October 30, 2021 – Corazon CRM

Your home can be your biggest asset and a primary tool for building wealth over the long term. But like other assets you invest in, such as stocks and bonds, the value fluctuates. These fluctuations can put you underwater with your mortgage.

Here’s what you need to know about underwater mortgages and what you can do if you have one:

What is an underwater mortgage?Signs of an underwater mortgageProblems with underwater mortgagesUnderwater mortgage options

What is an underwater mortgage?

An underwater mortgage, also known as an upside-down mortgage or having negative home equity, is a home purchase loan with a principal balance that exceeds the value of the home — in other words, you owe the lender more than your home is worth.

Underwater mortgages were common during the Great Recession from 2007 to 2009, when home values throughout the country plummeted and continued to decline for several years after the recession’s end. Homeowners with purchase or refinance loans based on pre-crash home values found themselves underwater as a result.

Underwater mortgages are less common today because of tighter underwriting standards and record price increases since the pandemic. Median home prices increased nearly 25% from June 2020 to June 2021, so there’s a good chance that your home is worth more now than when you bought it.

Signs of an underwater mortgage

Situations that might push you into negative equity include a decrease in local property values. A low appraisal is also a good indicator that you might be underwater on your mortgage.

Here’s how to find out if your loan is underwater.

Figure out how much you owe

You can find out how much you owe by checking your mortgage statement. You’ll see the amount listed under “principal balance” or “outstanding principal”.

If you need to know the exact amount immediately, you’re best off calling your loan servicer and asking for your payoff amount. That figure will include interest and fees that have accrued since the lender prepared your statement.

Whether you’re researching rates or looking to buy a home, Credible is here to help. You can compare prequalified rates on home loans from all of our partner lenders in just a few minutes.

Credible makes getting a mortgage easy

Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.We keep your data private: Compare rates from multiple lenders without your data being sold or getting spammed.A modern approach to mortgages: Complete your mortgage online with bank integrations and automatic updates. Talk to a loan officer only if you want to.Find Rates Now

Trustpilot

Determine your home’s value

The only way to get an accurate opinion of value is to have your home appraised by a licensed home appraiser. A professional home appraisal is usually worth the cost if you’re hoping to sell your home. Otherwise, you can get a ballpark figure for free from a real estate portal site like Redfin or Realtor.com.

Subtract your home value from your principal balance

The final step is a simple math problem that will show whether you’re underwater:

Value – Balance = Equity

If, for example, your home is worth $200,000 and you owe $225,000 on your mortgage, the equation will look like this:

$200,000 – $225,000 = -$25,000

In this scenario, you’re $25,000 underwater on your home loan.

Problems with underwater mortgages

An underwater mortgage doesn’t always have a negative impact on a homeowner. If your mortgage is affordable and you’re not planning to sell or refinance, you might not worry about it at all. However, when that’s not the case, an underwater mortgage can put you at a serious disadvantage.

Refinancing

Lenders protect themselves against default by limiting how much of your equity you can refinance. The limit might be 80% for a cash-out refinance, for example, or 95% for a rate-and-term refinance. But if you have negative equity, you have nothing to draw against.

Even in the event you find a loan that lets you refinance 100% of your home’s value, the new loan won’t fully repay the underwater one. In that case, you’ll have to pay enough cash at closing to make up the difference.

Also See: How to Refinance Your Mortgage in 6 Easy Steps

Selling

Most mortgage loans have a due-on-sale clause that makes the loan due in full when the owner sells. In the case of an underwater mortgage, where the sale won’t cover the amount needed to pay off the loan, you’ll need enough cash at closing to make up the difference.

Foreclosure

Your lender can’t foreclose simply because you’re underwater, but being underwater increases your risk of foreclosure because it limits your options. Since you might not be able to refinance or sell the home, there’s a greater chance of your home going into foreclosure if you can no longer keep up with the mortgage payments.

