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The FHA 203k home improvement loan is one option for today's home buyer.  It allows all sorts or repairs and upgrades to be financed into the mortgage.  Best of all it keeps the down payment low.  Many Kalamazoo area home buyers have taken advantage of this program and used it to fix up outdated properties.  We also have a special incentive for buyers looking to do energy star improvements to the home Check it out!

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Real estate agents and licensed Realtors® in the greater Kalamazoo area can earn continuing education credits while learning about a great financing option for home buyers. Today's housing market is full of fixer uppers, bank-owned (and vacant) homes and other problem-listings. The FHA 203k home improvement loan is one option for today's home buyer.

Thursday, February 25th, 2016 real estate professionals will hear from national renovation lending expert Joseph P Daly on how to put the FHA 203k to work selling these misfit homes. Check out the information from Joe below:

Renovation Mortgages 101:

Mortgage Solutions for a Challenging Market

As a REALTOR® in today’s market you face many challenges. There are many external factors affecting the housing and mortgage lending industry and in order to survive you need to change the way you think to open new doors.

A recent study by the NAR showed over 40% of the homes being sold today are distressed properties. These numbers are staggering. Some reports have these numbers even higher. These homes come on the market and RELATORS® get new listings. Sounds like a win-win right? There is one big problem. Many of the homes need repairs and lenders don’t like that, especially if your buyer is looking at FHA 203b or what most just call an FHA loan. So what do you do? The answer has existed since 1978.

That answer is an FHA 203k loan.

This mortgage allows the buyer to purchase a home and make any necessary improvements they desire and any required by the bank. Follows the same guidelines as traditional FHA loans. Only requires the buyer to put 3.5% down. Allows for up to a 6% sellers assist.

  • Who: Joe Daly, FHA 203k Loan Specialist & National Program Director
  • What: Renovation Mortgages 101
  • When: Thursday, February 25th, 2016
    • Schedule:
    • 10:00 am - 12:00 Program
    • Lunch provided after the event
  • Where: Greater Kalamazoo Association of REALTORS®
    • 5830 Venture Park Dr.
    • Kalamazoo, MI 49009
  • Fee no cost!
  • See attached flyer below to registar for the event.

Past FHA 203k classes have received rave reviews: A Real Hunger for the FHA 203k

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The National Association of Realtors recently published the 2015 Remodeling Impact Report  its defiantly worth looking at.  The report ranks projects likely to increase value.

  1. Kitchen Renovation
  2. Bathroom Renovation
  3. New Master Suite
  4. New Wood Flooring
  5. Etc (see report)

The report goes into a lot of detail including estimated costs and how much the value is increased.  If you are thinking of renovating your current home or purchasing a home and renovating it this report is a must see! I'm a big do it yourself and have personally renovated quite a few homes; whether you are a DYI or hiring a contractor this is simply some great information to have on hand.  Thinking you would like to hire a pro but wondering how the heck you are going to pay for it?  You aren't alone.  Here at Amerifirst Home Mortgage we have a whole array of renovation loan programs that can help you find a way to fund your home renovation.  Give me a call to discuss your options or check out some more information here. 

 

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YTD Dollar Amount Of Repairs Completed:  $167,481.10

It seems that now days appraiser required repairs are almost the norm.  Looking back at the loans my team closed so far in 2014 over 40% had one repair or another required by the appraiser.  There is a misnomer out that that conventional financing is some how shielded from required repairs, that simply not true.  Now these transaction don't have to fall apart simply because there is a busted window or missing toilet, in fact I don't think any transaction should fall apart because of appraiser required repairs.  We have a number of options when it comes to seeing these transactions through to closing.  You can read all those options here.  I will say setting up a repair escrow is by far the most popular option.  In fact, 95% of the borrowers that ran into repair issues chose to deal with those repairs using a repair escrow.

If you have been following my previous post my team is playing a little game building a log home tracking how many loans we gets closed that have repairs.

 Each block on the house represents $500 worth of repairs we escrowed for and had completed after closing. 

