What Improvements Can You Make with a FHA 203K Loan For?

March 2, 2009 by Leave a Comment

renovate homes!FHA has a great program to help with renovating a new home!  It’s called the 203K program - and if you’ve been on Craigslist, you’ve definately seen, “this property is eligable for FHA 203k loan!”

It’s a great program for making up to $35,000 of improvements to the home.  Many time, foreclosed property has what Realtors refer to as “Deferred Maintenance.”  This means that people who could not afford to make their house payment – also could not afford to have the termite / wood rot repaired, or the stove fixed, or the carpet replaced… So this loan is PERFECT for those kinds of updates!

What items can you update – and which ones can you NOT do with this loan?  Here are some basic guidelines:

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
  • Repair/Replace/add exterior decks, patios, porches
  • 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
  • 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.

REMEMBER!  If you are a First Time HomeBuyer, you might qualify for a $8000 tax credit (that you don’t have to pay back!)!  Click Here for more details!

Many loan officers do not offer this program, and are not familiar with the process.  Please call Steve and Eleanor Thorne, Corporate Investors Mortgage Group in Cary, NC for details!  919-649-5058

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FHA 203K Loans in NC

February 16, 2009 by 2 Comments

FHA 203K loans are perfect for those of us who fall in love with a greatThe Green Shag has to GO! house that has this Gosh Awful Shag Carpet!  This carpet would give you a headache!  How can you buy the house if you don’t have an extra $5000 to update that 1970′s carpet, green countertops, and linoleum?  If the property is under the FHA loan limit in your county, you can purchase it with a FHA 203K loan.

Let’s say you negotiate a sales price of $100,000.  With a traditional FHA mortgage loan, you would need to put 3.5% of the $100,000 into the downpayment.  With this special FHA mortgage program, designed for REHABS, you can add up to $35,000 for “updates.”  This means that if you negotiate a price of $100,000 and you need an additional $5000 for the updates…  we base the 3.5% downpayment on $105,000!

It’s a GREAT program for folks who need to update a property!  The main things to remember are:

  • You can add a minimum of $5000 to the purchase price for improvements, including appliances.
  • You can not change the “footprint” of the house.
  • You can not borrow more than $35,000 for improvements.
  • The property must appraise for the improvements plus the purchase price, or “after improvement” value.
  • Qualifying is the same as with traditional FHA loans, so you need to have at least 2 credit scores above 600.
  • The after improvement value can not exceed the maximum loan amount for your county.
  • The checks for improvement will be going directly to the entity doing the work, only in RARE occassions will this be the homebuyer.
  • Great loans for folks purchasing foreclosed property!
  • FHA is not a loan for Investors, with the exception of those purchasing a HUD foreclosed property – when HUD allows an FHA mortgage as part of the contract.

If you have questions about a 203K loan in NC, please contact Steve and Eleanor Thorne at Corporate Investors Mortgage Group, Inc  919-649-5058.

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FHA Started Because of The Great Depression…

February 5, 2009 by 1 Comment

Housing is the most important part of getting the Economy back in shape – (according to many of the guys that met for The Global Economic Summit in Davos).   Keeping that in mind, it’s important to remember how FHA and the Government Backed “Mortgage” Programs might be able to help with our housing issues, and hopefully fix them.

When the Great Depression hit in 1929, millions of AmericFHA Started in the Great Depressionans began to loose their homes to foreclosure. Short term mortgages (3-5 years) and balloon payments were common. The banking crisis during the 1930s forced banks to call in loans, and there were no refinancing options for the average homeowner.

As a result the federal banking system was restructured and in 1934 The National Housing Act was passed. This legislation created the Federal Housing Administration (FHA) with the intent to regulate interest rates and mortgage terms on the loans that it insured. The agency purchased mortgages and insured them, allowing banks to turn around and make another loan without putting out substantial capital of its own.

Today, we have some of the same problems they had during The Great Depression, and that’s one of the reasons the Obama administration is looking at new ways to use FHA mortgage loans to help with the current crisis!  With these changes, many “vague” statements on the Internet about FHA mortgage loans could be wrong… so if you are considering purchasing a home in Raleigh, or refinancing in Cary, NC - please call Steve and Eleanor Thorne at Corporate Investors Mortgage Group, Inc to get the most up todate information! 919-649-5058

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Maximum Income Requirements USDA in Wake County NC

January 25, 2009 by Leave a Comment

The Raleigh / Cary markets are considered an MSA (Major Suburban Area??) by the Government.  So, in Wake County that’s how you will find the maximum income limits specified for Wake County. These numbers changed at the beginning of the year, and the new income limits (which are based upon the number of people in your household) are as follows:

1 to 4 person family $86,100
5 person or higher, the limit is $93,000

If you like the idea of using a USDA Home Loan to purchase a home in Wake County, and you meet the income requirements… then you also need to consider the property location.  If you are considering a property in Apex, look at this map.  If you are looking in Holly Springs, look at this line along Ten Ten – and if you are thinking about Wake Forest, check out the map here.  If you have a specific address you want to check and see if it qualifies, you can always click here!

