERE and We’ll See if You’re Credit Worthy!

Looking to INVEST in commercial real estate? You need a small business loan. Check out our SBA and business loan resources!