Underwater mortgage options

You don’t necessarily have to take action when your mortgage is underwater, but it’s probably a good idea, even if only to ward off future problems. If you’re already struggling, a quick response can keep you from losing your home.

Stay in your home

The simplest option is to remain in your home and continue making your regular mortgage payments. By paying down your principal balance, you’ll continue to build equity. Consider making extra principal payments to pay down your loan balance faster.

You can also try to increase the value of your home. Home remodeling projects rarely generate a positive return on investment unless you can do the work yourself, but simple jobs that improve curb appeal can give your home value a boost for little cost beyond elbow grease.

Tip: If you can’t afford to make extra principal payments or remodel your home, sit tight and wait for a market cycle more favorable to sellers. This can right your mortgage naturally as values appreciate.

Refinance

Refinancing an underwater mortgage is tricky because you typically need equity to do it. However, you might be in luck if your loan is backed by Freddie Mac.

The Freddie Mac Enhanced Relief Refinance is meant for homeowners whose mortgages are underwater. This option could make your loan more affordable by lowering your mortgage rate and monthly payment or allow you to increase your equity faster with a shorter repayment period.

The program is available if you took out your home loan on or after Oct. 1, 2017, and are current with payments. Additional requirements include having had no 30-day delinquencies within the last six months and no more than one 30-day delinquency in the last year. Fannie Mae has a similar program but has paused it temporarily.

What about government-backed loans? Certain government-backed loans may still allow you to refinance if your mortgage is underwater. The FHA streamline refinance program, for instance, doesn’t require an appraisal, so you can refinance your FHA loan even if you have negative equity.

On the other hand, the VA no longer guarantees loans where the loan-to-value ratio exceeds 100%. Some lenders do set a higher cap on streamline refinances, but the cap includes closing costs and funding fees that the lender rolls into the loan. These costs can put you even further into negative equity.

Sell your home

You’ll have to meet one of two conditions to sell a home with an underwater mortgage:

Make up the difference between your loan balance and the sale price with a cash payment at closingGet permission from your lender to sell short

Unless you’re struggling to make payments, in which case you probably lack the funds to bring cash to closing, it doesn’t make sense to sell while your mortgage is underwater. But if you are struggling, a short sale can be an alternative to foreclosure.

Your lender won’t allow a short sale unless you document a hardship that’s likely to keep you from making payments for the foreseeable future, such as a job loss or disability. It can also take months before your lender approves the short sale.

In the meantime, you might rack up enough late payments that a short sale will do as much harm to your credit as a foreclosure would. And if the lender does approve the short sale, you might have to pay tax on the amount of the loan balance the lender forgives.

Walk away

Your last resort is to simply walk away from your home and let the lender foreclose on it. This option is called a strategic default because you’ll have concluded that you’re unable to stay in the home and instead plan to use the money to pay off other debt or build savings for rent.

Foreclosure will negatively impact your credit and remain on your credit report for seven years. As such, you might find it difficult to rent a home. Paying some or all of your rent upfront, though, gives you a better chance at having your rental application approved.

Important: One more option you can try before walking away is a loan modification. This is an agreement between you and your lender that changes the terms of your loan and makes your mortgage payment more affordable. Your credit might still take a hit, but it can at least help you avoid foreclosure. Talk to your lender to see if you qualify.

The post Underwater Mortgage: What Is It and What Are Your Options? appeared first on Credible.

Did you miss our previous article…
https://corazoncrm.org/?p=348

Kevin Smith

corazoncrm.org

Financial Tips

16 Fast Weekend Projects to Boost Your Home’s Curb Appeal

October 30, 2021 Kevin Smith

Taking on projects to boost your home’s curb appeal can give you a great sense of satisfaction and boost your mood every time you see your completed work.

