In many home purchase transactions where the subject property is in need moderate repairs, borrowers, and their Realtors, find themselves in a Catch-22 situation - banks won't lend money to buy the house without the repairs being made, and the repairs can't be made until the home has been purchased.
Enter HUD's 203 (k) Streamline Program. This loan will enable the borrower, with a down payment as low as 3.5%, to obtain financing that will cover the acquisition cost, plus the costs of making necessary repairs and improvements. In most cases, the work will need to be performed by a licensed contractor, and the plans need to be prepared and approved by the lender during the loan approval process. The borrower can obtain up to $35,000 for these repairs, and draw funds from an escrow account established by the lender at the close of the transaction to pay the licensed contractor at the completion of the repairs. This loan affords the borrower up to 6-months to complete the work, and the final disbursement will only be made after a HUD-approved inspector verifies that the repairs stipulated in the contract have been completed. These repairs must meet HUD's Minimum Property Standards, and all necessary permits must be obtained to meet all applicable building codes.
Under the right circumstances, these loans can be a real benefit to borrowers who are unable to cash flow needed repairs. The final loan amount is based upon the After-Improved Value of the property. Feel free to contact me to discuss the benefits of these loans. I can be reached at 888/627-2002 or kkertin@gmail.com
Tuesday, January 25, 2011
Outlook for 2011
The mortgage industry has undergone significant changes during the last year, and will continue to see change in the early part of 2011. The industry, as a whole, has experienced a significant reduction in the number of licensed loan originators and independent brokers, due to stricter licensing guidelines, real estate market conditions, and other factors.
Business models, like my own, in which I try to pay borrowers' closing costs with a portion of my commissions earned on the deal, are again under pressure due to proposed new regulations that are slated to go into effect on April 1, 2011. Like many other regulations that have evolved after the mortgage crisis, these regulations will have a negative impact on a borrower's ability to obtain competitive rates, by eliminating a mortgage broker's ability to offer superior rates and fee structures at a lower cost than the big banks would charge for the same loan products. The competitive advantages that I have had, due to lower overhead and more efficient operations are being eroded as an unintended consequence of new regulations. Nevertheless, I remain committed to offering my customers a better deal than anyone else.
Moving forward, I will continue to provide exceptional customer service and the lowest possible rates.
Business models, like my own, in which I try to pay borrowers' closing costs with a portion of my commissions earned on the deal, are again under pressure due to proposed new regulations that are slated to go into effect on April 1, 2011. Like many other regulations that have evolved after the mortgage crisis, these regulations will have a negative impact on a borrower's ability to obtain competitive rates, by eliminating a mortgage broker's ability to offer superior rates and fee structures at a lower cost than the big banks would charge for the same loan products. The competitive advantages that I have had, due to lower overhead and more efficient operations are being eroded as an unintended consequence of new regulations. Nevertheless, I remain committed to offering my customers a better deal than anyone else.
Moving forward, I will continue to provide exceptional customer service and the lowest possible rates.
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