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Author Topic: Financing Question  (Read 7519 times)

Offline christopher w

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Re:Financing Question
« Reply #15 on: October 19, 2006, 03:53:50 pm »
Also,anyone who says that 203K loans are the same as construction loans is not correct. Construction loans are a piece of cake. 1X or 2X closes. Here in Texas we can close those in 10 days. Here are the differences

Plan Review - Prior to the appraisal, a HUD-accepted plan reviewer (or fee consultant) must visit the site to ensure compliance with program requirements. The utilities must be on for this site review to take place.

To process a Section 203(k) mortgage, two appraisals can be performed: (1) As-is value of the property; and (2) Estimated market value of the property assuming completion of the rehabilitation.

Preliminary Feasibility Analysis. After the property is located, the homebuyer and their realtor should make a marketability analysis prior to signing the sales contract.

In addition to all the HUD forms that have to be filled out by the contractor completing the work on the property. To make sure that things like the following are done correctly.

Cost Effective Energy Conservation Standards
(1) Addition to Existing Structure. New construction must conform with local codes and HUD Minimum Property Standards in 24 CFR 200.926d.

(2) Rehabilitation of Existing Structure. To improve the thermal efficiency of the dwelling, the following are required:

a) Weatherstrip all doors and windows to reduce infiltration of air when existing weatherstripping is inadequate or nonexistent.

b) Caulk or seal all openings, cracks or joints in the building envelope to reduce air infiltration.

c) Insulate all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation. Insulate ceiling areas where necessary

d) Adequately ventilate attic and crawl space areas. For additional information and requirements, refer to 24 CFR Part 39.

 

(3) Replacement Systems.

a) Heating, ventilating, and air conditioning system supply and return pipes and ducts must be insulated whenever they run through unconditioned spaces.

b) Heating systems, burners, and air conditioning systems must be carefully sized to be no greater than 15 percent oversized for the critical design, heating or cooling, except to satisfy the manufacturer's next closest nominal size.

Most of this information can be found on the www.hud.gov web-site. Making sure that the property conforms to FHA standards can take awhile.. So to make a long story short; things like this are most certainly NOT minimal and will take more time than a conventional loan. Finally I can't find anywhere in this posting where anyone complained about paperwork. I think the only point that was stated is that these loans (203K) take longer than regular FHA and construction loans to close. Hope this helps.
Christopher W
C-214.923.5781

Offline REI4ROI

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Re:Financing Question
« Reply #16 on: October 20, 2006, 06:51:04 pm »
I thought it was rather obvious; if you don't experience in something, you shouldn't offer advice on the same.  

Regards,

EZ,

I have originated plenty of FHA mortgages over the last couple of years. I am working on two right now as a matter of fact. Now that we have that answered...What does it have to do with the price of tea in china?
RE Investment Advisor
Weichert Realtors
[email protected]

Offline REI4ROI

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Re:Financing Question
« Reply #17 on: October 20, 2006, 07:01:59 pm »
Chris,

Not be a stickler, but you didn't give the differences between a 203K loan and a conventional construction loan...you provided a cut and paste summary 203K loan from the HUD website.  

The HUD information you provided pertains to energy efficiency requirements; I am not quite sure how this dispels the 203K loan as the loan of choice for owner occupied purchase and rehab or refinance and rehab projects.

FHA clearly offers the greatest overall value for the borrower and I fail to see how "time to close" overrides higher interest rates, higher down payment costs, higher credit score requirements, etc.  

Your post claims that you can close a conventional construction loan in TX in 7 days, but you don't say how long it takes to close a 203K loan.  

I don't see how you have proven or dispelled anything...did I miss something?

Regards,

Regards,

 

Regards,


Also,anyone who says that 203K loans are the same as construction loans is not correct. Construction loans are a piece of cake. 1X or 2X closes. Here in Texas we can close those in 10 days. Here are the differences

Plan Review - Prior to the appraisal, a HUD-accepted plan reviewer (or fee consultant) must visit the site to ensure compliance with program requirements. The utilities must be on for this site review to take place.

To process a Section 203(k) mortgage, two appraisals can be performed: (1) As-is value of the property; and (2) Estimated market value of the property assuming completion of the rehabilitation.

Preliminary Feasibility Analysis. After the property is located, the homebuyer and their realtor should make a marketability analysis prior to signing the sales contract.

In addition to all the HUD forms that have to be filled out by the contractor completing the work on the property. To make sure that things like the following are done correctly.