Here are 16 projects that aren’t expensive or time-consuming — and that you can often do yourself:

Sweep the front porchGet a new front porch matHang a decorative wreathAdd potted plants to your front porchHide your hoseEliminate weedsAdd natural mulchReplace light fixturesClean, touch up, or completely repaint your front doorClean and polish or change front door hardwarePrune flowers and shrubsPressure wash your concreteHire a tree trimmerEmbellish your garage doorStyle your mailboxAttach house numbers

1. Sweep the front porch

The fastest, cheapest thing you can do to boost your home’s curb appeal is to get out a broom and dustpan and sweep your front porch.

You’ve probably become oblivious to the dead leaves and dirt that have accumulated there, so cleaning up will make an instant difference. Everyone who walks up to your front door is sure to notice.

2. Get a new front porch mat

Now that you’ve got a clean front porch, the next simplest way to spruce it up is with a new porch mat. Chances are, you either don’t have one at all, or you have an old one that’s looking ratty.

Hit up a big box store for a simple mat or outdoor rug you can use year-round. Buy a seasonally themed mat from virtually any home goods vendor. Or order something customized from a creator on Etsy.

If you need cash for a major home improvement project, consider a cash-out refinance. Credible can help you find a great refinance rate from our partner lenders in just a few minutes — checking rates with us is free, secure, and won’t affect your credit score.

Get the cash you need and the rate you deserve

Compare lendersGet cash out to pay for home improvementsPrequalify in just 3 minutesFind My Loan
No annoying calls or emails from lenders!

Trustpilot

3. Hang a decorative wreath

If you want to dress up your front door, try a wreath! You don’t have to hammer a nail into the door to hang it, either. You can use a temporary adhesive hook or an over-the-door hanger.

Choose from holiday-specific wreaths (like Halloween or Easter), seasonal wreaths to celebrate fall or spring, or year-round wreaths that look good all the time.

Front door signs, hung on the door or propped next to it, are also a simple and affordable way to make your front entrance more inviting.

Don’t Miss: 8 Popular Pandemic Home Renovations to Transform Your Space

4. Add potted plants to your front porch

Even the smallest front porch usually has room for a potted plant or two. You might go for a vibrant magenta Tradescantia zebrina or a classic green fern. Consider how much sun the plants will get: You might need shade-loving varieties. Also, keep pet safety in mind.

If you purchase plants from your local nursery, you’re almost guaranteed to get something that’s well-suited to the season and climate, but for a wider selection, you can order plants online.

Tip: If your gardening skills are nonexistent, consider a high-quality artificial plant. You might be surprised by how realistic they can look!

5. Hide your hose

Many of us have a hose in front of our house that we don’t put away because we use it so often. As convenient as this is, some form of hose storage will eliminate the visual clutter of an uncoiled hose.

If you have the right power tools, you can mount a hose holder to a wall, but if you don’t want to drill holes into your home — or you’re looking for an easier project — a hose pot will also work.

One free, temporary fix is to just unscrew your hose from the faucet and store it in the garage. This can be a good option if you just want to impress guests in the short term and aren’t looking for a long-term solution.

6. Eliminate weeds

Weeds are another nuisance that you might have stopped noticing if you see them day after day. Pulling them can be a ton of work, and it won’t work long-term unless you get all the roots out.

There are, however, natural ways to kill weeds using substances you already have around the house. Vinegar, salt, and dish soap can help you kill unwanted plants. Check online for DIY recipes and application tips.

For weeds in your lawn, adjusting your watering and mowing patterns can also help limit weed growth going forward.

7. Add natural mulch

In flower beds and gardens, a thick layer of mulch will help prevent those weeds you just pulled from growing back. Mulch’s sunlight-blocking power also retains soil moisture so you can water less and keep your plants healthy.

You’ll want to do a bit of research to determine the best kind of mulch for your plants and climate, how close to your trees and plants it can be, and which types of mulch are the safest for people and pets.

