FHA 203K IS ONE LOAN FOR A PURCHASE OR REFINANCE, THAT ALSO FINANCES HOME IMPROVEMENTS. WHILE THE FHA 203K HAS MANY ADVANTAGES, ITS PRIMARY BENEFIT IS IT ALLOWS HOME LOANS CLOSED WITH UNFINISHED REPAIRS. FHA 203K Outline OriginatorMax.com

Menu OriginatorMax.com 203K Loan Basics 203K Loan Types  Full 203K Full 203K  Streamline 203K Streamline 203K Contractor  Requirements Requirements  Final Disbursements Final Disbursements  Draws Draws HUD Consultant  List of FHA 203K Consultants List of FHA 203K Consultants  Consultant Responsibilities Consultant Responsibilities Property  Guidelines Guidelines Repairs  Budget Determination Budget Determination  Contractor’s Bid Contractor’s Bid  Documentation Documentation  Minimum Repair Requirements Minimum Repair Requirements  Repair Changes Repair Changes  Who Can Adjust Repairs? Who Can Adjust Repairs

STREAMLINE 203K  Finance repairs plus reserves and Fees up to $35,000  Due to reserve and fee requirements amount available for repairs is about $30,000  Repairs Non structural only.  Contact lender to verify their versions of “Structural”.  No Landscaping, Driveway or Walkway repairs  No FHA 203K Consultant is required.  There are two draws.  Contractor receives up to 30% to 50% up front and the balance when work is completed and signed off by owner. OriginatorMax.com

FULL 203K  Allowed Repairs  Almost any permanent, non-luxury improvement.  Subject to local codes and zoning.  FHA 203K Consultant is required.  Fees for Architectural Drawings, Inspections and Permits can be included in the loan.  Contractor receives no money upfront and up to five draws based on work completed. OriginatorMax.com

LOAN BASICS Minimum Loan:  Full $5,000  Streamline $0 Maximum Loan: FHA’s County maximum. Loan to Value: 96.50% of the Improved Value. Qualification:  Standard FHA Guidelines (See OMax for Lender Overlays) Reserves from 10% to 20% based on age of property.  Unused reserves are applied to remaining loan balance. Loan can include up to six months payments if home is uninhabitable. OriginatorMax.com

PROPERTY Structure completed for at least one year Occupancy:  Owner Occupied Only: Types:  One to four units, PUDs, FHA approved Condominiums,  At Lender’s Option:  Manufactured Homes built after June 15, 1976  Mixed Use Properties. Improved property value must be comparable to similar properties in the area. OriginatorMax.com

Who Can Make Repairs New owners can make repairs only if they are qualified and licensed.  FHA rules prohibit Owners being paid for their labor.  Owners can only finance materials. A licensed contractor is required in most cases.  The contractor should be experienced with FHA 203k.  Always: require references,verify Licensing and $1M Bond.  IMPORTANT: Contractors must be FINANCIALLY ABLE to carry the project using their own cash due to possible disbursement delays. OriginatorMax.com

Repair/Improvement – Minimums Repairs and Improvements must begin with 30 days of closing and be completed within six months. ALL existing health and safety issues must be cured. Repairs and improvements must comply with HUD’s Minimum Property Standards Repairs must meet all local building, zoning and other codes. OriginatorMax.com

Step 1 – Determine Repair Budget Find at least three homes comparable to the improved subject property to determine the approximate subject property’s improved value. Difference between the subject property’s Listed or Offering Price and its comparative improved value is found to determine the repair budget.  Example: Comparables show an Improved value of $300,000 and the property is Listed for $250,000  $300,000 - $250,000 = $50,000 Maximum Repair Budget. OriginatorMax.com

Determine Repair Budget Continued If there’s insufficient budget to make the required repairs the price of the subject property must be negotiated down to make room for the required budget.  A 203K contractor should consult on the repair estimate. OriginatorMax.com

The Offer The purchase offer is written as any other FHA loan except, the offer is subject to Buyer and Property qualifying for FHA 203K Financing. Qualified FHA 203K Contractor prepares formal repair bid. Full 203k:  FHA 203K Consultant reviews the contractor’s bid for not allowed repairs and inspects for additional repairs mandated by FHA.  The FHA 203k Consultant’s Work Up is submitted to the lender. Streamline 203K:  The Contractor’s formal bid is submitted to the lender. OriginatorMax.com

Hud 203K Consultant The consultant is responsible for the HUD Work Write Up and to facilitate Draws and Inspections.  HUD Work Write Up Includes:  Clear, concise project specifications,  Construction cost analysis,  HUD required Draw Request forms,  Preparation of Contractor Bid packages, Find FHA 203 Consultants OriginatorMax.com

Contractor’s Bid Contractor Bid must be dated within 120 days. Contractor Bid must reflect:  Borrower(s) name.  Property address.  Itemized costs for materials, labor, permits, etc.  Estimated completion date within 6 months.  Signatures of Licensed Contractor and Borrower(s).  Full 203k:  Detail of structural items and their costs. OriginatorMax.com

Repair Changes Borrower:  After approval, any changes to the approved Work Write-Up document and made a part of the Rehabilitation Loan Agreement, must be approved prior to the change using HUD form FHA 203 Consultant  Can make changes to the contractors bid and borrower’s requirements based on FHA property or code requirements. Appraiser  Can add repairs based on observation. Underwriter  The underwriter has final word and can make changes based on lender requirements. OriginatorMax.com

Required Documents Contractor:  Copies of License and Bond.  Resume or letter of experience  Three work related references  Contractors W-9 completed and signed. Owner Made Improvements.  A copy of the Homeowner Self Help form signed and dated. Copy of permit(s) when required. Rehabilitation loan agreement. Home Owner / Contractor Agreement. Borrower Acknowledgement (HUD A) 203k Worksheet (HUD 92700) OriginatorMax.com

Full 203K Contractor’s Draw Process The HUD Consultant inspects work before any monies are released. If permits are required, the first draw will typically NOT be released until all the permits are in place. Once a scheduled portion of the work is completed the HUD Consultant inspects it and if everything is satisfactory a draw will be received in 3-5 business days. OriginatorMax.com

Final Disbursement Once all work is completed the following items must be submitted to the lender to process of the final disbursement:  Signed and dated Homeowner’s Notice of Work Completion  Final Contractor Invoices or Self-Help Receipts  If a contractor(s) performed any or all work:  Contractor(s) final invoice on company letterhead. Format should be: Initial amount, minus the amount received and what is now due. If any additional work was completed, this must be broken down by cost of labor and material.  If the owner signed a Self-Help Agreement:  Owner must submit paid receipts for all permits, fees, building materials and building supplies  Proof of payment; bank statements, canceled check or credit card receipts showing owner’s name  Itemized spreadsheet detailing completed work and costs OriginatorMax.com