Property Flipping guidelines extended by FHA , until May 2010! What does this mean and who does this affect?
What is property flipping?
No .......it's not flipping your home with another couple as seen in trading spaces on TLC!
FHA GUIDELINES STATE THE FOLLOWING:
Property flipping is a practice whereby a recently acquired property is resold, often for a considerable profit.
Most property flipping occurs within days or a few weeks of acquisition and usually with only minor cosmetic improvements, if any.
While there is nothing illegal with selling properties within days of acquisition, some of these transactions are fraudulent because the condition of the property is misrepresented and/or the value of it is artificially inflated.
Effective June 9, 2008, FHA temporarily waived the property flipping rule 90-day waiting period, for homes that were foreclosed on and being sold by lenders or by property disposition firms on the behalf of lenders.
So if you have a property that was purchased by an individual investor, or investment group, you must must wait 90 days to DO ANYTHING! We can not order an appraisal or case #, we can't open escrow, order title or apply for the mortgage. You can't even draw up the contract, or do inspections or the buyer will be in jeopardy of losing their deposit. There basically can be no record of any sale during that 90 day timeframe.
This has become an issue in recent months because of the lack of knowledge of the guidelines along with the anxiousness of all parties involved. Day 91 is when it can all begin unless the exceptions apply.
We CAN however, apply for the mortgage with a property "to be determined "and get the buyer PRE-APPROVED.
So keep this in mind when you are putting your deal together and expecting your lender to jump through hoops on day 91 and close in two weeks!
The waiver applies to owner occupants only and does not apply to people/entities that purchase foreclosures either singly or in bulk for resale. Subsequent sales of such properties will continue to be subject to the standard regulatory requirements.
The temporary property flipping waiver has been extended and FHA will recognize sales agreements on foreclosed properties signed by the seller and buyer on or before May 10, 2010.
Do you want more BORING 
but pertinent facts you MUST know if you encounter a flip ????
The only exceptions to the FHA property flipping rule are:
1. Properties acquired by an employer or relocation agency in connection with the relocation of an employee.
2. Re-sales by HUD under its Real Estate Owned (REO) program. There are LOTS out there! And most homes can benefit from an FHA 203k streamline loan!
3. Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.
4. HUD REO properties that were purchased by nonprofits at a discount with resale restrictions.
5. Sales of properties that are acquired by the seller through inheritance.
6. Sales of properties by state and federally-chartered financial institutions and government sponsored enterprises.
7. Sales of properties by local and state government agencies.
8. Sales of properties within Presidentially Declared Disaster Areas.
9. The restrictions do not apply to a builder selling a newly built home or building a home for a borrower.
10. The sale must be by the owner of record.
11. Appraisers are required to analyze any prior sales of a subject property in the previous three years for one to four family residential properties.
12. A lender must obtain a second appraisal by another appraiser if:
the re-sale date of a property is between 91 and 180 days following the acquisition of the property by the seller, and
the resale price is 100 percent or more over the price paid by the seller when the property was acquired
FHA reserves the right to require additional documentation from a lender to support the resale value of a property if:
the resale date is more than 90 days after the date of acquisition by the seller, but before the end of the twelfth month following the date of acquisition, and the resale price is 5 percent or greater than the lowest sale price of the property during the preceding 12 months.
Any subsequent re-sales of the properties must meet the 90 day threshold in order for the mortgage to be eligible as security for FHA insurance.
So remember to do your research! We are the professionals and it is our job to know this information for our consumers. We will save time, money and problems if we know this up front.
Happy Selling, buying and financing peeps!
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The streamline 203k is a perfect program for REO properties with minimal repairs.
Did you know you can tell the bank that they will not be responsible for the repairs? WOW! The bottom line not to mention the headaches, just looked a lot better! And that FHA buyer that didn't look so great, just went from mediocre to a GREAT offer!
