The Home Buyer's Korner

Information presented should be used for educational purposes only.

January 22nd, 2016

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NASHVILLE, TENNESSEE

Home Buyer’s Korner

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 Do’s and Don’t with FHA 203K

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Get Pre Approved for a Home Loan

You can buy a fixer-upper so awful it wouldn’t qualify for a regular home loan.

Whether buying or refinancing, all that needed work might keep a home from qualifying for a regular bank loan. Banks don’t finance homes in ill repair because they’re too hard to resell if they have to take the house back via foreclosure. With an FHA 203K all that’s required is some portion of the existing foundation still exist, so tear downs are acceptable, if you build from the original foundation up.

You can DIY with a 203(k) if you can show you know how to DIY.

You can do the repair work yourself if you can show you have the experience and act as your own general contractor. You’ll need to provide all the same requirement documents like any other general contractor and your bid estimates will have to show estimate general contractor labor cost. After you’ve completed all repairs, your lender will apply your estimated labor cost and any other remaining reserves as a principle reduction. In short you can pay yourself to work on your own house.

You can use the FHA 203K Streamline for non-structural repairs and renovation up to $35000.

The streamline FHA 203K is great for remodeling, carpet replacement, purchasing new appliances or updating your kitchen or bathroom.

You can’t use it to buy a new-construction home.

The house you’re fixing up to have a certificate of occupancy that is at least a year old.

You can expect the lender to be up in your grill about how and when the home improvements get done.

An inspector will be dispatched to your home multiple times to check in on the progress.

You have to keep your general contractor from going on a long vacation.

Your contractor has to start work within 30 days of the loan closing. They can’t stop working on the project for more than 30 days and the work has to be done within six months for the standard FHA 203K and lenders want the streamline FHA 203K completed within 30 days of closing.

Don’t purchase any materials until you close.

Don’t get to excited and purchase any materials or appliance until you have closed. That doesn’t mean you can do your window shopping. Any items who receipts are dated before your close date will not be included in future draws.

You can use the loan to make your mortgage payments if you can’t live in the house until the work is done.

This is one sweet provision of the 203(k) program, because it means you don’t have to make a mortgage payment on the home you’re remodeling and pay to live somewhere else while the work is going on. You can use the 203(k) loan to pay for up to six months of principal, interest, taxes, and insurance payments when your property is going to be uninhabitable because of the renovation work.

You can use it to make energy-efficiency upgrades like installing a new furnace, windows, or attic insulation.

You can get a 203(k) loan to pay for 100% of the cost of energy-efficiency improvements. You don’t have to get those improvements appraised, but they do have to be cost-effective, meaning they’ll pay for themselves over their useful life. The HUD inspector will make the call.

You can have a little shop downstairs. It’s kosher to use a 203 (k) loan, to remodel a home that includes some commercial space, as long as you use the money only for projects in the residential part of your home and the amount of commercial space doesn’t exceed these limits:

  1. 25% for one-story building
  2. 49% for two-story
  3. 33% for three-story building

You can use a 203(k) for a condominium unit

Your condo building must have on the FHA Approved Project List, which is tough to get one if it isn’t already or meet VA, Fannie Mae, or Freddie Mac guidelines. Also, your building can have no more than four units, though there can be multiple buildings in the association and the repairs are limited to the interior of the unit.

You can’t break these rules or the lender can foreclose and the will.

Your lender can also refuse to advance you any more money or apply any money left in the escrow account to reduce what you owe on the mortgage.

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TENNESSEE HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace a deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

Mortgage Loan Officers, Real Estate Agents & General Contractors are ready to assist you

A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document, click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

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