Streamlined Dreams, Find Your Niche in the 203(k) Loan by Michael Pavelchik

by 02 Jun 2008

Have you ever had someone call you up looking to purchase a home that needed repairs? Or, maybe they had enough money for a small down payment but the home had a list of things that needed to be done to make it perfect? Well, in the past there were companies that specialized in ?Repair and Remodel Loans?. These were problematic for a variety of reasons. Generally, the person wanting these loans would have to be on title for twelve months before they could assume any equity out of a property. In order to help revitalize run down areas, a seasoned FHA lender could use a 203k loan to step in and save the day. These were more arduous than the ?Repair and Remodel Loans? and involved fee advisors, engineers, multiple appraisals and inspections. The plan would have to be approved by a HUD reviewer. The process could easily frustrate everyone involved. Many people tried to do 203k?s and it left many vowing to never do it again. But in today?s market, with all of the foreclosed properties coming to market, now is the time to consider using it again. Bank owned properties offer a great value for home buyers. Often these houses have not been left in the best shape and banks are quick to discount these homes to get them off their books in ?As-is? condition. This is where a savvy lender will search out the allusive ?203k streamline? loan. Imagine being able to call up a Realtor that you have never met before to tell them that you can get a less than perfect borrower qualified to buy a less than perfect house AND get them the money they need to fix up the property using the ?As To Appraised Value? while requiring as little as $100 of the borrower?s own money. This program can be used in conjunction with other programs. This means that you can buy a HUD REO that is 203k eligible; this means that you can use down payment assistance program; and this means you can use the Energy Efficient Mortgage program all together. If you take the time to study and learn, you could set yourself aside from other lenders and position yourself in the forefront of a coming market. In 2005, HUD changed the 203k streamline loan. They increased the money available for repairs from $15,000 to $35,000. The money still cannot be used for landscaping, it can not be used to increase the square footage of living space, nor can it be used move or change any structural elements. But, what you can do should earn you enough business to right a sinking ship. Here is what you can do - even on refinances - from ?MORTGAGEE LETTER 2005-50?: ?The Streamlined (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. The Streamlined (k) program includes the discretionary improvements and/or repairs shown below: ? 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 ? Lead-based paint stabilization or abatement of lead-based paint hazards ? Repair/replace/add exterior decks, patios, porches ? Basement finishing and remodeling, which does not involve structural repairs ? Basement waterproofing ? Window and door replacements and exterior wall re-siding ? Septic system and/or well repair or replacement? There are a few caveats involved. The money is escrowed for the repairs. You can have up to three contractors that can only get two draws each. They can get up to 50% in their first draw. If the total repairs are less than $15,000, then the owner can sign off with receipts that the work has been done to their satisfaction. If the repairs total more than $15,000 then a third party inspector must verify the work has been completed before the final checks will be cut. This loan product is growing and will become a great tool to increase your market share. Any FHA approved lender can originate a 203k streamline loan. As more and more companies search for more loan volume you will see more of these offered to brokers and correspondents. In terms of the secondary market for these loans, once the loan is closed it is not limited to clear only through Ginnie Mae, but can also be cleared through Fannie Mae. I urge you to do your research and become knowledgeable with the 203k streamline loan. As we all move forward, we can help banks dispose of REO?s. We can make new realtor contacts. And we can help borrowers obtain their dream homes while securing our own futures through these tough times. Michael Pavelchik, Mortgage Relationship Officer Northpointe Bank FDIC Insured Member FHLB,Equal Housing Lender



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