8. Replace light fixtures

Replacing your old exterior light fixtures with more modern ones can help update your home’s look. It involves some electrical work, so you may want to hire an electrician. However, if you’re comfortable learning basic electrical safety, reading instructions, and watching a few videos, replacing light fixtures can be an easy DIY job.

For an extra-fun change, use smart light bulbs in your new fixtures. You can control these via WiFi and change their color and brightness with your smartphone.

9. Clean, touch up, or completely repaint your front door

Your front door will get dirty and fade over time since it’s exposed to the elements 24/7. Sometimes, just cleaning it with a wet rag will make a big difference, but other times, your door will need a paint job to look its best.

Painting your front door a bright color that complements the other colors in your home’s exterior can make your home stand out in a good way — and potentially raise your home’s value.

The ideal way to do the job will involve removing the door and hardware, filling and sanding any cracks, painting, then reinstalling the door. But you can also paint it in place by taping off the hardware and putting down a drop cloth to prevent paint drips and spills from marring your porch.

10. Clean and polish or change front door hardware

So many things in our homes can look like they need replacement because we’ve never cleaned them properly, and door hardware definitely falls into that category. The solution is sometimes as simple as a dish soap and water mixture.

For problems that go beyond surface dirt, you’ll need to know what material the doorknob is made of. Coated or plated hardware can require different cleaning approaches than solid metal. If your door hardware has corroded due to factors like humidity or salt air, replacing it is probably the best.

Keep Reading: 10 Ways to Craft an Elegant Outdoor Space

11. Prune flowers and shrubs

You should be able to improve your curb appeal by pruning away the dead parts of your flowers, shrubs, and hedges. If you can reshape them, even better!

You might also need to pull out plants that are beyond recovery and add new ones. Planting new flowers in full bloom is a great way to quickly add color to your landscape.

12. Pressure wash your concrete

To get stains and mildew out of the hard surfaces around your home, like your patio and driveway, try pressure washing. With the right detergents and degreasers, you can remove years of grime. Best of all, it’s one of those home improvement projects you can wrap up in a day.

You can borrow a pressure washer from a neighbor or rent one from a home improvement store. Carefully follow the instructions so you don’t hurt yourself. Also, certain materials can be damaged by pressure washing, so do your research first, or hire a professional.

13. Hire a tree trimmer

Having your trees professionally trimmed can make a big difference in your curb appeal.

An arborist will know how to shape your trees to make them look their best. They can also keep your trees healthy by thinning enough branches to improve air circulation and treating any problems that might be weakening your trees.

Besides, it’s a good idea to identify trees or limbs that could be in danger of falling in a storm, then take care of them promptly. A house that’s been partially crushed by a tree is not a pretty sight.

14. Embellish your garage door

If you have a traditional raised-panel garage door, you can add decorative or “dummy” hardware to make it more attractive. These handles and hinges don’t serve any functional purpose, but do add visual interest. There are also kits that allow you to add simulated windows.

Give your door a carriage style, mid-century modern, or contemporary look to go with the rest of your home. Just make sure to install the embellishments in a way that won’t affect the door’s ability to open and close smoothly.

15. Style your mailbox

A professional might be able to build you a custom stone mailbox in a weekend, but for a more affordable DIY upgrade, you have a few options.

If you have a metal mailbox, try cleaning it and spray painting it. You can also order decals, letters, and numbers to customize your mailbox. Or perhaps landscape your mailbox by adding plants and flowers around it.

Keep in mind that you’ll need to prune them periodically, and you may not want to plant anything that attracts lots of bees (like lavender) so you don’t have to worry about getting stung when you check the mail.

16. Attach house numbers

You can make sure your address is prominently displayed on your house by replacing old house numbers or installing new ones. This is also a way to ensure that emergency services can locate your home and that someone else’s packages don’t get dropped on your doorstep. Kits are available online in all different styles.

Boosting your curb appeal is a great way to get more money when selling your home. But even if you’re not selling, sprucing up your home’s exterior will increase your pride of ownership and create a more welcoming experience for your guests. And once you see the results of your first project, you’ll probably feel inspired to do even more.