With October over we only have 2 months left to complete the most important building "The Bar" slated to be constructed right next to the Real Estate Office.   I need your help to make this happen. If you have any repairs that need to be completed after closing give me a call!

 

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Free Money!  Yeah I said it, theres not even much of a catch.  Here's the deal.  AmeriFirst Home Mortgage energy improvement promotion.  The basic idea is that buyers taking out a FHA 203k renovation loan who make at least $3,500 in eligible energy efficient improvements to the home will then receive a lender credit towards closing costs in the amount of $1,000.

Eligible home improvements include:

  • Use of Energy Star Products for heating systems, air conditioning, window & door replacement, water heaters, roofs, etc. . .
  • Duct sealing
  • Approved insulation
  • Energy upgrades like solar panels, wind turbines, & ground source heat pumps

Borrower Benefits:

  • Monthly utility savings
  • Lender Credit towards closing costs for $1,000!
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Looking to buy a HUD home?  FHA recently changed the program around to make it easier for buyers to purchase properties and renovate them.  Now buyers can overbid on HUD homes, obtain FHA renovation financing (203K), and they don't have to bring in the difference!

Heres the deal.  For properties that are FHA foreclosures (you can find a list at hudhomestore.com) an appraisal has already been completed on these homes.  For buyers obtain FHA financing they are required to use that apprasial.  In many cases buyers are offering more than what that home sold for.  If they offer more than what that appraisal put the value at and they are obtaining FHA financing buyers would have to bring in the difference.  HUD made some changes to the program late in 2013 that now allows those buyers to take out a FHA 203k Renovation Loan and FHA now allows a new appraisal to be completed.  What does that mean?  Basically, if the new appraisal supports the value the buyer no longer has to bring in the additional cash.  They will simply need their 3.5% required down payment.  If you find yourself getting ready to bid on a HUD REO give us a call and we can go over all of the different options!

 

This topic is so important we went to some other industry experts to get there opinion on the topic!  Joe Daily Renovation Lending Manager at Amerifirst and David Howard from Century 21 C. Howard comment on the program changes.

 

Published in Jeremy's Blog

2014 Dollar Amount Of Repairs Completed:  $179,425.10

It seems that now days appraiser required repairs are almost the norm.  Looking back at the loans my team closed in 2014 over 33% had one repair or another required by the appraiser that couldnt be completed prior to closing.  There is a misnomer out that that conventional financing is some how shielded from required repairs, that simply not true.  Now these transaction don't have to fall apart simply because there is a busted window or missing toilet, in fact I don't think any transaction should fall apart because of appraiser required repairs.  We have a number of options when it comes to seeing these transactions through to closing.  You can read all those options here.  I will say setting up a repair escrow is by far the most popular option.  Infact, 93% of the borrowers that ran into repair issiues chose to deal with those repairs using a repair escrow.

So we are playing a little game building a log home tracking how many loans my team gets closed that have repairs.

 Each block on the house represents $500 worth of repairs we escrowed for and had completed after closing.  As you can see its the end of August and the log city is comming along nicely!

The bottom line if you "Got Repairs" you got to give me a call!

 

Published in Jeremy's Blog

So how exactly does the repair escrow work? Well that's a great question!  Let's go thru this step by step.  We offer repair escrows with any loan program:  FHA, VA, RD, & Conventional. Repair escrows give the buyer the ability to have the work done after closing. Here’s how it works:

