Why 203konline.com?

We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state. It really doesn't matter as we have associate offices in most every state in the USA. Find a consulant anywhere in the country.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation". If you like what you see here please take a look at Another blog by Mike Young in Spanish and other languages.

Got a 203k project giving you "fits" contact www.203k911.com. If you are looking for quality 203k software for consultants to speed up the underwriting process..

Skype name: the203kconsultant

We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state. It really doesn't matter as we have associate offices in most every state in the USA. Find a consulant anywhere in the country.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation". If you like what you see here please take a look at Another blog by Mike Young in Spanish and other languages.

Got a 203k project giving you "fits" contact www.203k911.com. If you are looking for quality 203k software for consultants to speed up the underwriting process..

Skype name: the203kconsultant

New Construction Loans

FHA 203k Contingency reserve

Lender requires consultant to buill for draw inspections

You just purchased a home. Now you wish that you would have used a renovation loan as your home isn't quite the way you wanted it but you needed to close the loan quickly, or so everyone told you. Now you can't really enjoy it till you get it fixed up and everyone is now telling you that you need to let this loan mature at least six months before you can refinance. Well, it just isn't true. In fact, it would be to YOUR benefit to refinance immediately with regards to getting the money to fix it up.

BAH HUMBUG !

FHA 203k loans have a little known feature for those who need to fix up a property they just purchased and likely should have purchased under the 203k program in the first place. It is simply that you can refi immediately and as long as you close the new loan within six months of the original loan closing YOU get to count all that money you put down as money you have in the new transaction. This is huge because you can 

This is huge because otherwise you would have to show equity on a home you just purchased and may have to come up with more money to close the new loan. The drawback is that the original lender may loose their commission on the first loan. Not typically an issue if you let them do the new 203k loan. If they don't do the FHA 203k then they just loose their commission. Sometimes $%^* just happens. In many cases they can do the 203k for you and recapture the commission.

Contractors typically are used to getting 10% down at the signing of their contract, and another 30% when materials are landed at the sight. That hasn't been the case with a Standard 203k where they must work soley on their own credit and cash to get started then get "reimbursed" for each phase to get their money back.
The "Limited 203k" loans, per the guiedline always provided 50% of the project cost for materials  up front to the contractor unless you were dealing with a lender like Wells Fargo that only allowed 35% or Prospect Mortgage at 40%. Most other lenders still provide the full 50% per the guideline. Years ago I would see B of A, close the loan and in many cases it took them up to six weeks to provide the "50% up front money". These "limited 203k" project were quite often only going to take 30 days to six weeks to complete. They finally got with the program (years ago) and started providing the money from escrow at closing.

The new rule as it is proposed for

Standard 203(k) transactions, Mortgagees may disburse the following at closing:

• permit fees (the permit must be obtained before work commences [to be reimbursed at closing]);
• prepaid architectural or engineering fees;
• prepaid Consultant fees; [reimbursed to the borrower] [This can be added to your escrow instructions to be used as part of their down payment or closing costs too]
• materials costs for items, prepaid by the Borrower in cash or by the contractor, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date; and
• up to 50 percent of materials costs for items, not yet paid for by the borrower or contractor, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date
• For any Disbursements paid to the contractor, the Mortgagee must hold back 10 percent of the draw request in the Contingency Reserve.

What does a typical 203k project look like? Here are a few that we saw in the past year... 

 San Jose. Needed a new roof, heating system was well beyond it's useful life. Vegitation growing all over the home... clinging vines, dated kitchen and bathrooms. Seller ignored repairs for years thus a lower than typical sales price would be in order.

Duplex northease of Davis. Lack of typical maintenace over a long period of time caused damage to wood members that might have been avoided with normal owner preventive mainteance. Seller should eat the loss here as this never should have gotten this bad.

SFR in Vallejo. This cute home just need some updating and weatherization.

SFR in SF had an illegal lower level unit. Someone convered the basement to a second living area but forgot to obtain permits and then failed to use common construction methods. Seller should carry the brunt of the cost in a lower sales price. 

Pretty much anything is a typical FHA 203k renovation potenial property. If you are trying to sell a home with a bad roof or a marginal roof and it leaks just after the home is sold, you will likely get sued... not if you had suggested a 203k to replace that faulty roof as it would be a warrantee item. 

For Standard 203(k) transactions, Mortgagees may disburse the following at closing:

• permit fees (the permit must be obtained before work commences);
• prepaid architectural or engineering fees;
• prepaid Consultant fees; [reimbursed to the borrower]
• materials costs for items, prepaid by the Borrower in cash or by the contractor, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date; and
• up to 50 percent of materials costs for items, not yet paid for by the borrower or contractor, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date
• For any Disbursements paid to the contractor, the Mortgagee must hold back 10 percent of the draw request in the Contingency Reserve.

Mike Young, 203k Team Leader    

We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state.

To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation". If you like what you see here please take a look at Another blog by Mike Young in Spanish and other languages.

Got a 203k project giving you "fits" contact us at www.203k911.com. If you are looking for quality 203k software for consultants to speed up the underwriting process.

Skype name: the203kconsultant

    

Can you add my contractor to your list?

Sure we can. In fact this week we added another four or five.. All of them went something like this - 

I get a call and they ask to be on our list, I tell them to send me an email with all of their contact information and they all must hear something I didn't say as they ALL sent 

Name

Company name

Phone number, and of course I do have their email address.

