Are you thinking
about a home improvement loan? New purchase and refinance
options are now available and more flexible and easier to set
up than ever
. Contact Jim
Garwood today to discuss your options. Jim has a
constructions background and can advise you through the
process.
Contact Jim at: Phone 260-494-1111
Fax 800-516-4016 Email Jim
Questions to ask yourself when evaluating your home
improvement loan options
Are the
improvements you plan to undertake increasing the value of
your home more than the loan you apply for?
What will the
monthly payments be?
What are the tax
implications? Possible tax deductions?
FHA 203(k) Streamline Limited
Repair Program Loan Process 203(k)
The
203(k) Streamline Limited Repair Program allows a customer to
purchase or refinance a home and make limited upgrades/repairs
to the property all under one single loan. The loan is not
re-qualified as it is only underwritten one time, upfront. No
cash out refinances are permitted – only purchases and
refinances. The FHA 203(k) Streamline Limited Repair Program
is underwritten and closed on terms that are to be determined
“finalized” upon the completion of the repairs. The loan is
underwritten to the FHA guidelines The Energy Efficient
Mortgage (EEM) may be used in conjunction with the 203(k)
streamline program. There is no minimum amount for the repair
costs; however the maximum is$35,000 (includes 10%
contingency, supplemental origination fee and final inspection
fee). There is a mandatory 10% contingency required on all
203(k) streamline loans. This contingency is held until final
disbursement. If the contingency is not used it will be
applied to the principal mortgage balance. The repair funds
are held in escrow with TBW. No more than two payments may be
made payable to each specialized contractor or to the
borrower, if the borrower is performing the work under a
self-help arrangement. The borrower is given 3 months from the
closing date to complete all the repair/rehab work.
FHA 203(k) Streamline Loan
What does this loan permit?
Apart from disallowing borrowers to use the loan for any type
of structural repairs, the
FHA 203(k) Streamline Loan program will permit you to:
· Carry out upgrades to facilitate
access/movement for the physically challenged
· Replace/repair downspouts,
gutters and roofs
· Replace/upgrade/repair
electrical and plumbing systems
· Replace/repair tiles and
flooring
· Remodel the kitchen without any
structural repair work
· Water-proof basement including
removal of mold
· Connect to public sewage or
water system
· Purchase and install
free-standing home appliances such as a dishwasher; microwave
oven; refrigerator; cooking range and washing machine, among
others.
· Paint the interior and exterior
of the home
The FHA 230(k) Streamline Loan has been designed in a manner
that puts it within reach of all deserving, applicants. Unlike
conventional loans, it has excellent features, most reasonable
repayment periods, and affordable interest rates. Above all,
it will give you an opportunity to own your home, or improve
it in a way that fits your budget and lifestyle perfectly.
Interest Rate & Pricing
Fixed
Rate and Adjustable Rate options are available on the FHA
section of our rate sheet. There are no additional hits for
using the 203(k) streamline program
Buy
Downs are allowed. The borrower is responsible for P & I
payments based on the complete loan amount including the
repair escrow funds.
Appraisal and Closing Fees
On a
purchase the appraisal is completed as “Subject To.” It should
also state the “As Is” value in the notes section. On a
refinance TBW requires 2 appraisals: One appraisal will
reflect the current “As-Is” value, and the second appraisal
must reflect the “Subject To” (or After Improvement) value.
Both appraisals may be performed by the same appraiser,
however it is not required.
TBW FEES:
TBW
charges our normal fees with the addition of:
• Final
inspection of $100
• The Supplemental Origination Fee is
required (greater of $350 or 1.5%).
Please see Line 11 of the Maximum
Mortgage Worksheet.
Eligible
Properties
One-to-Four (single family)
residences, including HUD REO properties
Manufactured Homes are allowed
(must meet FHA guidelines)
Spot Approval for Condos is
permitted on this program (please see page 2 of
the Quick Reference Guide for condo
requirements)
Property must be 100% complete – no
partially built homes
Mortgage
Calculation
The lesser of:
Maximum (statutory) mortgage limit
for area
“As is” value plus rehabilitation
110% of “After Improved” value;
Condominiums limited to 100% of “After
Improved” value
If the borrower has owned the
property for less than one year, the
acquisition cost must be used to
determine the maximum mortgage
amount.
Eligible
Improvements/Work
Repair/Replacement of roofs,
gutters and downspouts
Repair/Replacement/upgrade of
existing HVAC systems
Repair/Replacement/upgrade of
plumbing and electrical systems
Repair/Replacement of flooring
Minor Remodeling, such as kitchens,
which does not involve structural repairs
Painting, both exterior and
interior
Weatherization, including storm
windows and doors, insulation, weather
stripping, etc.
Purchase and installation of
appliances, including free-standing ranges,
refrigerators, washers/dryers,
dishwashers and microwave ovens
Accessibility improvements for
persons with disabilities
Basement finishing and remodeling,
which does not involve structural repairs
Basement waterproofing, including
mold removal
Window and door replacements and
exterior wall re-siding
Septic system and/or well repair or
replacement
Connection to public water or
sewage system
Ineligible
Improvements/Work
Major rehabilitation or major
remodeling, such as the relocation of a wall
New construction (including room
additions)
Repair of structural damage
Repairs requiring detailed
drawings, plans or architectural exhibits
Pool Repairs
Landscaping or similar site amenity
improvements, including fence
Lead-based paint stabilization or
abatement of lead-based paint hazards
Any repair or improvement requiring
a work schedule longer than three (3) months; or
Rehabilitation activities that require more than two (2)
draws/payments.