  1. Appraisal is completed and the appraiser provides us with a list of required repairs.  Here is a sample of some things the appraiser might ask for.  The bottom line is that anything the appraiser feels is a health or safety issue will be on the list of repairs.  With that said there is no published list of required repair, its all up to the appraiser.
    • This IS NOT a home inspection which would be much more in depth. 
    • The appraiser required repairs are the only thing we can set up an escrow for. 
    • This IS NOT a renovation loan it is simply a way to complete the repairs that have to be done as part of the transaction.
  2. We send the buyer and real estate agent the list of repairs and contractor packet.
  3. Buyer obtains an itemized bid from a licensed and insured contractor for only the required repairs. Buyers are NOT allowed to complete any repairs themselves.  We need the following back from the contractor:
    • Signed bid
    • Copy of the contractor's license
    • Completed W-9
  4. AmeriFirst reviews and approves repair escrow accordingly. It should be noted that we typically won't approve bids over $10,000 because the work MUST be completed in 2 weeks.  For large projects AmeriFirst offers different renovation loan programs.
  5. Closing on the home occurs and escrow is funded. The key is “where does the money for the repair escrow come from?”
    • Seller could fund the escrow account out of their closing proceeds
    • Buyer could fund the escrow account by bringing additional funds to the closing.
    • Rural Development Only – if the home appraises for more repairs can be financed into the loan up to the appraised value.
  6. Repairs are completed by the contractor.  Once the loan is closed and ownership transferred the clock is ticking and the contractor has 2 weeks to get the repairs completed.
  7. After the work is completed we send the appraiser back out to the property to verify everything is done. 
  8. Checks are cut to the contractor.  Here's what we need before we can cut checks.
    • Final bid from the contractor (if the price has changed from the original)
    • Signed and notarized final lien waiver
    • Buyers authorization to release funds to the contractor (otherwise we have to cut a two party check)

 

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When it comes to renovation financing we have lots of different options for home buyers and home owners. The Renovation Loans, FHA 203k streamline, & the Fannie Mae Homestyle all have different benefits and pitfalls to them.  Not to mention you put the PowerSaver Grant option in there to further complicate things.  The chart below compares some of the differences between the programs.  Mortgage options can be complicated and when you throw repairs into the mix its even more confusing.  Give us a call today and we can help you figure out the best program to meet your needs.

Renovation Loan Comparison Chart

 

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This information is intended to explain to home buyers & Real Estate Agents all the possible solutions for appraisal required repairs.  Every ones situation is different so don't hesitate to call and run the scenario buy us.  Most of the time we can find a way to make it work and get the transaction closed. There shouldn't be any transaction that fall's apart because the lender cant accommodate the repair situation. So, lets address our options on these homes deemed un-financeable by other agents and lenders.

Conventional, FHA, VA & Rural Development Repair Options

  1. Seller Completes the repairs – this is the best option, typically costs little to no money, repairs are done prior to closing and the property is re-inspected prior to closing. Simply the best option. For bank owned homes (foreclosures) often the bank will not do any work to the property. It can’t hurt to ask and I would encourage that, however if the bank will not complete the repairs there are other options.
  2. Repair Escrow - with this option repairs are done after closing.  Here’s how it works:  More Details
    1. Obtain a bid from a licensed and insured contractor for only the required repairs (2 bids required for FHA & VA). Buyers are not allowed to complete ANY repairs themselves.
    2. AmeriFirst reviews and approves repair escrow accordingly
    3. Closing on the home occurs and escrow is funded. The key is “where does the money for the repair escrow come from?”
      • Seller could fund the escrow account out of their closing proceeds
      • Buyer could fund the escrow account by bringing additional funds to the closing.
      • Rural Development Only – if the home appraises for more repairs can be financed into the loan up to the appraised value.
    4. Repairs are completed by the contractor. Now that we closed and ownership transferred the clock is ticking and the contractor has 2 weeks to get the repairs completed.
    5. Checks are cut to the contractor.
  3. Switch it to a  Renovation Loan
    1. Typically the most costly option: Higher APR/Interest Rate & Higher Closing Costs
    2. 3.5% + down required
    3. Obtain a bid from a licensed and insured contractor for the required repairs and any other repairs the buyer wishes to complete
    4. AmeriFirst reviews bids & validates the contractors
    5. Closing occurs and repairs are financed into the loan.
    6. Contractor receives half the money upfront
    7. Work completed and property is re-inspected
    8. Check for remaining balance cut to the contractor

 

 

Check out the attachments below for more information or give us a call to discuss!

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