Possibly a web address, I guess that is so I can look it up more easily. 

And that is all. Yep, that is what they think all of their contact information consists of. Yet when I input it into a report the lender expects a "license number", full address, not a PO Box, email address, name, company name, etc. 

I must be saying it incorrectly as they all did it. What is so hard about 

Name

Company name,

Full physical address

PO Box if you have one

Phone number

License number

I hope they know  that we need this so we can mail checks, visit their site to see they are really there, email paperwork to them, call them if needed. Did I say all them have been in business from ten to twenty years and still can't get it right?

If you want your contractor on any list, make as easy as possible by providing all of the necessary information at one time on one piece of paper. One of them sent a second email and failed to reply to that one so I had the first bit of info, I had to find that other email to get him into the system. Ya gotta love 'em.

If you have all the work you need already then maybe you don’t need to know about the FHA 203k loan program but there are allot of you out there that have been buying my eBook “Contractors and the 203k” indicating that many of you are becoming aware of this program. Why is that? Simply put “more business” than you can handle.

When I take on a new contractor into our “203k Team” we ask one thing of them “Stop us before you get too much work from this program”. The last thing any of us want is for you to get a bad reputation for not being able to get these projects to completion in a timely manner and we have had some that don’t know when enough is enough until we start getting bad service. So… please just pull back a little when the time comes and then open the spigot again when it appears you are about 3-4 weeks from needing more work.

There are two types of FHA 203k loans. I will describe the differences below and YOU need to know them and choose the right one for your circumstances:

1) Full or Original 203k (started in 1961)

This program uses a 203k Consultant to create a bid specification. That specification is sent to you, the contractor for your bid. It is typically a blind bid situation. In some cases the contractor has already put in a bid for the work they think will be required but in many cases they aren’t aware of the HUD Guidelines so they may miss a few things but overall this seems to cut down on the time it takes to close the loan so it isn’t all bad. If the borrower has several clients come out and bid the project prior to seeing us to create the “scope of work” it can be a mess. As much as the client tries to have them bid the same project if you don’t write it down each contractor will have their impression of what they thought you said and each bid will be slightly different and the client will not have a clear bid that they can use.

I prefer to be the first one on the job to create the specification of repairs. I also will bid the job (never will do the work, just bid it) so the client has an expectation and we all know this project is still viable.

There is no “up front money” for this program. The contractor must be well healed and have credit or money or both to get the project started. Since each draw must be no more than 30 days from the prior one the contractor should have enough money to carry his/her business, materials and labor for that period of time plus whatever they need to run the rest of their business. This program allows for interim draws and you can get partial payments for anything that is partially complete but only for completed work. Some lenders will follow the guideline and let you get money for cabinets and finished flooring up having it delivered and stored on site. Some lenders will advance 50% of the window and cabinet materials money only when they are custom sizes and the check may be made out directly to the cabinet maker or window manufacturer.

This has been and can be a difficult situation for a small contractor or a contractor growing too fast. They need, heck, we all need “cash flow” which is the life blood of every business.

2) Streamlined “k” (started in 2005)

This program was intended to make the program easier to use for the majority of the lighter renovation projects. The significant thing with this one is that it cannot have any “structural” component. It is intended for smaller projects and though the maximum construction costs are limited to $35,000 per the Guideline in reality it is only $30,000-34,200. If you come up with Streamlined “k” loans where the work is $35,000 and your lender only does the Streamlined “k” you will be disappointed most of the time. The $35,000 must include the costs and fees associated with it. The $30,000 figure is due to the requirement of many lenders to maintain a 10% contingency reserved which takes a $30,000 right to $33,000 immediately.

The big thing here is that there is “up front” money for the contractor of 35-50% of the construction cost. The project must be completed in no more than 60 days, and there is only one final draw at the completion. No other interim draws. 

Mike Young, 203k Team Leader    

We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state. To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation". If you like what you see here please take a look at Another blog by Mike Young in Spanish and other languages. Got a 203k project giving you "fits" contact us at www.203k911.com. If you are looking for quality 203k software for consultants to speed up the underwriting process.

Skype name: the203kconsultant

    

Your 203k Consultant can make or break you. Typically you want someone who has done a few. They shouldn't be experimenting on you. Now that I've said that you don't always get what you want. If it isn't available or you have a new consultant who has just contacted you that "enthusiasm" can be worth a lot. If your new consultant has done their homework and taken the time to get some training you may be just fine.

We have had people call from areas where there were no consultants on the HUD list but the need was there. They had a contractor in some cases or a home inspector in others that knew how to make the inspection, we took those qualified people land were able to train them in how to conduct the consultation and write the finished report in such a way that they appeared like seasoned pros with their first consultation. We are in the process of doing that again right now in a remote area of Northern CA. If you are a lender and have been copying the required HUD forms from the 203k handbook, filling them out by hand, and turning them in with your underwriting submission, you are wasting your time. Our trained consultants do all that for you. 

Mike Young, 203k Team Leader    

We have fourteen offices in CA covering both CA states, NorCAL and SoCAL where we can cover the entire state. To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation". If you like what you see here please take a look at Another blog by Mike Young in Spanish and other languages. Got a 203k project giving you "fits" contact us at www.203k911.com. If you are looking for quality 203k software for consultants to speed up the underwriting process.

Skype name: the203kconsultant