Buying and renovating a home with an FHA 203k loan presents many exciting opportunities!  Here are some quick tips to make sure it is the right program for you.

1. Many lenders, including us, have rules that are more strict than the FHA rules you may read about online.  Ask me questions early.
2. Please know the difference between a Streamline 203k loan and a “Full” 203k loan.
3. The monetary cap on renovations for a Streamline 203k loan is $35k.  However, when you factor in the contingency reserve (usually 15% of renovation amount) and ancillary fees, the “real world” cap to your contractor’s estimate is about $29,500.
4. 203k loans are only for properties that have had a CO for at least 1 year prior to the contract date.
5. Not for flipping!  This loan is for owner occupants only who plan to live in and enjoy their newly renovated home for the foreseeable future (at least 1 year).
6. This program is great for foreclosure properties.  However please identify the current owner of the property and when that owner obtained the property.  There are anti-flipping rules that we must follow for the seller too.  Ask me questions early!
7. HUD foreclosure homes carry some specific rules.  Be careful with over bidding and the $100 down program.  You may have difficulties with each on a 203k loan.
8. Not for properties on the National Historical list.
9. Give yourself and us 60 days from contract effective date to projected closing. 
10. There are strict rules prohibiting Identity of Interest and Conflicts of Interest.  Call or email me for additional details.
11. Borrowers may NOT perform any of the renovation work themselves. 
12. We prefer that the renovation be handled by a Licensed General Contractor or Lowe’s.  If you prefer to hire individual vendors (such as an HVAC company and a flooring company) then you are capped at 3 vendors before a Licensed General Contractor becomes a requirement.  Only a licensed GC (or Lowe’s) can sub-contract to other vendors.
13. Are you suitable for this program?  What I mean by that is are you going to be able to handle the added paperwork, the permitting requirements, the contractor negotiations, the overall ups and downs of obtaining a government renovation loan and seeing it through to completion.  The benefits are great (updated homes, fully functional home bought at a discount, potential for immediate equity, etc.) but so must be your commitment and your patience.

For additional details or questions, ask me early!  Thanks, Don

If you’ve been around lending long enough I’m sure someone has mentioned (or even taught you) the 5 C’s of credit: Capacity, Capital, Collateral, Character, and Conditions. If not, Google can teach you all about them. Well there are plenty of 5 P’s that pop up in a Google search too. But I’m creating a new list today: The 5 P’s to a successful 203k loan.

1. Prepare. Before you start shopping for a home that needs renovating, or in other words, a foreclosure, do some homework. Use the Internet. Call a Realtor. Call me. But don’t put an offer in on a property that needs work before you’ve done your homework….a lot of homework.

2. Plan. Since you’ve learned about renovation loans in your preparation, you can begin to formulate a plan to capitalize on this great product. A plan that takes into account the type of renovation you’re willing to experience: general updates, repairing broken stuff, or a full blown rip-to-the-studs renovation. You should also speak with a Licensed General Contractor. I work with many and would be happy to refer you.

3. Pre-approval. I think the general public is pretty comfortable with getting pre-qualified to buy a house. So what’s the difference? Let’s start with pre-qualification. A pre-qualification can be as thorough (like from me) as having a loan officer fill out the official mortgage loan application (1003), accessing your credit report, asking you a lot of probing questions, running his/her automated underwriting report and issuing you a pre-qualification letter with some detailed estimates of payments and closing costs. Or a pre-qualification can be as limited as a loan officer accessing your credit, asking a few general questions, and telling you that you’re pre-qualified. Yes, even after all the credit tightening over the past three and a half years there are still plenty of cowboys and cowgirls flying by the seat of their pants in this business. But with a pre-approval, you will start with a thorough pre-qualification, then sign the loan application and several dozen disclosures, compile a stack of supporting documentation to verify the information on your 1003 (mortgage application), have an underwriter review your submission and render a decision. I don’t know about you but if I’m putting a lot of time into preparation and planning, then I don’t want to leave it to chance (or some cowboy) that I’m actually going to be approved for the loan.

4. Property. Now that you’re pre-approved, prepared, and have planned for the type of renovation you’re willing to tackle, it is time to find a property. Call me and I’ll help you find the right realtor that fits your situation.

5. Process. Remember that your FHA 203k loan is a government mortgage that incorporates a renovation into the loan. Everything has a process. From applying, to picking your Licensed General Contractor, to developing your scope of work, to accessing the funds for the renovation, there is a process to follow. And while I’m at it….I should have called this the 6 P’s because you’ll have to develop some Patience. Because, did I mention this is a government loan?

FHA 203k loans represent a fantastic opportunity to buy a home, fix it up the way you’d like it, and live in it for the foreseeable future. You just need the right Person to help you…dang it, there’s another P. Call me and I’d be happy to help you.

Over the past two and a half months, agents and loan officers from The Allen Tate family of companies have been signing up as REbuildUSA members at a record pace. At last count we had 260 Realtors and all of our loan officers on board. If you are one of those newly registered members, I thought you could use a practical guide for your next steps. So here goes:

1. Set up your profile page, including your picture and a short description of your expertise.

2. Complete the online training program.

3. Visit the marketing center for logos, ideas for planning a home buying seminar, consumer directed copy to use in mailings to your sphere, logos to add to your web site and email signature, and consider sign riders and marketing materials.

4. Practice talking to your buyers about the benefits of using a 203k loan program to buy and update or renovate a home and about our partnership with a quality brand like Lowe’s Home Improvement.

5. Introduce the benefits to your selling customers who may benefit from marketing their properties to customers who want updated homes.

6. Make sure your buyers who are looking at foreclosure properties are pre-approved and have a consultation meeting with me early in the house hunting process. It is never to early to prepare and plan for this exciting opportunity!

7. Lastly, have fun embracing the potential of this program and the impact it can have on people by turning an ordinary purchase transaction into the satisfaction of buying a home and making it their own.

Check out Dennis & Teresa Walsh’s appearance on NBC Miami. It’s a great way to show friends, family, customers and potential 203k Specialists what REbuildUSA is all about! Click on the image below to view the video:

Happy New Year!  We are excited by the recently launched partnership between Allen Tate Mortgage and REbuild USA.  Together, we will enable North and South Carolina residents to purchase or refinance a primary residence using the FHA 203k loan and renovate it with Lowe’s Home Improvement.  Since the launch of our partnership in mid-November, 194 Allen Tate Realtors have enrolled in the program.

It’s going to be an exciting year.

Yeah, who isn’t? Buy a foreclosure and use an FHA 203k loan to fix any damage, update the flooring, kitchens and bathrooms. Call/email me, I can help you.

This is a “BEFORE” picture of a foreclosure home that my customer recently bought and is in the process of renovating.  She got a great deal on the price and is having a licensed general contractor coordinate a new roof, attic insulation/soffits, duct work, HVAC, some new windows, a whole new kitchen, and repairs to the master bath.

I’ll post an “AFTER” picture when they’re done.