FHA 203k renovation and rehabilitation mortgage

The FHA 203k renovation and rehabilitation mortgage clears the way for numerous homeowners to get the very best buy on purchasing their home. In my career as a mortgage loan officer for the past 20 years, I have seen my customers seal some of the very best deals buying real estate using the FHA 203K Repair and Renovation loan.

My customer, Mr L, called me when they put the last finishes on their repairs on the house they purchased for just cents-on-the-dollar. Here’s how he snagged the “deal of the century” as we are calling it.

Mr. L knew that his family needed to purchase a home that would more than meet their needs but still remain within their budget. They had been on the hunt for their perfect home for about 2 years. I could hear the excitement in his voice when Mr L called me to get the loan application completed and the preapproval letter drafted so that his contract could be accepted by the seller.
“This is the perfect house for us, Jo. It is so unbelievable that we getting this house in this neighborhood for so little money. Not only is our payment going to be within our budget, but is going to leave room for other stuff. What a deal!”

Here is the process we went through to get the perfect house for Mr. L.
(1) First he looked at the house with his contractor and got an idea of how much it would costs to repair
(2) I gave him an estimate of what terms would be on the loan
(3) He and his realtor wrote an offer to purchase the home and it was accepted.
(4) I set up an appointment for the appraiser, the HUD consultant and the homebuyer to meet at the property. The HUD consultant reviewed the specifications and cost estimates from the contractor who would do the work. The appraiser gave us a value for the property. Later the HUD consultant delivered the “official” reasonable costs estimate that the mortgage office would use to calculate Mr. L’s loan amount.
(5) Mr. L submitted his income and asset documents and loan disclosures to the mortgage office and we submitted the loan to underwriting for approval.
(6) Mr. L closed on his loan leaving the money for repairs in escrow to be pulled out little by little as the repair on the house gradually came to completion. The HUD consultant came out 4 or 5 times to inspect the work as they would get to a certain stage in repairs. At each inspection, a draw was made on the repair money sitting in the escrow account to pay the contractor until the work was completed.

Here is how the 203k loan structure looked approximately for Mr. L. :
Sales price: $80,000
Cost of renovations: $38,000
15% reserve on renovations: $5,700
$123,700
X 96.5 (to subtract 3.5% mandatory down payment)
$119,371 (FHA base loan amount)
X 1.01 (adding 1% upfront FHA mortgage insurance)
= $120,564 (total loan amount with upfront MIP added)
Mr. L’s money needed to close:
Down payment 3.5% $4,339
Closing costs including $800 HUD consultant fee & 3 inspections $5,000
Escrowing property taxes and insurance $2,700
Seller agreed on contract to pay $2,400 of closing costs for buyer. (FHA allows the seller to pay up to 6% of the closing costs if it can be negotiated on the contract)

$4,339 dp + $5,000 closing costs + $2,700 tx & ins=$12,039 minus seller pd $2,400=Mr L to pay $9,639 to close.

The house value was assessed at over $200,000. What a deal for Mr. L! What a deal for anyone who can buy a house that far below market price, fix it up and walk into an instant 40% equity position!

The FHA 203K mortgage loan financing was a great real estate home purchase for Mr. L living in Memphis.

Jo Garner, Mortgage Office
Evolve Bank & Trust
(901) 482-0354 jogarner@mindspring.com
www.MoneyShoppe.NET

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“SHOW ME THE MONEY”

“SHOW ME THE MONEY”
TREASURE HUNTING FOR CLOSING FUNDS

By: Jo Garner, Mortgage Officer
Evolve Bank & Trust (901) 482-0354
jgarner@getevolved.com

“Jerry McGuire” was a 1996 award winning film with the resounding catch phrase, “Show me the money!” Lenders have been repeating this to their borrowers for years. Where can borrowers go to find money when they do not have it to show?

Three areas to search are the borrower’s forgotten assets, gifts from family or employers and move-in costs paid by third parties. Sinking a shovel into these three areas has turned up pay dirt in the past. Here is a treasure hunting map detailing some clues.

Gift From Family: Gifts can come from family members or employers. The amount of the donation varies according to different loan programs. The donor will be required to document the source of his funds and that the money is a gift to the donee not requiring repayment. If the family member giving the money does not want to cash in a certificate of deposit or stock fund, he can borrow against the asset to give to the donee.

Borrower’s Forgotten Assets: Whole life insurance policies or annuities may have a cash value that can be borrowed. Many times the borrower does not realize the insurance she purchased years ago has a cash value that can be borrowed to pay the move-in costs.

