The FHA 203K LOAN
If you are planning to buy the house but just could not find the perfect one? Or you found the house you like but in a neighborhood that you don’t like, or perhaps the neighborhood is just great but the house needs repair and rehabilitation? If you’re like all the other homeowners who are very particular with safety and security and who aim for some peace of mind when they sleep at night or when they leave their kids at home, then you would probably choose the “needs-repair” home in a safe and nice neighborhood than the nice house in a “not-so-safe” neighborhood.

At least there is a solution for the “needs-repair” home than the “not-so-safe” neighborhood. And the solution to this is the FHA 203K loan program which provides homebuyers the opportunity to buy and do repair on a property without exhausting their own savings. A homebuyer may buy a home and include all the necessary expenses for the repairs and the desired updates or even to fully renovate it, all in a thirty-year fixed loan. The repair will start after buying the property utilizing the funds that were set aside by the bank. There are 2 kinds of 203K loans; the one is the full 203K which is for larger projects that require structural improvements where an HUD consultant is required.

The other type is the streamline 203k which is for less extensive repairs and improvements and an HUD consultant is not required. Maximum cost that could reach up to $35,000 but does not include structural costs.

The eligible properties for the 203K are one to four family dwellings that have been completed for one year and the number of units must be acceptable according to local zoning requirements. Homes that have been demolished or will be removed as part of the rehabilitation work as long as the existing foundation remains in place. An existing modular home on another site could be moved to the mortgaged property but only after inspection.

About 203K FHA
It is a loan offered by the Federal Housing Administration designed to revitalize the community by allowing buyers to purchase and a rehabilitate a damaged property. This is for homes that need structural repairs that may include: room additions, bathroom remodeling, flooring, roofing and air conditioning system.

Application Process:
Look for an FHA approved lender who finances 203k. Provide necessary documents.
Go through bidding process with a cap of $35,000.
Submit improvement estimate.
Submit appraisal.
Upon closing the transaction you have 6 months to complete repairs.
Repairs must commence 30 days after closing.

Disbursement Process:
Upon closing, the funds for the purchase of the property is given right away.
Funds for repair which is based on the bids and estimates of the contractor will be put in an escrow and the funds will be paid to the contractor in draws as the construction/repairs progresses.
Final payment is given after inspection and completion of the project.

FLOW PROCESS
STEP 1: BENEFIT BRIEFING CALL
A telephone call is initiated to find out whether our client will be purchasing new property or refinancing an existing mortgage.
Completing the application process to confirm client’s eligibility for the loan would be faster with better cooperation and accurate information from the client.

STEP 2: LOAN SAVER DIRECT PACKAGE
A package that will contain the loan application and the list of requirements is sent to the client for review and completion.
The client fills out the forms, and signs all the disclosures.
The client gathers all the documents necessary for the loan.
The client mails, faxes, or emails the documents to our loan processing team.

STEP 3: QUALIFICATION
Loan Saver Direct Underwriters reviews the application and all the documents submitted.
The Loan Officer discusses with the client the benefits gained from refinancing. He also sets the right expectations by disclosing all the loan details and fees involved.
If the client is agreeable to the terms, then we will commence with the next step of the loan process.

STEP 4: OPENING ESCROW AND LOAN PROCESS
Loan Saver Direct opens escrow and processes the loan.
An appraisal is requested by the lender, and the client is responsible for paying the cost involved, ranging between $450 to $475.
Final loan documents are released, and the client signs the loan documents with a notary.

STEP 5: CLOSING
The client brings funds to escrow if necessary.
The final closing package from escrow with the new loan terms and closing statement is provided to the client.

Table of Requirements:
Employed:
Latest (1) one month Pay stub
Last 2 years W2
Last 2 years Tax return
Last 2 months Bank Statement
Copy of I.D.
Copy of Social Security Card
For College Grads with less than 2 years employment must present degree certification prior to employment.

Retired:
Social Security Award Letter
Pension Letter
Last 2 years Tax return
Tax exemption letter if Tax has not been filed
Copy of I.D.
Last 2 month Bank Statements
Copy of Social Security Card

Self-Employed:
Year to Date Profit and Loss
Business License or Article of Inc.
Last 2 years Tax return
Tax exemption letter if Tax has not been filed.
Copy of Social Security Card.
Last 2 month Bank Statements
Copy of I.D.

2 Types of 203K FHA Loan:
203K Streamline
This is for less extensive improvements that does not require the services of a licensed professional like an architect, engineer or a contractor.

203K Standard
Intended for projects that involve structural changes like exterior grading, room additions, and projects that require engineering or architectural expertise as well as licensed contractors.

Repairs that Qualify:
Heating, ventilation and air conditioning
Plumbing
Disability access
Roofing and Flooring
Kitchen remodeling
Energy conservation

Approved Amount of Rehabilitation:
Purchase Transactions mortgage basis, lesser of:
“As-is” value plus rehabilitation cost” or “purchase price plus rehabilitation cost”.
110% of after-improved value (100% for condominiums including site-condos).

Refinance Transactions mortgage basis, lesser of :
Existing debt plus rehabilitation cost plus prepaid and closing cost.
97.75% of “as-is” value plus rehabilitation costs.
110% of after-improved value (100% for condominiums including site-condos)