Any work requiring a plan reviewer
Result in work not starting within
30 days after loan closing; or cause the borrower to be
displaced from the property for more than 30 days during the
time the rehabilitation work is being conducted (FHA
anticipates that, in a typical case, the borrower would be
able to occupy the property after the mortgage closing.
Contractors and
Repair Criteria
All repairs/work must be completed
within 3 months of the closing date.
Repairs must be completed by a
contractor unless the borrower can demonstrate the required
expertise/experience (ie: plumbing repairs would require a
licensed plumber, electric work would require a licensed
electrician).
The contractor making the repairs
does not have to be a licensed general contractor; however, he
must provide a resume along with two references (see client
reference form).
The cost of repair(s) must be
reasonable.
Use of Contractors:
Contractors provide estimates for
the work to be done.
Contractors provide a resume and
two references (see client reference
form)
TBW will review the contractor’s
credentials verifying jurisdictional requirements for
licensing, bonding & insurance are met (we will need a copy of
all these docs).
Each contractor must sign a
homeowner/contractor agreement.
The cost estimate(s) provided must
clearly state the nature and type of repair and cost for
completion of the work item.
TBW may require additional cost
estimates from the borrower.
Self Help (borrowers completing
work):
The borrower is required to have
the necessary expertise and experience to complete the work in
a satisfactory manner (ie: borrower is a licensed plumber and
will complete that portion of the work).
The cost of labor is included in
the repair/rehabilitation cost (in case the borrower is unable
to complete the work and a contractor must be hired).
The borrower may not be compensated
for his/her labor. No sweat equity.
The borrower must provide written
estimates of the repair/rehabilitation costs as well as
written estimates from the suppliers of the materials that the
borrower will purchase
The borrower must sign and complete
the self help agreement.
“Cost Plus” or “Time and Material”
contracts are prohibited.
Submitting Your
File
Files are submitted for automated
underwriting.
Manual Underwriting is permitted if
you receive a refer finding; however, please see guidelines
for DTI limitations and credit score requirements.
Your local underwriter and closer
will underwrite and close the 203(k)
Streamline loans; therefore,
submission is identical to all other TBW loans.
Use the “Credit Package 203k
Streamline Repair” cover sheet.
The 203k Maximum Mortgage Worksheet
is required for submission. Please be sure this form is
complete. The form can be found at http://www.nhl.gov/offices/adm/hudclips/forms/files/92700.pdf
A copy of the Homeowner/Contractor
Agreement(s) is required for each specialized contractor.
The underwriter will also need to
see estimates for materials from suppliers for the items being
purchased for the work/repairs.
Upon specific request prior to
closing, TBW will allow the first disbursement at closing to
cover for, and not exceed, actual required contractor
deposits, building permits, and/or the cost of building
materials incurred prior to construction. These must be
evidenced on contractor estimates or other verifiable
documentation in the file along with the initial
disbursement form prior to clear to close. The initial
disbursement form must be dated within 30 days of the date
the form is received by construction lending for review.
Getting to
Closing
Schedule your closing with the
submission of the on-line fee sheet. Be sure to indicate the
file is a 203(k) streamline loan.
There is a $100 final inspection
fee charged at closing.
Requesting
Disbursements
No more than two payments may be
made payable to each specialized contractor or to the
borrower, if the borrower is performing the work under a
self-help arrangement.
Upon specific request prior to
closing, TBW will allow the first disbursement at closing to
cover for, and not exceed, actual required contractor
deposits, building permits, and/or the cost of building
materials incurred prior to construction. These must be
evidenced on contractor estimates or other verifiable
documentation in the file along with the initial
disbursement form prior to clear to close.
The lender may choose to obtain or
perform inspections if it believes such actions are necessary
for program compliance and/or risk mitigation.
Please submit the invoices,
receipts or proof of payment for materials purchased and/or
labor. These documents should match the estimates that were
submitted when the file was underwritten and approved.
Please submit the applicable
(initial or second) disbursement request form along with the
invoices, receipts or proof of payment to Construction Lending
via fax or email. These receipts/invoices should match the
estimates that were submitted when the file was underwritten
and approved. Funds will not
be disbursed until the applicable
form is executed by the borrower(s), and contractor (if
applicable. The date on the disbursement request form must be
within 30 days of the date it is received by Construction
Lending.
The borrower(s) may not be
compensated for his/her labor.
Requirements for Final
Disbursement: The final
payment to the contractor(s) and/or borrower will be made
following completion of all work and release of any and all
liens arising out of the contract or submission of receipts or
other evidence of payment covering all subcontractors or
suppliers who file a legal claim.
A final inspection is required
prior to release of the final disbursement.
The final inspection is ordered by
the construction dept upon receipt of request for final
disbursement.
Borrower must sign Mortgagor’s
Letter of Completion form prior to release
The
final disbursement includes the 10% repair contingency.
Any unspent funds remaining after
the final work item payment(s) is made, must be applied to the
mortgage principal.
For more information contact Jim Garwood
260-494-1111 or Email Jim