Loans secured on certificates of deposit, stocks and bonds, and durable assets such as cars can be used as acceptable sources of funds to close as long as the loan is secured on an asset owned by the borrower. The payment must be added into the debt-to-income ratios for qualifying purposes

IRAs, 401(k)s and Retirement Funds. There can be heavy financial penalties for pulling money from these sources. However, many companies allow the homebuyer to borrow against these assets with no penalty. The repayment terms may be calculated in the borrower’s debt-to-income ratio.



Sale or Cash Out Refinance of Existing Real Estate Property can generate needed funds to close on another property. Lenders will require the HUD 1 Settlement Statement or sufficient proof of the source of funds.

Tax Refunds can provide a surprising source of closing funds.

Move-In Costs Paid By Third Parties: Sellers are as motivated to sell a house as the buyer is to purchase. Sellers can pay up to 6% of the sales price toward the buyer’s costs on FHA loans. If the borrower is getting a conventional loan above 90% loan-to-value the seller can pay 3%. If the loan-to-value is 90% or less, the seller is allowed to pay costs up to 6% of the sales price or value whichever is less.
Investor loans allow the sellers to pay no more than 2% no matter how much money the investor pays down.

Lenders are motivated to close the transaction and sometimes can bump up the interest rate slightly in order to use “premium pricing” to pay the borrower’s prepaid taxes and insurance or some of the closing costs. In most cases the rate is increased .25% and the difference in the monthly payment is minimal.

Charitable Organizations and government agencies such as Tennessee Housing Development Agency have programs that provide down payment assistance to borrowers. Some of the well known programs are City of Memphis Down Payment Assistance, Shelby County Down Payment Assistance, United Housing, Inc.. For the down payment assistance grants and loans, the borrower is required to meet a minimum or maximum annual income guideline and sometimes are required to be first time homebuyers. First time homebuyers are defined as buyers who have not owned real estate in the last 2 to 3 years.


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housing market improving

housing market improving

The housing market has improved in the last two years to the extent that John Burns Real Estate Consulting sees the market as possibly approaching the beginning of its next up cycle. Three factors needed for such a transition include demand, supply and investment, as the firm noted in a March 2008 report. More than two years later, job growth is coming back slowly and renters are beginning to recognize favorable buying conditions. New home construction is at an all-time low and is likely to remain low until REO inventory clears. As for the investment situation, mortgage rates and home prices fell dramatically since March 2008, creating the best buyer affordability conditions in about 30 years, the firm said. "We are at Stage 1 (The Bottom) and heading into Stage 2 (The Beginning)," CEO John Burns said in a statement today. "While we think Stage 2 will last longer than usual, we want to point out that the downside of investing in housing right now is about as low as you will ever see."

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Home Loan Demand Sinks to 13-Year Low

Home Loan Demand Sinks to 13-Year Low

Demand for loans to buy U.S. homes shriveled to a 13-year low last week, following the expiration of federal tax credits, while near-record low mortgage rates stoked refinancing, the Mortgage Bankers Association said on Wednesday. Mortgage purchase applications sank 27.1 percent to the lowest level since May 1997 in the absence of the popular government support, the group said. U.S. housing groped for footing after more than a year of homebuyer tax credits worth up to $8,000 expired on April 30. Requests for home purchase loans have fallen almost 20 percent over the past month despite low borrowing costs. "The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season," Michael Fratantoni, the industry group's vice president of research and economics, said in a statement.

Overall loan requests were down 1.5 percent, on a seasonally adjusted basis, in the week ended May 14, cushioned by a 14.5 percent jump in mortgage refinancing applications as home loan rates neared historic lows. Average 30-year mortgage rates fell 0.13 percentage point last week to 4.83 percent, the lowest since last November, the MBA said. The record low was 4.61 percent in March 2009, based on the group's survey, which has been conducted since 1990. Low borrowing costs and stabilizing home prices are being offset by near double-digit U.S. unemployment and a looming supply of foreclosed properties yet to hit the market. The worst of the housing crisis is over but recovery will be long and slow, most economists agree.

