FHA 203(k) vs FNMA Homestyle – Info You Should Know

contractorThe FHA 203(k) Standard Rehab Loan, the FHA Streamline 203(k) and the FNMA Homestyle Renovation Mortgage are single-close mortgage that enables borrowers to purchase a home that needs repairs, or refinance the mortgage on their existing home and include the necessary funds for renovation in the loan balance. The loan amount is based on the “as-completed” value of the home not the present value
Here’is an overview of what you should know about each program.

FHA 203(k) Standard
•  All FHA(203k) loans require a FHA Approved Consultant who acts as a “construction manager” to oversee and inspect the rehabilitation project from start to finish. Consultant works with the borrower’s contractor to write-up a cost estimate and work plan  for the project
•  Used for the purchase or refinance of properties needing major structural repairs. Any repair is acceptable; however – health and safety items and building code violations must be addressed first.
•  Minimum $5,000 requirement for repair cost. The loan amount including purchase price and rehab cost cannot exceed the FHA maximum loan amount for the county.
•  Cost of rehab includes: energy package and lead paint abatement costs, consultant fees, architectural and engineering fees, contingency reserves, inspections and up to 6 months PITI if homeowner can’t live in property during the rehab.
•  Maximum repair amount is 110% of the after-improved value
•  Maximum LTV 96.5%
•  Eligible Properties include:
◊  1-4 unit owner-occupied properties
◊  Owner-occupied FHA approved condos in a 1-4 unit structure are eligible when   the funds are being used only to renovate the interior space of the subject unit.
◊  Mixed-use owner-occupied properties are eligible when the rehab funds are used only on the residential sections and access areas leading to it
•  Project must begin within 30 days of loan closing and must be completed within 6 months. Rehab projects lasting more than 6 months are not eligible.

FHA (203k) Streamline
Used for the purchase or refinance of properties needing minor repairs or upgrading
No Minimum Repair cost. Maximum repair cost of up to $35,000 for non-structural repairs only
•  Eligible Properties include:
◊  1-4 unit owner-occupied properties
◊  Owner-occupied FHA approved condos in a 1-4 unit structure are eligible when   the funds are being used only to renovate the interior space of the subject unit.
◊  Mixed-use owner-occupied properties are eligible when the rehab funds are used only on the residential sections and access areas leading to it
A 203(k) Consultant is not required in most cases
Maximum LTV is 96.5%.
Contractor must be licensed and bonded. Borrower is allowed to choose their own contractor as long as they meet FHA guidelines. Contractor provides written work plan and cost estimates.

FNMA Homestyle
•  FNMA Homestyle is the only rehab loan product that allows for a relationship between the borrower and the contractor.
•  FNMA Homestyle is an ideal product for borrowers who have loan amounts which exceed FHA county limits or have an LTV of less than 80%.
•  Any type of structural and non-structural repair is eligible as long as it is permanently affixed to the property and adds value.
•  Eligible properties include: 1-4 unit principal residences; one-unit second homes; one unit investor properties including condos, co-ops and PUDS.
•  Renovations must be completed within a 12 month period.
•  Maximum Repair amount is 50% of after improved value.
•  Maximum LTV is 95% for one-unit principal residence; 85% for 2 unit principal residence; 75% for 3-4 unit residence and 90% for second homes.
•  All renovation work must be performed by a licensed contractor. The borrower must choose his or her own contractor to perform the needed renovation, subject to the lender’s determination that the contractor is qualified and experienced
•  Under Fannie Mae’s “Do It Yourself” repair option, which is available for one-unit properties only, the borrower may complete repairs that the lender reviews and approves in advance.

Many of the existing homes that are listed for sale in today’s markets are functionally obsolete because they are older and don’t have the amenities today’s buyers are looking for in a home.

The answer is you can get a mortgage to buy a house and fix it up at the same time using the same loan Renovation financing otherwise known as FHA 203K and FannieMae HomeStyle loans; provide solutions for this stalled market segment. The renovation financing revolution is in full bloom as home buyers are taking properties in need of attention and turning them into dream homes with help from the FHA and Fannie Mae.prequal-vs-preapproval

Call  Rick Cignoli @ 860.945.9284 to discuss the right mortgage option for your family and to take advantage of my FREE Mortgage “Jump Start” Pre-Approval service

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https://www.forbes.com/sites/markgreene/2016/01/19/203k-and-homestyle-mortgage-loans-the-renovation-revolution/#6f027b71e1a8

 

 

The FHA 203(k) Loan–Turning “Fixer-Uppers”into Dream Homes

The purchase of a house that needs repair is often a catch-22 situation. The bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.

203k 2The FHA 203(k) Rehab Loan Program can help you with this dilemma. It allows you to purchase a property plus include in the loan the cost of making the repairs and improvements with a single mortgage. It is available to persons wanting to purchase or who own a 1-4 family owner-occupied property.