The FHA 203k Loan allows for the client to finance the cost of repairs needed on a property into their mortgage. The repairs are done after closing so this is an advantage to the seller or bank that owns the property because they aren't responsible for the repairs. This is a great negotiating tool for your client who may be up against other offers which would require the seller/bank to do the repairs! Are there any foreclosed properties out there in need of repair? I think so! This is perfect for those REO properties that have missing appliances or plumbing and electrical repairs needed!
STREAMLINE 203k for dummies
The Streamline 203k is for limited repairs requiring little expertise to manage therefore there is no consultant required (Although it depends on the extent of the repairs, I may recommend you get one anyway - It's worth the cost!). It is designed for a "streamlined" project where the home can be occupied immediately after closing, and the contractor will receive a single payment at completion. (Maximum of 3 contractors) The maximum amount that can be financed on top of the sale price for the streamline is $35,000 (which includes some fees/reserve/costs) so assume about 30,000 in actual repairs.
Below are the Eligible and Ineligible repairs for the Streamline K
ELIGIBLE:
INELIGIBLE:
This works the same way as the Full Consultant 203k program but can be done in less time. We recommend at least 90 days for the Consultant K program and 45 for the streamline.
The banks want to unload their inventory as quick as possible and with the least amount of costs. Educate your clients which INCLUDES the bank about this program and close more deals. This is also a great way to negotiate a short sale if you have a qualified 203k buyer. But just remember -give it the time it needs and set the expectations up front. This is why having a certified FHA 203k Lender with experience with this program is crucial.
This program can also be combined with the Energy Efficient mortgage for those clients that are GOING GREEN!
There are so many options and I would be thrilled to help you find the right program that most people don't even know exist!
Happy Rehabbing!
203k MADE SIMPLE?
Ok, maybe not, but I will attempt to make it as simple as possible for the client to understand and want to read on. For many of us in the business who are " in the know" we forget that we need to go back to the basics and spell it out in simple terms for others to understand. So I've compiled some information based on my most recent commonly asked questions just this week.
In Southern California, FHA loans were just not utilized over the past 10 or so years because of the FHA Maximum Mortgage limits But now that the limits have been increased and the prices have decreased, FHA loans have become the most utilized loan in recent months. HOWEVER, because it was not a popluar loan, you would be amazed at how many lenders/brokers do not know what they are doing. Especially when it comes to the 203k loan. I spoke to a client today that was given such mis information it made me cringe.
Apparently they told the client that 203k loans were no longer being done (Gee, you think it was after realizing that they had no idea what they were doing?) and they tried to flip them into another loan. This was after telling my client that their loan amount would be for the contract price and the extra money would just be separate and sit in an impound account to be disbursed over the next 6 months. Ok partially true, the extra amount would be in escrow to be disbursed as the remodel progressed, but for free? Who pays for the extra 50,000 dollars you just borrowed for repairs? Your loan amount is for the entire amount you are borrowing. Makes sense right?
So what is a 203k loan and why use one?
When a buyer wants to buy a home that needs repairs utilizing FHA financing, normally the repairs would have to be completed prior to the close of escrow. The repairs would normally fall on the responsibility of the seller. With so many foreclosures in today's market, the bank is the seller. And many times the home in need of repair is listed "as is". Which in the past would require a cash buyer or conventional financing. This is another reason that people in the business decided to shy away from FHA loans. I believe it was pure ignorance of the programs that were available by the brokers and the realtors couldn't properly prepare their seller for what to expect that gave FHA loans a bitter taste.
My associate Jeff Belonger said it best in his post about ignoring what your listing agent tells you about FHA loans
Here we go....203k loans for dummies
* 203k loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser and 203k consultant) What does this mean? I buy a house for 200,000 that needs 50,000 in repairs and I can borrow the extra 50,000? Too good to be true? NOPE. That's it in a nutshell....
ok details please.........