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#1 Turnkey Whitehaven rental
18.46% ROI
Video walk through at http://www.youtube.com/jdsproperties1

5024 Shubert Memphis TN 38109Memphis TN 38109 . 903sqft 3 bed 1.5 baths.
Purchase price of only $27,500 ARV= 60,000
Estimated monthly rental income $700/mth (8,400/yr)
Minus management fee 56/mth
Minus monthly taxes 78.77/mth
Minus monthly insurance 30/mth
Minus maintenance 56/mth
Minus vacancy 56/mth
= $423.23 positive monthly cash flow (5,078.76/yr) =18.46% ROI

EMAIL OR CALL JDS PROPERTIES @ (901) 212-7246 FOR MORE INFO OR PICS

House Prices Up 5.1 Percent in April Amid Slower REO Growth

House Prices Up 5.1 Percent in April Amid Slower REO Growth

Home prices in April gained 5.1% from last year, while REO levels across the country slowed their climb, according to the real estate data provider Clear Capital. The firm measures home prices on a rolling three-month period. REO took up 29.6% of the market in April, less than a percentage point of growth from 28.9% in March when levels increased from 26.1% in February. The best performing markets manage to post positive gains as the tax credit expired in April. Alex Villacorta, senior statistician at Clear Capital, said an interesting dynamic their seeing is the distinction between markets that resist increased levels of REO and those that remain sensitive to them. “For example, the highest performing metro areas have seen prices remain relatively flat over the last quarter despite REO saturation rates averaging just above 33 percent. Contrast this with the lowest performing areas which have seen prices drop dramatically with average declines of more than 10 percent and average REO saturation rate less than those in the highest performing areas,” Villacorta said. “This paradox suggests that price trends are not wholly dependent on distressed sale volume, and re-enforces the need to understand local market trends.”

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Whitehaven rental

12.88% ROI

324 Dreger Memphis TN 38109. 1595sqft 4 bed 2 baths.
Purchase price of $39,000 ARV= 80,000
Estimated monthly rental income $750/mth (9,000/yr)
Minus management fee 60/mth
Minus monthly taxes 121.13/mth
Minus monthly insurance 30/mth
Minus maintenance60/mth
Minus vacancy 60/mth
= $418.87 positive monthly cash flow (5,026.44/yr) =12.88% ROI

EMAIL OR CALL JDS PROPERTIES @ (901) 212-7246 FOR MORE INFO OR PICS

New home sales surge

New home sales surge

Sales of new single-family houses in March 2010 were at a seasonally adjusted annual rate of 411,000, 23.8 percent above the March 2009 estimate of 332,000, according to estimates released jointly Friday, April 23, 2010 by the U.S. Census Bureau and the Department of Housing and Urban Development. March new sales are 26.9 percent above the revised February rate of 324,000. The $8,000 first-time home buyer tax credit expires Friday, April 30, 2010. There is also a $6,500 credit for repeat buyers. “Undoubtedly, the tax credit is working,” said Bob Jones, chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “Builders are seeing a growing optimism among consumers.” “The near record-breaking 27 percent increase over February was the result of home buyers taking advantage of the tax credit as well as a carryover of demand that was held back by unusually bad weather in February,” said NAHB Chief Economist David Crowe. “The increased sales are very welcome news and sales will continue to improve, although we expect them to plateau in late spring and early summer when the credit expires. Following that, the housing momentum will be carried forward by low interest rates, pent up household formations, excellent affordability conditions and a budding employment growth,” Crowe added.

Regionally, sales increased 35.7 percent in the Northeast, 4.3 percent in the Midwest, 43.5 percent in the South and 5.7 percent in the West. The nationwide inventory of new homes on the market dropped a negligible 0.8 percent in March, to 227,000 units as builders continued to maintain small inventories. With the increased sales pace and low inventory level, the month’s supply of new homes for sale dropped from 8.6 in February to 6.7 in March. The median sales price of new houses sold in March 2010 was $214,000; the average sales price was $258,600.

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HAFA coming April 5

HAFA coming April 5

Short sales are already picking up in the distressed-property market, and the trend is expected to explode in coming weeks, when the government starts handing out cash to encourage lenders to close these deals. "Banks have ramped up short sale approvals," said Duane Legate of House Buyer Network. "They're hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales." Short sales accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.

And Bank of America, the country's largest mortgage servicer, has more than doubled the number of short sales it processed in recent months. This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers. But that has been changing.

For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. "The lenders lose 50% on a foreclosure and only 30% on a short sale," said Glenn Kelman, founder of the real estate Web site Redfin. "And short sales offer a way to get distressed properties off their books quickly." And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing. Under the new Home Affordable Foreclosure Alternatives (HAFA) program, borrowers will earn a $3,000 "relocation incentive" and servicers will get $1,500 for handling a short sale. The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims. Lenders participating in the program must also determine the market values of properties early on
and inform the owners of just what price they're willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.

What's in HAFA?

The coming boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners. Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale. I'll provide details as they come along, but here's a primer from the National Association of Realtors (NAR):

- Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

- Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

- Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

- Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6%).

- Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

- Uses standard processes, documents, and timeframes/deadlines.

- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

- Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

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