The total amount of your mortgage will be based on the projected value of your home after the renovation is complete, taking into account the cost of the work to be done. A portion of the loan is used to buy the new home, or in the case of a refinance, to pay-off any existing debt. The remainder of the loan proceeds are placed in an account for your benefit and released in stages as the rehabilitation work is completed.

Here are the Steps to a Successful Closing of a FHA 203(k) Loan:

• A potential homebuyer locates a fixer-upper and executes a sales contract after doing a feasibility analysis of the property with their Realtor. The contract should state that the buyer is seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the lender.
• Within 7 to 10 days of signing the purchase agreement. the buyer should obtain an inspection of the property by a professional Home Inspector, a termite company and a well/septic inspector (when applicable) to make sure there are no unseen problems with the property.
• The buyer is also required to work with an  FHA Approved Consultant who will inspect the property along with the borrower to determine what repairs are needed to meet minimum FHA requirements. The borrower will also indicate any additional work they wish to have done to the property.
The Consultant will provide the buyer with a Work Write-up/Specification of Repairs which includes the Consultant’s cost estimate for completion of the project.
• The buyer will then select a contractor to perform the work. All rehab work must be performed by an experienced, licensed contractor and satisfy all lender requirements. All subcontractors must be licensed as well. FHA does not allow borrowers to use relatives as their contractor. “Self-Help” is not allowed either.
• A Homeowner/Contractor Agreement is executed between the borrowers and the contractor to ensure that a contractor is in place who will be able to complete the work for the loan amount.
The Homeowner/Contractor Agreement will include a detailed proposal (Plans and Specs) from the contractor showing the scope of the work to be done and including a detailed cost estimate on each repair of improvement of the project. This estimate must ultimately match $ for $ with the Consultant’s Work Write-up/Specification of Repairs. All work must be completed within 6 months of closing the loan.
• The Buyer is then ready to submit a formal application to the lender. The loan amount will include the agreed on purchase price for the property plus the estimated cost to rehab the property. The amount of the loan could also include a contingency reserve of 10% to 20% of the total remodeling costs and would be used to cover any extra work not included in the original proposal. It can also include up to 6 months of mortgage payments if the borrower is not going to live in the property during construction.
♦ The total loan cannot exceed FHA’s maximum mortgage limit for the        area.
♦  The 203k loan requires a minimum 3.5% down payment based on    the total amount of the home’s purchase price plus the cost of repairs.
• An “After Improved” Appraisal is ordered to determine the value of the property after the project is completed as compared to similar properties in the neighborhood.
• When the borrower passes the lender’s credit-worthiness test and the project meets FHA Guidelines, the loan closes for an amount that will cover the purchase or refinance cost of the property, the remodeling costs and the allowable closing costs.
• At closing, the seller of the property is paid off and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.
• The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments (PITI) put into the cost of rehabilitation if the property is not going to be occupied during construction, but it cannot exceed the length of time it is estimated to complete the rehab.
• Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of the job, 10% of each draw is held back; this money is paid after the lender determines there will be no liens on the property.

ELIGIBLE 203K IMPROVEMENTS
FHA 203k loans are offered only on 1-4 family owner-occupied properties. A full FHA 203k allows for complete renovations and rehabs of properties where the improvement cost exceeds $35,000. A Streamline FHA 203k may be used when the cost of the project ranges from $5,000 to $35,000.
The types of Improvements that borrowers may make using full FHA 203k financing include:

• Structural alterations and reconstruction
• Repair or replacing well and/or septic system
• Roofing, siding and gutters
• Major Landscape work and site improvements
• Enhancing accessibility for a disabled person
• Additions
• Kitchen and Bathroom renovations home repair 2
• Replace/Upgrade existing HVAC systems
• Replacement windows and doors
• Finish Basements and Waterproofing
• Plumbing and Electrical upgrade
• Appliances, Floor and Wall covering
• Elimination of health and safety hazards
Luxury Items that do not become permanent Part of the property are not eligible for improvements include; swimming pools, tennis/basketball courts, and hot tubs.