Remember, USDA Home Loans are 100% loans with no PMI! The Wall Street Journal says, “Created in 1991 as a way to boost homeownership in rural areas, the program is being tapped by home buyers in overbuilt exurbs who are attracted to the no-money-down terms.”  (Click Here to see their interview with our client!)

For questions about purchasing a home using USDA – please call Steve and Eleanor Thorne at Corporate Investors Mortgage Group, 919-649-5058. We’re EXCITED!  It’s truly a great time to purchase a home in the Triangle!

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Cash Out of Home with FHA Refinance

January 5, 2009 by Leave a Comment

Do You Have Cash in Your Home?Have you heard the joke about the way you see your house, and the way the tax guy sees it and the way your appraiser sees it?

Well, it’s pretty funny… because everyone has a difference perspective!

If you believe you have some equity in your home, and you would like to take cash out, FHA might be your best bet! Not on a home like the one above (of course), the maximum FHA loan in Wake County is now $271,050… but FHA now allows you to cash out up to 95% of the value of the home!

FHA allows you to use this money for investments, to take a vacation, pay off bills, home improvements… almost anything you need!  Some folks think rates will be at 4.5%!  To find out how to get your 4.5% mortgage - click here!

Call us for details, and the current interest rates! Steve and Eleanor Thorne, Corporate Investors Mortgage Group, 919-649-5058.

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Are You A Waitress? Wanna Buy a House!?

January 5, 2009 by Leave a Comment

I just wrote about a waitress in Garner, NC who was able to purchase a home, with a new roof, new windows, carpet, and HVAC system!  It cost her less than $3000 – and her total monthly payments are LESS than $500!

Best of all… she also qualifies for a $7500 Tax Credit from Uncle Sam!

We used a FHA 203K loan for her – which can be complicated – but it’s a GREAT program!

WOW! If you want to purchase, don’t let anything stand in your way!  Give me a call!

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Documents You Need 4 A Loan

July 22, 2008 by 1 Comment

A customer who is quickly becoming a friend of mine asked me recently what she needed to gather for a loan application - she’s moving to a new area (the company is relocating them) and before she packed everything up and moved into corporate housing (“Hey,” she said, “Maid Service and it’s free! Are you kidding?  I’m taking every day we get in Corporate Housing!”)!  Here’s my advice to her:

Great News!  The documents needed for a FHA loan are VERY similar to those you would need when applying for most other types of financing these days!  Here’s our “Scavenger Hunt” list!

  • Most Recent pay stubs for 1 full month.
  • The name, address and telephone number of someone who can verify employment.  (We will be sending them a form to complete)  We will be verifying your income for the last 2 years.
  • If either of you are now, or have been self-employed, or earned income OTHER THAN W-2 income in the last two years, we will need full copies of your tax returns.  If you ONLY earned W-2 income, we will need a copy of the W-2s for the last 2 years.
  • Any data regarding the relocation package, and specifically what NASA is covering.
  • If you owned property, and you’ve sold it, we’ll need a copy of the HUD-1 Settlement Statement.  If you own a property that is leased, then we will need a copy of the lease agreement.  We need to document 2 full years of residence.
    If you’ve been renting during the last 2 years, we will need the name, address and telephone number of the landlord.
  • We need copies of bank statements for the last 2 months.  If you are changing banks, remember that we will need to verify the money going out of one account and into another! (PLEASE try not to have any NSFs!)  We will need ALL pages of the bank statements.
  • If you are receiving a gift for the your down payment – we will provide you with a gift letter to have completed.  We will also need to verify that the person giving you the gift has the money in their account.  In the event that you, or the donor, do not keep money in a bank – we do have other options, so you will need to speak with us directly about that situation.
  • In the event that you do not have sufficient “lines” of credit, we can look at “alternative lines.”  This means that if you have only 1 credit card, and no other credit, we will likely need to use your cell phone, and your insurance (for instance) to establish that you pay your bills on time.  If you think you might be in this situation, please have the last statement available for us.

In every single loan file, there are other items that we might also request… it’s difficult for me to anticipate every different situation… for instance, if you sold a car before moving, and deposited $5000 from that sale – we are going to ask for evidence of the sale… but for the most part… this should be a VERY complete list.

Congratulations on your move, and your new opportunities!  I know this is an exciting time!

