FHA 203k Renovation Loans.3.50% Down, 6% Seller Closing Credit Allowed

FHA 203k Renovation Loans Program Guidelines

Loan Purpose

• Purchase
• Refinance: Cash out

Credit Profile

• 580 minimum middle credit score for Accept/Eligible findings
• 620 minimum middle credit score for Accept/Eligible and Refer/Manual automated underwriting findings
• No foreclosure or short sale within three years of contract ratification date
• No Chapter 7 bankruptcy discharge within two year of contract ratification date
• No mortgage delinquency in the last 12 months for a FHA 203kStreamlined Refinance

Parameters of Repairs Budget:

• Minimum $5,000
• Streamlined FHA 203k Loan up to $35,000
• Standard FHA 203k Loan no limit

Construction Time

• Must start within 30 days of the loan closing
• No more than six (6) months from closing

Contingency Escrow Reserve

• 10% to 20% of the Contractor proposal, based on the following:
  • 10% minimum to cover any unexpected costs arising from the project
  • 15% to 20% minimum if utilities are not operational at time of Appraisal inspection
  • Up to 20% if evidence of termite damage
• If unused the contingency escrow reserve will be used to reduce the outstanding mortgage amount after settlement or make additional improvements to the property
• Based on the Underwriter discretion a Contingency Reserve is not required for the Streamlined 203k

Draws

• For the Streamlined 203k Loan the Contractor is paid as follows:
  • At settlement the following may be paid:
    • Permit Fees
    • 50% of the base bid amount to defray the cost of material
  • Up to two draws permitted
• For the Standard 203k Loan the Contractor is paid as follows:
  • At settlement the following may be paid:
    • Permit Fees
  • Up to five draws permitted

General Contractors

• Only 1 General Contractor (“GC”) allowed
• GC can’t be related to the borrower(s) or an employee/employer of the borrowers
• GC must be insured, licensed, and bonded
• GC must provide a detailed contractor estimate itemizing all repairs that are to be completed with costs broken down by material and labor and if applicable permit costs

FHA HUD Consultant

• Required when using the Standard FHA 203k Loan. The HUD Consultant will:
  • Charge a fee of $400 to $1,000+ depending on the dollar amount of the project
  • Prepares a Feasibility Study
  • Inspects the property and work completion prior to each draw request
  • Reviews any proposed changes to the Work Write-Up and prepares change orders

Loan Amount

• Maximum loan limit is established by The Department of Housing and Urban Development and is determined by the County where the property is located and by the household units. Click here for loan limits in your area
• Base Loan amount is determined by the purchase price of the house, plus total renovation budget, less the down payment (minimum 3.50% down required). The Base Loan can't exceed maximum HUD loan limits
• Total Loan amount is the purchase price, less the down payment, plus the FHA 1.75% Upfront Mortgage Insurance Premium (UFMIP)

Mortgage Insurance Premiums

• Upfront Mortgage Insurance Premium (UFMIP) 1.75% of the Base Loan Amount
• Annual Mortgage Insurance Premium (MIP) required
• MIP Calculations are as follows:

  Mortgage Term of More Than 15 Years
  Base Loan Amount	LTV	MIP (bps)	Duration
  Less than or equal to $625,500	≤ 90.00%	80	11 years
  	> 90.00% but ≤ 95.00%	80	Mortgage term
  	> 95.00%	85	Mortgage term
  Greater than $625,500	≤ 90.00%	100	11 years
  	> 90.00% but ≤ 95.00%	100	Mortgage term
  	> 95.00%	105	Mortgage term
  Mortgage Term of Less Than or Equal to 15 Years
  Base Loan Amount	LTV	MIP (bps)	Duration
  Less than or equal to $625,500	≤ 90.00%	45	11 years
  	> 90.00%	70	Mortgage term
  Greater than $625,500	≤ 78.00%	45	11 years
  	> 78.00% but ≤ 90.00%	70	11 years
  	> 90%	95	Mortgage term

Ratios

• As determined by Automated Underwriting System or AUS with DTI ratios up to 56%. Requires a Desktop Underwriter “Approved/Eligible” or Loan Prospector “Accept” findings
• Manual Underwrite acceptable with DTI ratios up to 31% front end and 43% back end

Property Type

• Owner-occupied properties 1-2 units
• Existing attached and detached single-family residences
• New construction with permanent financing only
• PUD's (i.e. Townhomes)
• Condo-units must be FHA approved project
• Log cabin homes, provided Appraisal Report lists other comparable log cabin homes that have recently sold in the area

Occupancy

• Owner occupied only
• Non-occupant co-signers permitted

Property Valuation

• The appraisal order can’t be processed without contractor proposal being obtained
• Appraiser to provide two sets of valuation, which are the “as-is” and "after-completed value" appraisal value
• On purchase transactions, combined purchase price and renovation budget can be 110% of "after-completed value"
• Final inspection must be completed by the FHA 203k Appraiser once property is 100% complete

Documentation

• All loans must be fully documented per Agency Guidelines
• For Self Employed borrowers, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)

Down Payment/Closing Costs

• 3.50% down payment required with a minimum 580 middle credit score
• Seller contribution toward buyers closing costs and escrows up to 6% of the purchase price
• Closing cost help can come from flexible sources including family member gifts and loans against a 401k retirement account

Terms

• Amortization period: 15, 20, 25, 30-year fixed rate
• Adjustable Rate Mortgage