If you want to buy a home that needs repairs, FHA’s 203(k) may be a good option for you.Get Pre-Approved
Reach out to me with any questions or concerns you may have about the program and to take advantage of my FREE Jump Start Mortgage Pre-Approval

 

 

 

148 Northwest Drive Watertown CT 06795 For Sale

I live around the corner from this beautiful 4 bedroom colonial and would be happy to welcome you to the neighborhood with the Courtesy, Competency and Concern you’d expect from a seasoned mortgage professional. I can help you live comfortably and financially secure in this home with the right mortgage for your needs at the right rate.
148 Northwest drive
Move right in to this 4 Bedroom, 2 ½ Bath Colonial featuring a spacious Eat-In Kitchen, Formal Living Room, Formal Dining Room, Family Room with Cathedral Ceiling and Gas Fireplace. Includes new Bamboo Hardwood flooring, updated Baths, First Floor Bedroom or Office, Master Bedroom with His and Hers walk in closets, and a 2 car garage.

https://www.trulia.com/property/3201933678-148-Northwest-Dr-Watertown-CT-0675

Reach out to Me @ 860.945.9284 to discuss the right mortgage option for your family and to take advantage of my FREE “Jump Start” Mortgage Pre-Approval service.

Then reach out to Ann Martere, Realtor at annemartere@optonline.com or 860.766.7330 to schedule a showing and be ready to make an offer.

Credit Tips for Home Buyers, and Home Owners, to Consider

good-credit-vs-bad-creditYour Credit Score is the most obvious factor in your ability to getting your Mortgage Application approved. The higher your score, typically the less risk you pose to lenders and the lower your mortgage interest rate. So how is your credit score determined? And how can you improve it?
Here are some Credit Tips for Home Buyers to Consider:

• Consumers can obtain free credit score models on-line all with different ranges.
These scores can differ from the FICO score models used by mortgage lenders

      ♦ The Only Website authorized by law to provide the FREE Annual Credit
Report you are entitled to under the Fair Credit Reporting Act
annualcreditreport. com. 

• Mortgage accounts add more points to the FICO score since they are the most
difficult type of credit to qualify for.

• The higher the credit score, the more it drops after a delinquency.
• Most negative info remains on your credit report for 7 years.
• Revolving credit balances can have an extreme impact on credit scores.
     ♦ Revolving credit is classified as credit cards, overdraft protection on checking
accounts, and other lines of credit

• Most experts recommend keeping your overall credit card utilization below 30%.
Lower credit utilization rates suggest to creditors that you can use credit r
responsibly without relying too heavily on it, so a low credit utilization rate may
be correlated with higher credit scores.
You can calculate your credit utilization rate by dividing your total credit card
balances by your total credit card limits. The resulting percentage is a
component used by most of the credit scoring models because it’s often
correlated with lending risk.

• Closing revolving credit cards can reduce scores dramatically since it can alter the balance-to-limit ratio.
      ♦ All of the accounts on your credit reports count, even if they are closed.
• The older the average age of credit, the better it is for FICO scores.
• Seasoned credit is credit accounts that are over 2 years old.
• Consumers with the strongest credit scores tend to have a mix of different
types of accounts.
The key is to manage all these accounts responsibly. Credit scoring models are
looking to see if you can handle all different types of financing as they assess
your creditworthiness.

• When consumers find errors on their credit report, they should speak with a credit expert before calling the creditor directly.
Consumers often rush to call creditors about errors on their credit  report
thinking it will help them. Often times, they may make a statement that
confirms their guilt or makes it more difficult to reach a successful resolution.

Resources: Northshore Advisory. www.northshoreadvisory.com

 

 

What To Know When Choosing the Right Real Estate Agent

_real_estate_agent3
From beginning to end, it is a real estate agent helping you select, negotiate, and legally purchase your new home. Choosing the right real estate agent to help guide you through the whole process isn’t easy. Here’s an overview of what you need to know.

THE AGENCY RELATIONSHIP

Real estate agents are licensed by the State of Connecticut to represent a person in the purchase, sale, exchange or lease of real property. The Agency Relationship is based on one person representing the interests of another person.
The responsibility of the real estate agent is defined by the state law relating to agents, the REALTORS®’ Code of Ethics, and general principles of agency law.
The type of relationship formed between the agent and the client is called a fiduciary relationship. A fiduciary relationship is one based on trust because the agent owes the following duties to the client: Loyalty, Obedience, Diligence, Disclosure, Confidentiality, Accountability and Reasonable Skill & Care.

THE FOUR TYPES OF AGENCY RELATIONSHIPS

BUYER AGENCY
A Buyer’s Agent represents the interests exclusively of the buyer in a real estate transaction.
A Buyer’s Agent:
o        Arranges property showings that meet the buyer’s needs.
o        Provides information about the home or property, community, schools, taxes, utilities, and zoning.
o        Discloses any information about the property that can be obtained from public sources.
o        Prepares a competitive market analysis on the property.
o        Counsels the buyer on what price to offer the seller.
o        Shows what other buyers are paying for property in the area.
o        Assists in writing an offer with the buyer’s interests in mind.
o        Negotiates the best price and terms for the buyer.
o        Keeps the price capabilities and objectives of the buyer confidential    and maintains anonymity, if desired.
o        Assists with the loan application process.
o        Monitors all dates, events, and requirements.
o        Attends the closing with the buyer.