Cost Effective Energy Conservation Standards
(1) Addition to Existing Structure. New construction must conform with local codes and HUD Minimum Property Standards in 24 CFR 200.926d.

(2) Rehabilitation of Existing Structure. To improve the thermal efficiency of the dwelling, the following are required:

a) Weatherstrip all doors and windows to reduce infiltration of air when existing weatherstripping is inadequate or nonexistent.

b) Caulk or seal all openings, cracks or joints in the building envelope to reduce air infiltration.

c) Insulate all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation. Insulate ceiling areas where necessary

d) Adequately ventilate attic and crawl space areas. For additional information and requirements, refer to 24 CFR Part 39.

 

(3) Replacement Systems.

a) Heating, ventilating, and air conditioning system supply and return pipes and ducts must be insulated whenever they run through unconditioned spaces.

b) Heating systems, burners, and air conditioning systems must be carefully sized to be no greater than 15 percent oversized for the critical design, heating or cooling, except to satisfy the manufacturer's next closest nominal size.

Most of this information can be found on the www.hud.gov web-site. Making sure that the property conforms to FHA standards can take awhile.. So to make a long story short; things like this are most certainly NOT minimal and will take more time than a conventional loan. Finally I can't find anywhere in this posting where anyone complained about paperwork. I think the only point that was stated is that these loans (203K) take longer than regular FHA and construction loans to close. Hope this helps.
RE Investment Advisor
Weichert Realtors
[email protected]

Offline christopher w

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Re:Financing Question
« Reply #18 on: October 22, 2006, 05:13:14 pm »
EZ
I believe the point has been made. 203K loans take longer than a traditional FHA mortgage or a conventional construction loan. It is very difficult to predict the amount of time it takes to close a loan like a 203K because EVERY property is different. If you would like to discuss this any further my email is located at the bottom of this posting. I don't think the readers of this site want to hear about my extensive background in FHA and construction loans. Also, how does an FHA loan offer the best value when unless the borrower goes with a 15 year FHA mortgage they are going to pay upfront MIP as well as be REQUIRED to pay MIP for 5 years or ubtil they get to 80% LTV of the original loan amount? A conventional rehab or construction loan will allow them to use the appraised value instead nof acquisition cost. This allows for little or no down payment, and if you are working with a trustworthy loan officer you are going to get a better rate than FHA. As for credit score there are mutiple national lenders that will do a conventional construction loan down to a 620. As a lender I am sure that you love FHA because it pay so well, but when it comes to the needs of the customer FHA is not always the best choice. Especially when it comes to the 203K.
Christopher W
C-214.923.5781

Offline REI4ROI

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Re:Financing Question
« Reply #19 on: October 22, 2006, 09:41:34 pm »
Chris,

HUD has specific guidlines on how long it takes to close a 203k loan, and yes, it does take a little longer then a conventional construction loan, but that does not overshadow the overall value of the government's program (BTW, you can't use a traditional FHA loan [I assume you mean a 203b] for construction or rehab).  

I am not going to speculate as to what might interest the readers of the post, but I believe any borrower faced with this decision, might find a comparison useful.  

I am quite familar with variety of construction programs and or construction to perm loans available from IndyMac, National City, Bismark, etc., and stand behind my original statement, that an FHA 203k delivers the highest value.  

I think you meant to say that a conventional rehab or construction to perm is based upon future appraised value (property value after rehab) and not appraised value; loans based on ARV are the only loan programs that would allow for a potential 100% financing (with grants, gift funds, etc., so does the 203k).  

At this point, I am not interested in crossing swords with you and let's just part agreeing to disagree.  

I am both a direct lender and broker, and recommend loans that best serve my client and the situation (not my bottomline), but I understand that it must be difficult to compete with something you don't offer.  

P.S.  MIP is cheaper then PMI
P.P.S.  Even with the upfront MIP, a 203k loan oftens proves to the lowest cost of borrowing alternative to higher interest rates, lower LTV allowances and the need to refinance in the future.  
RE Investment Advisor
Weichert Realtors
[email protected]

Offline christopher w

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Re:Financing Question
« Reply #20 on: October 22, 2006, 10:11:27 pm »
EZ,

No sweat. I agree that both loans do have their own merits. FHA loans are fun to do because typically it is for first or second time homebuyers and they get so excited. I find the loan limits to be a bit constricting though. Thank you for keeping me on my toes.
Christopher W
C-214.923.5781

 




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