Shopping around for a home loan can be stressful. Fortunately, Credible simplifies this process and makes comparing multiple lenders easy. You can see prequalified refinance rates from our partner lenders in just a few minutes.

window.credibleAsyncInit = function() {
CredibleSDK.initWidget(‘#credible-rate-table’, {
environment: ‘production’,
product: {
marketplace: ‘mortgage-combined’,
type: ‘rate-table’,
variation: ‘shortened’,
loantype: ‘refinance’,
},
analytics: {
source: ‘credible_blog’,
},
});
CredibleSDK.initWidget(‘#mortgage-combined-rate-widget-simple’, {
environment: ‘production’,
product: {
marketplace: ‘mortgage-combined’,
type: ‘rate-widget’,
variation: ‘simple’,
},
analytics: {
source: ‘credible_blog’,>

The post 16 Fast Weekend Projects to Boost Your Home’s Curb Appeal appeared first on Credible.

Did you miss our previous article…
https://corazoncrm.org/?p=330

Kevin Smith

corazoncrm.org

Loans Serivces

What Happens to Your Mortgage When You Die?

October 30, 2021 Kevin Smith

One important aspect of estate planning is deciding what will happen to your home after you die. The answer might be fairly cut and dry if the home is fully paid for. If it’s not, though, you’ll need to consider the financial ramifications for your estate and for the person who inherits the home.

Here’s what happens to your mortgage when you die:

Who assumes a mortgage after my death?How to take over the mortgage of an inherited housePlanning ahead

Who assumes a mortgage after my death?

No one automatically assumes your mortgage after your death. Your estate executor (i.e., the person you appoint to carry out your will and manage your estate after you die) or administrator (i.e., the person a court appoints to fulfill those same duties) will continue to make payments using funds from the estate while everything is being settled.

Later, the individual who inherits the home might be able to assume the loan.

Good to know: If you’re a co-borrower or cosigner with the decedent, you don’t have to do anything to take over the mortgage because you’re already responsible for paying it. You’ll simply continue the payments. However, you should contact the mortgage servicer to inform them of the decedent’s death.

How to take over the mortgage of an inherited house

Mortgage loans have a due-on-sale clause, also called an acceleration clause, that requires the loan to be paid in full if it transfers to a new owner. However, federal law prohibits lenders from accelerating a loan in the event of a borrower’s death. Individuals who acquire ownership this way are considered “successors in interest,” and lenders must treat them as if they were the borrower.

The law allows a successor in interest to assume the loan, without having to apply or qualify, and continue making the payments. You’re also entitled to modify the mortgage to avoid foreclosure if you wish to keep the home.

What are my options as the heir of a home with a mortgage?

In the event you inherit a mortgaged home, you have several options. Which one is best depends on your personal preferences and your financial situation.

If you want to keep the house, you can:

Assume the mortgage: Federal law allows heirs to assume a decedent’s mortgage loan in many cases. As long as you’re a qualified successor in interest — someone who inherited or otherwise acquired ownership as a result of the homeowner’s death — you can take over the loan once the deed is signed over to you. The law also entitles you to modify the loan if you’re not financially capable of making the payments.Refinance the mortgage loan: You can also refinance the mortgage into a new mortgage loan as soon as the deed is signed over to you. You’ll have to apply for the loan, qualify based on your own creditworthiness, and pay any closing costs. However, refinancing could result in a lower interest rate or an extension of the time to pay off the loan — either of which can make the home more affordable.Repay the loan in full: Assuming you have the cash on hand, you can avoid mortgage issues entirely by paying the balance in full. The home would then be yours free and clear.

If you can’t or don’t want to keep the house, you can:

Sell it: The home is yours as soon as the deed has been transferred to you, so you can list it for sale just like you would a home you’d purchased yourself.Let the lender foreclose: If you don’t want the house and don’t want to sell it — a reasonable decision if you’re unlikely to sell at a profit — you can simply take no action. After a period of time with no payments, the lender will foreclose and repossess the home.