SELLER AGENCY

A Seller’s Agent represents the interests exclusively of the seller in a real estate transaction.
A Seller’s Agent:
o        Prepares a competitive market analysis of the seller’s home or property.
o        Develops and implements effective marketing strategies for the seller, including asking price, staging, and positioning.
o        Informs the seller how much other homes and properties have sold for in the area.
o        Presents all offers and counsels seller on what price to accept.
o        Negotiates exclusively on the seller’s behalf.
o        Updates the seller on market conditions.
o        Prepares an estimate of closing costs.
o        Works closely with seller to assure a smooth closing.
o        Monitors all dates, events, and requirements for the seller.
o        Represents the seller’s interest at the buyer’s walkthrough inspection.
o        Attends the closing with the seller.

DUAL AGENCY

Legal in all 50 states, Dual Agency occurs when a buyer’s agent shows a property to a buyer that is also represented by that REALTOR®’s firm, or when the Listing agency shows real estate to a buyer that is also represented by the same firm. In dual agency situations, both the buyer and seller will be asked to sign a consent agreement.
A Dual Agent owes both the buyer and seller equal representation and must:
o        Treat both parties fairly.
o        Not knowingly represent one party to the detriment of the other.
o        Disclose facts each party needs to make an informed decision.
o        To assist, as the buyer and seller are empowered to negotiate on their own behalf.
o        Assure confidentiality on each party’s price, terms, and personal information.

DESIGNATED AGENCY

Buyers and sellers have an option when the real estate brokerage firm is a dual agent. That option is called Designated Agency. In designated agency, the real estate brokerage firm will designate a salesperson to represent the buyer and another salesperson to represent the seller. The designated buyer’s agent will act as an agent for the buyer as described in “buyer agency” above. The designated seller’s agent will act as an agent for the seller as described in “seller agency” above. This is the case even though each of the salespeople is from the same real estate brokerage firm.

The seller and the buyer must each agree to having a salesperson designated for them, and the real estate broker in charge of the brokerage firm must make the designation.

UNREPRESENTED PERSONS
A person is Unrepresented by a real estate agent unless he or she has signed a representation agreement with that agent.
The real estate agent cannot provide advice or counsel to an Unrepresented Person on matters pertaining to real estate, including real estate financing. An Unrepresented Person has the responsibility to protect his or her own interests.

All real estate agents are obligated by law to treat all parties to a real estate transaction honestly irrespective of whom they represent in the transaction.

This information is reprinted courtesy of:

CONNECTICUT ASSOCIATION OF REALTORS®, INC.

ct-realtor

Click Here for more information on choosing the right real estate agent

Why Every Home Buyer Should Get Mortgage Pre-Approval

What is the benefit of having a Mortgage Pre-Approval when looking for a new home?

There is a difference between a Mortgage Pre-Qualification and a Mortgage Pre-Approval.

A mortgage pre-qualification is based on the information you verbally give to your loan officer to  get a snapshot of how big a house you might afford and how much money you can afford to borrow to buy it.

A Mortgage Pre-Approval is an application file reviewed by an underwriter to be sure your income; assets and credit history qualify you to get the loan you are applying for.

Knowledge is Key:  A Mortgage Pre-Approval gives you a firm idea of how much house you can afford. The underwriter bases this amount using a formula that compares your income to your total outstanding debt.
The Debt:Income Ratio (DTI) is derived from the monthly payments that show up on your credit report and the income documents you surrendered as part of the process. This will keep you focused on the big picture and help to prevent being disappointed if you fall in love with a home that is too expensive.

Improve Your Negotiating Position:  When a seller is comparing two offers and one of the buyers has Mortgage Pre-Approval there is a high confidence level that the deal will go through and close sooner. This may help you to win in a competitive bidding situation.

Confidence in Your Offer:  Knowing that the key information in obtaining a mortgage has been reviewed by an underwriter will give you, and the seller, confidence that your offer is bona fide.

Keeping Your Spending On Track:  Having detailed information on your interest rate, mortgage payment, closing costs and down payment requirements will help you stay within your monthly budget.

Time is Valuable:  Knowing what you can and cannot afford can save you time and frustration in the house hunting process. This will help your Realtor find the perfect house in your price range.

Move in Quicker:  Having Mortgage Pre-Approval will save you time when you submit your complete mortgage application for approval. Everything has been done beforehand. All you need is and inspection, appraisal and closing documents. The faster you close, the sooner you can begin to enjoy your new home.

pre-approval 2If you are looking to buy a new home, a Mortgage Pre-Approval is the smartest way to get into your new home. Call Me at 860.945.9284 to discuss the right mortgage option for your family and to take advantage of my  FREE Jump Start Mortgage Pre-Approval service.