FHA 203k LoanHelp your clients buy their dream home

Link to 203K Dream Home Video

See link below for video

AgendaWhat is an FHA Loan?What is a FHA 203k Loan?

StreamlineStandard/Full

Why 203k?The Benefits of a 203k Loan?The 203k Process (Streamline versus Standard/Full)

Pre-QualificationPre-SettlementPost-Settlement

How Will 203k Loans Help You Grow Your Business?Why PRMI?Questions / Answers

What is a FHA Loan?The FHA does not actually provide mortgage funds, but instead provides lenders with insurance that protects them against loss in the event of homeowner mortgage default.

This reduces the lenders’ risk, allowing them to offer loans to buyers with less than perfect credit and with lower down payments.

Lenders must follow specific guidelines established by FHA to assure qualification for insurance.

What is a FHA 203k Loan?A purchase or refinance loan for individuals who want to rehabilitate, remodel or repair a damaged home so they can live in it as their primary residence.

Streamline 203k• Up to 35K in total rehab (includes contingency reserve & associated fees.)

• No structural changes or repairs• Can be 100% cosmetic improvement• Refinance option available

Standard/Full 203k• No limit to the amount of rehab (minimum 5K)• Structural changes allowed• Loan amounts up to County limits

Why 203k?Allows homebuyers to finance the purchase price, as well as, the cost of renovations.

203k allows average homebuyers to take advantage of distressed properties, add a little “TLC” and make it their own!

Catch 22 – Bank won’t lend money to buy the house until repairs are complete and the repairs can’t get done on the house, until house is purchased.

The Benefits of a 203k Loan?• One loan and one set of closing costs

• Closing costs and interest rates are equivalent to other types of financing

• Financing based on the as-completed value of the home

• Standard FHA guidelines apply

• Low down payment requirements

• Buy or refinance a home with up to four units

• Monetary gifts from family members toward the down payment are allowed.

Streamline 203k Example

Contractors estimate is $30,000Contingency money is 15% or $4500Title update $150Inspection update $150

Total of this is $34,800

StreamlineThe 203k Process: Pre-Qualification

• Meet with 203k specialist – Jim Conway, Greg Carll and/or Shane Hancock to get pre-qualified

• Shop for houses or evaluate your current home• Determine whether the project is cost justified – will the

property valuation after renovation support the cost of the project.

Ex. Spending $20K to renovate your kitchen adds $50K in value is a cost-justifiable project.

StreamlineThe 203k Process: Pre-Settlement

• Sign a sales contract• Complete your loan application• PRMI will set up contact with Renovation Ready• Renovation Ready will contact 203k HUD consultant

(Al Davis) to complete work-up / feasibility study• Select your licensed Contractor and obtain bid

• Realtor / Contractor relationship• Appraisal completed

StreamlineThe 203k Process: Post-Settlement

• House is transferred to buyer (new home purchase) and renovation funds are placed in escrow account

• Renovation Begins• Must begin within 30 days of settlement• Mortgage payment begins• At closing, 50% of total bids are dispersed to borrower and

contractor• When work is completed, contractor contacts Renovation

Ready• Final Inspection completed• Disperse remaining 50% of funds• At conclusion of project, final title update will be completed

Standard / Full 203k Example 1

Contractors estimate is $42,000Contingency money is 15% or $6300Title update $500Inspection update $500

Total of this is $49,300

Example 2Contractors estimate is $15,000Contingency money is 15% or $2250Title update $150Inspection update $150

Total of this is $17,550 *structural issues with property

Standard / FullThe 203k Process: Pre-Qualification

• Meet with 203k specialist – Jim Conway, Greg Carll and/or Shane Hancock to get pre-qualified

• Shop for houses or evaluate your current home• Determine whether the project is cost justified – will the

property valuation after renovation support the cost of the project.

Ex. Spending $20K to renovate your kitchen adds $50K in value is a cost-justifiable project.

• Sign a sales contract• Complete your loan application• PRMI will set up contact with Renovation Ready• Renovation Ready will contact 203k HUD consultant to

complete work-up / feasibility study• Meet with a 203k HUD Consultant (Al Davis)

• Review the HUD minimum safety standards• Inform you if project is cost-justified based on proposed work and

renovation funding available• Identify require permits to complete renovation• Complete the Work Write-Up which will assist Contractor

• Select your licensed Contractor and obtain bid• Realtor / Contractor relationship

• Appraisal completed

Standard / Full The 203k Process: Pre-Settlement

Standard / Full The 203k Process: Post-Settlement

• House is transferred to buyer (new home purchase) and renovation funds are placed in escrow account

• Renovation Begins• Must begin within 30 days of settlement• Mortgage payment, unless financed, also begins• As work is completed, Contractor informs Renovation Ready

who will inform 203k consultant• Work inspected by buyer and 203k consultant• Satisfied complete - Contractor is ready for payment, draw

request from escrow is made (minus 10% contractor holdback)• Up to six draw requests can be made during renovation

• At conclusion of project, final title update will be completed• 10% Contractor holdback is released to the contractor

How Will 203k Loans Help You Grow Your Business?

• Any house can be your client’s dream home• Great for clients who want specific items in a home

that are hard to find• 90% of people who purchase a home repair or

remodel after they move in• Everyone has projects they plan on doing but never

get around to• 203k allows buyers to complete their dreams before

they move in• When ready to re-list, updates are done!

Why Primary Residential Mortgage, Inc. (PRMI)?

• We created and service our 203k product • No M&T, Wells Fargo, etc…• Processing / Underwriting / Closing – all done here!• Margie Winkelman – head 203K Underwriter works in our

Towson, Maryland office.• Over 200 Branches nationwide• Underwritten thousands of 203k loans – locally/nationally

• We are the hub for the 203k loan product

203k Questions?

Primary Residential Mortgage, Inc.1220 A East Joppa Road, Suite 118,

Towson, MD 21286410-663-2222

lnagel@primeres.comwww.easymdmortgage.com

PRMI NMLS: 3094. PRMI is an Equal Housing Lender. DISCLAIMER: Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. Maryland Department of Labor, Licensing, and Regulation, Commissioner of Financial Regulations, #5511