* Down payment is based on the sale price PLUS the final cost of the repairs x 3.5% so for example:
Sale price is 200,000 (DO not calculate 3.5% on this) PLUS 50,000 in repairs/costs (which includes certain costs and reserves the lender will require) 250,000 x 3.5%. Down payment is $8750.00 (closing costs are separate as usual)
* Buyer will hire (lender can recommend) a HUD approved FHA 203k Consultant to go to the property with the buyer to determine the required repairs and wish list repairs.
The fee charged by the consultant can be included in the mortgage. The fee can range anywhere between $ 400 to $1200 depending on the repairs required. Please check with the consultant prior to scheduling your appointment.
*Buyer will obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs.
Three estimates are recommended for each contractor but not necessary. The buyer can act as their own general contractor only if experienced and licensed. (FHA says experienced, but most investors require the buyer to be licensed) The contractors must provide documentation to be approved by the lender prior to approval.
The consultant will determine the "required" repairs versus the "wish list repairs". You must start with the required repairs and then move on from there for you wish list. This is an important step for the consultant and appraiser so that you don't over improve the home and exceed the comparable properties in the area.
Eligible Repairs
Ineligible Repairs
* Once the consultant completes his report of required and wish list repairs, the lender will forward it to the appraiser for an "After Improved Value". This is where you may run into problems with OVER improving the property based on current values. Between the consultant, appraiser and buyer - the FINAL FINAL report will be tweaked to come up with a final report that the contractors will be hired to do.
* So now the file is submitted to underwriting and approved ( you need to qualify at the full amount you are borrowing of course, which may include your current mortgage payment for the home you will live in during the rehab period) and the normal steps for closing will occur.
(BIG PLUS - you can include 6 months of mortgage payments in the new loan amount since it's assumed that you will have TWO housing payments during the rehabilitation of the new home. This money will be deducted each month during the rehab process) This is optional.
* Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money - however, if you included the 6 mths mtg payments, they will be deducted from escrow starting when your first payment is due)
* Disbursments are made throughout the following 6 months from the escrow account (normally 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed.
Remember you paid the seller for the price of the home, and then you borrowed an additional amount of X which is sitting in an escrow account to pay the contractors (your total loan is the total amount you borrowed)
Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT........you are done! Simple As 1 2 3 - okay maybe not, but that's why having an experienced lender on your side is crucial!
There are specific properties and repair requirements for this type of loan, so please call me for specific details if this sounds like the right loan for your new home.
Please send me your before and after pics! I would love to see them and maybe even post them for people to see what can be done with this awesome program! Or contact Colleen Craig FHA 203k Specialist for more details
Happy Rehabbing!
LOAN APPLICATION
When applying for a home loan, you will need to supply your lender with...
YOUR PLACE OF RESIDENCE:
•· If you rent: Name, address and phone # of your current landlord.
YOUR EMPLOYMENT:
•· Name and addresses of your employers for the last two years.
•· Copies of your last two years W-2's and federal tax returns
•· A copy of your last 2 paystubs.
IF YOU ARE SELF EMPLOYED:
•· Complete copies of the last two years business and personal tax returns.
If you receive child support or alimony and are relying on this income to support your request for credit:
If you receive social security or pension Income:
•· Copy of the award letter
•· Copy of the most recent checks received or bank statements showing automatic deposit.
YOUR ASSETS:
(Including checking accounts, savings accounts, money market fund accounts, stocks, bonds and investments)
•· Copies of all pages of the last two monthly statements or the last quarterly statements for 401k or IRA
CREDIT INFORMATION:
•· A detailed credit explanation letter for any derogatory credit on your credit report may be required.
A copy of the executed sales contract or lease contract.
IF YOU ARE APPLYING FOR A VA MORTGAGE:
•· Copy of your discharge papers showing an honorable discharge (DD214)
•· Original Certificate of Eligibility
PERSONAL INFORMATION:
•· A Copy of your divorce decree and/or property settlement agreement documenting any financial obligation to your previous marriage.