If you are considering a home purchase in Garner, or your buying a home in Cary, please call Steve and Eleanor Thorne, Corporate Investors Mortgage Group, 919-649-5058

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FHA Compensating Factors

June 11, 2008 by 5 Comments

FHA LoansFHA (and all government underwriting for that matter) is somewhat different from other, more automated systems of loan approval. On an FHA loan you can actually have a real person look at the loan and apply the golden rule – not just a bunch of meaningless stipulations.  This is often the difference in making the dream of homeownership a reality… because not everybody has a perfect credit history, with a 20 year job, and 2.3 kids!

With FHA – there’s the magic of  COMPENSATING FACTORS. Some of our favorites include:

1. Borrower has already demonstrated they can afford this house payment. No payment shock, or at least a payment shock of less than 10% is a great offsetting factor for slightly higher debt ratios or a job history that is not as solid as we’d like to see.

2. Borrower can afford to put 10% down. I’m not talking about a gift (which FHA allows) I’m talking about a good old fashioned asset, and a behavior to save.

3. Conservative use of credit. Does the borrower have a 3 year old car that’s paid off because they don’t like having payments?  Do they pay their credit cards off every month?

4. The Borrower will have at least 3 months of PITI in reserves after closing on their Primary Residence.  FHA does not require reserves to insure a primary residence (unlike Conventional loans) and this additional “padding” can be a great offsetting factor.

5. Borrower has potential salary increases that you are not counting in your Debt ratios… if the employer indicates that the borrower has a review and potential raise coming up in the next few months this is a great off-setting (or Compensating) factor.  (It’s difficult to get an employer to put that in writing for obvious reasons.)

FHA requires that part time employment have a history of at least 12 months. Therefore if you have a  part time job with 8 months of history (for instance) we could not use those in the debt ratios – but we could use that income as an offsetting factor for higher ratios.  Rent from potential roommates, which would be logical income even with a lease agreement, is rarely considered in our experience.  8o(

If you have questions about purchasing a home in the Triangle - please call Steve and Eleanor Thorne at Corporate Investors Mortgage Group in Raleigh, NC 919-649-5058

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Step 2 Homebuying in Cary

June 7, 2008 by Leave a Comment

In a previous post we explored the whole “First the Loan, then the Home.” Mentality of Home Shopping. The idea is that if you begin shopping for a $175k home because you used an online calculator and figured that’s what you could afford… but some reason you DON’T qualify for that much… you’re never going to find a $150 house that looks like the $175K’s.  Does that make sense to you?

Lending is so very complicated, that you really really need to get pre-approved by a REAL PERSON! (preferrably me!)

SO we’re on to Step 2! ”Now that you and the agent know your budget, there are still questions about family, hobbies, interests, floor plan layouts, decorating tastes, schools and LOCATION which must be addressed.  Once these questions are answered, then you can see what is on the market.  In some prices rages, there are more buyers than listings and that is where your patience and the Realtor’s persistence come into play.

With today’s technology, Realtor’s have access to the constantly changing market which helps them keep an eye out for houses that meet your needs! ”

Let’s go back and re-read that highlighted section.  See that “R” word?  Realtor?  Guys!  You could cut your own hair… but why would you?  As a buyer, a real estate agent does not COST you anything!

We work with some of the TOP agents in the area.  If you don’t have one yet, look at one of these!

If you are considering buying a home in Raleigh or purchasing a home in Cary, contact Steve and Eleanor Thorne, Corporate Investors Mortgage Group, in Cary, NC  919-649-5058

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The FHA Bailout Plan

June 4, 2008 by Leave a Comment

Congress, and specifically the NC delegation and Rep. Barney Frank have a new plan to stop the “bleeding” for many American Families who are upside down in their homes.  This is really not so much a problem for those of us with property in the Triangle – but for folks moving here (and by my unscientific calculations almost 65% of the mortgages are currently being written for folks MOVING HERE), it could be a great deal.

The crux of the problem, as seen by Franks, are the number of new vacant homes that are competing on the market with “used” re-sale homes.  We need to get folks into those new homes, draw the inventory down – and Badda Bing – no more Housing Crisis.

How he proposes to do this is with a 300 Ba Ba BILLION dollar overhaul of FHA which creates a complicated system whereby the banks take a little loss – the seller takes a little loss and the government takes the risk.

IMHO there’s no chance this will make it’s way through Congress prior to the election - but the provisions in the bill – which expand the FHA authority are helpful, and if passed, this could be the end to the Housing Crisis.

The question we must all weigh is weather or not we are willing to take on this additional risk to our collective “Uncle Sam” balance sheet.  It could backfire, drive the dollar lower… and that would put gas at what – $6 bucks a gallon???

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