Important: Foreclosure can have tax consequences for the estate. Contact an accountant or attorney before going this route.

What happens to a reverse mortgage when you die?

The rules change when you inherit a home from someone other than a spouse with whom you are a co-borrower on the home’s reverse mortgage.

A reverse mortgage allows older homeowners to access the existing equity from their home. These loans don’t have to be paid back unless the borrower and their co-borrower spouse both die or move out of the home.

If you inherit a property with a reverse mortgage, you have the option of selling or keeping the home. The loan is not assumable, but you can keep the house by doing one of two things: paying off the balance or paying 95% of the home’s value, whichever is less.

Similarly, if you decide to sell the home, you’ll use the sale proceeds to pay off the debt owed on the loan — or an amount that’s at least 95% of the home’s value — and then pocket the remaining proceeds.

Planning ahead

A crucial step in estate planning is drafting a will detailing how you want your estate handled after you die, along with who you want to serve as the estate executor. In the event you die intestate — without a will — the court will appoint an administrator to take on that role.

When planning to bequeath a mortgaged home, it’s important that you disclose the mortgage to your executor and close relatives — otherwise they won’t know to make payments, and the home could be lost to foreclosure inadvertently.

In addition, consider whether the individual who inherits your home will be able to afford mortgage payments and upkeep. An estate or financial planner can help you devise a strategy to keep your gift from becoming a burden to your loved ones.

Compare your home loan options

Credible is a mortgage marketplace that allows you to easily compare rates and loan options. With Credible, you can secure a streamlined pre-approval letter and see loan details from all of our partner lenders in just a few minutes. We also provide transparency into lender fees that other brokers typically don’t.

Credible makes getting a mortgage easy

Trustpilot

The post What Happens to Your Mortgage When You Die? appeared first on Credible.

Did you miss our previous article…
https://corazoncrm.org/?p=327

Kevin Smith

corazoncrm.org

Loans Serivces

FHA 203(k) Loan: What It Is, How it Works, and More

October 30, 2021 Kevin Smith

Buying a fixer-upper home instead of a turnkey property can help you save money — as long as you have the time and budget to complete the necessary repairs. However, depending on the property condition, you might struggle to qualify for a traditional home loan.

Thankfully, you can apply for an FHA 203(k) loan. This type of mortgage rehabilitation loan is easier to qualify for than a conventional home loan and can potentially help you transform your distressed property into one of the best lots in the neighborhood.

Here’s what you need to know about FHA 203(k) loans:

What is a 203(k) loan?How does a 203(k) loan work?203(k) loan types203(k) loan uses203(k) loan requirements203(k) loan process203(k) loan pros and cons

What is a 203(k) loan?

There are several FHA home loan programs available to you. Most single-family homes requiring minimal repairs are eligible for 203(b) loans — the most common FHA loan.

But when a house needs extensive work for health, safety, and/or security reasons, you may need to apply for a 203(k) mortgage instead. Also known as a Section 203(k) loan, this rehab loan lets you buy the property as-is and use funds from the loan to complete the necessary repairs. You can also refinance your existing mortgage to perform structural and cosmetic repairs to your current home.

While Credible doesn’t offer 203(k) loans, our streamlined process makes comparing rates for conventional loans easy. It only takes a few minutes to see prequalified rates and generate a streamlined pre-approval letter using our free online tools.

Credible makes getting a mortgage easy

Trustpilot

How does a 203(k) loan work?

You can purchase or refinance a home that’s at least a year old with an FHA 203(k) rehab loan. Primary residences requiring structural repairs and minor improvements are eligible for financing with a fixed or adjustable interest rate.

A Section 203(k) loan can be an excellent option as you only need to apply for one loan to secure the property and finance repairs with lenient borrower requirements.