IF YOU ARE REFINANCING:
Copy of your most recent mortgage statements
Copy of your homeowners insurance policy
Copy of your property tax bill
If you are properly prepared with your documentation as early in the process as possible, You will have a much smoother transaction therefore alleviating any stress that comes with the process.
I was in a meeting with about fifty realtors the other day who had not even heard about the hvcc petition!
We can't assume that everyone has heard about it - as a matter of fact it's obvious the word has not gotten around since there are less than 50,000 signatures. OR have you heard about it but chose not to take the two minutes to sign it? I personally have forwarded the petition to all my current and past clients and asked them to sign it.
So for those of you who STILL have not heard about it, I will make it simple:
HVCC stands for Home Valuation Code of Conduct.
It was put into place to help curb the potential for fraud with respect to the valuation of residential properties.
This has changed the entire process for banks and mortgage companies to order the appraisals from the professionals that they have trust in from their proven track record and have built a relationship with over the course of their career.
1. We can NO LONGER order conventional appraisals from our trusted appraisers. We now have to go through a third party company that will order the appraisals from appraisers who are willing to work for less b/c the middleman (third party company) takes 40% of the fee. Honestly, don't we get what we pay for? I don't know any experienced appraiser that would be willing to cut their income by 40%. Alot of them are now froced to get out of the business.
2. The appraiser does not have to be located anywhere near the property that needs to be appraised! Would you feel comfortable with an appraiser coming from 200 miles to do your appraisal? This WILL affect your transactions people - don't just assume that it's the mtg company's problem.
3. We can NO longer have ANY contact with the appraiser! WHAT? Ok an appraisal comes in low with inaccurate information and we can't fight it? I personally had one where the appraiser knocked the value down 15,000 b/c he was using comps for a condo that sat right on the 101 freeway with DOUBLE windows (not double paned) and was in a far inferior neighborhood when there were plenty of comps supporting the property my buyer was buying. I sent emails and voicemails to try and discuss this inaccurate information and was completely ignored. I then found out that he never even went to the property!
4. If the loan needs to be submitted to a second investor for any reason, a whole new appraisal has to be ordered - resulting in additional fees to the consumer.
Ok this is just a brief overview of what the hvcc is -As of now because of all the problems, there is legislation requesting an 18 month moratorium on the hvcc. But we need more signatures to have it permanently reversed.
PLEASE GO TO WWW.HVCCPETITION.COM and help YOUR future business.
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I'm a Mortgage Consultant originally from NJ and now living in Southern California. I am a nationwide mortgage banker specializing in FHA/VA and 203k lending.
I have been passionate about the real estate industry since 1986. I have built my career by learning every aspect of the real estate and financing business. This includes buying and selling real estate along with every aspect of the mortgage business including opening loans, processing, underwriting, closing, supervising the entire process and finally originating applications. This experience enables me to guide each and every one of my clients through the loan process, ensuring a smooth, stress-free process.
My mission is to share the knowledge that I have gained, and to help every person individually by listening carefully to the needs of each situation. There are many mortgage options and a different program to meet each individual needs. By getting to know your situation, I can design a mortgage program that is best fit for you now and in the future. I have established myself as an educator not only to first time buyers, move up buyers & seasoned investors, but also to people who have the desire to become a real estate investor but do not know where to start.
I also counsel my clients on the credit scoring process so that they can learn how to increase their credit score to obtain the best possible financing terms for any type purchase now and in the future.
I specialize in FHA & FHA 203k rehab loans.
"Colleen is really a fantastic financial advisor as well as the best loan officer we've ever dealt with, by far, and we will always be eager to help our friends by telling them about Colleen whenever they utter the words "home loan".
Carlos and Leanna Rosas, Santa Clarita CA (Buyer)
"Colleen Craig has been exceeding the expectations of my clients for many years. She is trustworthy, ethical and extremely knowledgable and she goes the extra mile to ensure a smooth escrow. I highly recommend her!"
Gloria Feralio (Realtor)
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