While 203(k) loan requirements are typically more lenient than other home loans, the application process can be more tedious. For example, the lender requires a list of specific repairs, a cost estimate, and hiring a licensed contractor before you can close and make an initial draw.

Good to know: Only repairs or renovations that add value to the property will qualify. Certain luxury items like swimming pools and barbecue pits aren’t allowed. And while you may not have to occupy the home immediately, you’ll only have six months to complete the proposed projects.

203(k) loan types

There are two different 203(k) renovation loan options. Your estimated repair costs and the types of repairs determine which loan to apply for.

Limited 203(k) loan

A limited 203(k) loan — formerly known as a streamline 203(k) — allows you to borrow up to $35,000 for repairs or improvements. These loans are often better suited for cosmetic or non-structural repairs like a kitchen remodel or new flooring. Essentially, you’re performing the repairs that the seller didn’t do, allowing you to buy the house at a potential discount.

Here are some of the features of this loan type:

Cosmetic repairs only: Most minor remodels and non-structural repairs are eligible but an approved contractor must finish the work within six months. Contingency reserve: While you can borrow up to $35,000 for repairs, the lender may require a 20% contingency reserve — essentially, funds that are set aside to cover any cost overruns. For example, you might borrow $35,000 for repairs but the lender might withhold up to 20% (in this case, $7,000) in a reserve. They’re recommended, but not required, for limited 203(k) loans.Homebuyers and homeowners can apply: This loan is available to buyers and existing homeowners. However, you cannot refinance an active 203(k) loan.Self-made work plan: You may not have to work with a 203(k) consultant to draft a work plan for any repairs and improvements. However, your mortgage lender must approve the plan and the contractors you hire.

Standard 203(k) loan

If your home requires major structural repairs to get it into live-in condition, the standard 203(k) loan is a better option. This loan can also be a great alternative to construction loans when you retain the original foundation but need to rebuild or modify the existing structure.

The main features of this loan include:

Minimum $5,000 in improvements: You’ll only need to complete at least $5,000 in eligible improvements to qualify for a standard 203(k) loan.Contingency reserve: Lenders require a contingency reserve of up to 20% of the amount you borrow on all standard 203(k) loans.Complete major repairs: You can use this loan for significant repairs or remodeling as long as the original foundation exists. For example, you could rebuild the original structure or convert a single-family home into a multi-family property.Work with a 203(k) consultant: An FHA-approved 203(k) consultant must create your work plan and cost estimates. Qualified borrowers that perform their own work may be able to waive this requirement but cannot receive payment for the labor.More eligible repairs and improvements: Some repairs and improvements that aren’t eligible for funding with a limited 203(k) loan are eligible with a standard 203(k) loan. These include landscaping, structural rehabilitation, and installing storm shelter additions.

203(k) loan uses

You can use a 203(k) loan for many non-luxury repairs and improvements. Here are some ways to boost the value of your property using either 203(k) loan:

Heat and air conditioning systemsPlumbingWell or septic systemRoofingEnergy conservation improvementsSmoke detectorsExterior decks, patios, and porchesFencesWalkways and drivewaysKeep in mind: Your lender may only authorize repairs that increase the as-is property value by the same amount as the amount you spend.

203(k) loan requirements

Here are some of the FHA requirements you’ll need to meet:

Credit score: You’ll need a credit score of at least 500 to apply. However, 203(k) loan lenders may require a score above 600.Down payment: Your down payment is 10% with a credit score between 500 and 579. But you’ll only need to make a 3.5% down payment with a score of 580 or higher. Mortgage insurance premiums: You’ll pay an upfront mortgage insurance premium of 1.75% on the purchase price and repair funds. This loan also has an annual premium for the life of the loan. You can cancel the premium after 11 years if your initial down payment is 10% or higher. Employment history: You may need to provide proof of employment for the last two years. Your two most recent tax returns may also qualify. Traditional W-2 or self-employment income can qualify with a consistent work history.Debt-to-income ratio (DTI): Your maximum debt-to-income ratio is 43% in most instances. The DTI can be as high as 50% when you have qualifying income and cash reserves.Loan limits: You can borrow up to the nationwide mortgage limit or 110% of the estimated property value after improvements, whichever is less. In 2021, the mortgage limit is $356,362 in most counties for a single-family home and $822,375 in higher-cost areas.Primary residences only: 203(k) loans are only for primary residences. You must intend to live in the house for at least one year after the closing date.Must be an existing property: Your home must be at least a year old. The home can be a single-family home with one to four units, a condominium, or a manufactured house if the original foundation remains undisturbed.Closing costs: You’ll have to pay several fees including origination, appraisal, 203(k) consultant, and contractor charges.

203(k) loan process

Here is a look at how to apply for a 203(k) loan:

Apply with a 203(k) lender: Compare pre-approval rates from several mortgage lenders offering 203(k) loans. The lender can help you determine if a standard or limited 203(k) loan is better. Gather your documents: After identifying a property, apply for financing by submitting your personal, employment, and property details.Home appraisal: Your lender may require an initial inspection to determine the current property value and amount you may borrow for repairs. A 203(k) consultant can identify the necessary work items and total cost estimate.Hire a contractor: Unless you’re a professional contractor, you’ll need to hire a licensed general or specialized contractor before the loan closing date to complete the repairs. Using a contractor with previous 203(k) experience can prevent delays.Close on the loan: After hiring a qualified contractor, you can close on the loan to purchase the property and draw the initial repair funds. You’ll need to pay the closing costs, down payment, and upfront mortgage insurance premium.Complete the repairs: You have six months to complete the necessary repairs with a 203(k) loan. The work must start within 30 days of the closing date and the lender requires routine progress updates.Borrower’s letter of completion: You’ll provide the lender with a signed letter of completion stating all necessary repairs are complete to your satisfaction. Any unused funds from your contingency reserve will be applied to your loan principal.Occupy the house: You might be unable to occupy the dwelling until the necessary repairs are complete. After gaining a certificate of occupancy, you can move into your home to finalize the loan process.

203(k) loan pros and cons

These are the advantages and disadvantages of an FHA 203(k) rehab loan:

Pros

Most repairs qualify: Many minor and major repairs and improvements are eligible and can increase your property value quickly. Flexible borrower requirements: This loan type typically requires a lower credit score and down payment than conventional mortgages and construction loans. You can also apply for a 203(k) purchase or 203(k) refinance loan.Flexible borrowing limits: You can borrow up to your area’s borrowing limit or 110% of the after-repair property value.Lenient property requirements: While you must make repairs, 203(k) loans accept properties that may not pass the appraisal process for a conventional mortgage. Buying a fixer-upper at a low price can give you a tidy sum to spend on repairs and may end up being cheaper than purchasing a turnkey property.

Cons

Short repair window: You only have six months to complete the required repairs. Lenders may grant an extension for extreme circumstances. Houses with excessive damage may not qualify despite selling at a bargain price.Must hire a contractor: You’ll need to use a professional contractor to complete the work. Standard 203(k) loans also require hiring a consultant during the application process to develop a work plan. This oversight can complicate the purchase process. No investment properties: This program is strictly for primary residences that you plan on living in for at least one year. Rental homes and fix-and-flips don’t qualify.Mortgage insurance premiums: Like other FHA loans, you’ll have to pay mortgage insurance, possibly for the life of the loan. A 1.75% upfront mortgage insurance premium (UFMIP) is due at closing and an annual mortgage insurance premium (MIP) not exceeding 0.85% also applies.

The post FHA 203(k) Loan: What It Is, How it Works, and More appeared first on Credible.

Did you miss our previous article…
https://corazoncrm.org/?p=324

Kevin Smith

corazoncrm.org