Mortgage for a Fixer 203(k)

Renovation Loans
Purchase a home fixer which needs repairs.
So you bought this house and it needs a new kitchen

203(k) FHA Loan May Be the Fixer
You are able to borrow up to $31000 for repairs

What do you need?

  Identity of Interest Form

  203(K) Borrower Acknowledgement

  Work Explanation Letter 

  Correct Estimate to be signed by borrower and contractor

  Homeowner Contractor Agreement signed by contractor and borrower for every contractor 

  Contractor Resume for every contractor

  W-9 for every contractor 

  Business/State Licenses from contractor and subs as required by state 

  Liability insurance/bond/workman’s comp- Obtained from Contractor and Subs (if General Contractor does not have workman’s comp)

  Contractor Attestation Letter

  Contractor Identity of Interest

  Contractor Deposit Acknowledgment

  Permit Certification – Reno Specialist to Complete

  As Completed Appraisal with Estimate in the appraisal

FHA 203K Limited Renovation‐ Steps to Success  

•  Identify the Property! Let’s get it renovated and perfect!  
•  Review what renovations are necessary or desired.  You need to select a contractor.  Ask friends who have completed renovations for suggestions. Your marriage with the Contractor is an important relationship.  
• The Contractor fills out a Contractor Profile Form  This is an important part of reviewing their qualifications to do the work.  
• Are they licensed if required?  
• You and the contractor(s) sign a Homeowner/ Contractor Agreement. Spell out costs, time frame, and expectations in a notebook. Keep records in the notebook of progress
• Look for comparable homes that have sold in your tract that were upgraded in similar items that you plan to complete. as if all the renovations were completed Have all the proposals in writing given to your appraiser before the appraisal process begins. Provide all the details you can as to finish and upgrades.
• Appraisers may find other issues with the property that were not a part of the original inspection.  In these cases, those items must be added to the contractor proposals.  Health and safety code violations must be addressed. Install a carbon monoxide smoke detector before the appraiser arrives, as this is required in California code. If you know electrical is ancient, plan on bringing it Into this century. If the water heater is not properly strapped, purchase the kit to make it safe.
• Because renovation loans are a combination of purchase or refinance loans and construction loans, they take time to close.    
• Aside from the normal credit and property information, we must also gather and analyze the construction/ rehab part of the loan as well.  
•  Normally a renovation loan takes thirty days to close.  The process stops if we are waiting for the contractor proposals.  They are key.  
• A renovation loan is powerful product that allows a Buyer to move into a home and then watch it become their Dream Home.  Our commitment and expertise can help a Buyer realize that dream.  
• FHA and Lead Based Paint 
• If the home you are renovating was built before 1978, you may need to use a contractor or painter who is Lead Based Paint Certified.
• Lead dust or chips can be very harmful and toxic, especially to children, and FHA therefore requires that the contractor understands how to keep you and others safe.

Here are some things that may trigger the need for a lead paint certified contractor:

1. If you are breaking through walls and doing demolition.

2. If you are repainting rooms that have chipped or peeling paint of if you are sanding painted surfaces.

3. Doing an addition which requires you to expose any painted surface or break through it.

4. You are doing replacement windows or doors.

5. Bathrooms or other room renovations requiring the disturbance of painted surfaces.

6. Exterior painting which also includes chipping, scraping, sanding or pressure cleaning.

When in doubt, let us know so we can discuss it with you and your contractor.

We want to keep you and your family safe.

CMG Financial is a registered trade name of CMG Mortgage, Inc., NMLS# 1820 in most, but not all states. 

Caroline Gerardo Barbeau   C G Barbeau NMLS 324982   (949) 784 - 9699

Mortgage Escrow Impound Rules

Number of Months Property tax impound advance collection

Mortgage Lenders require tax and insurance impounds on high loan to value loans, called mortgage escrow accounts

California impounds are not required IF the loan is less than eighty percent loan to value.

• Closing month January – First Payment March, 6 months impounds required
• Closing month February – First Payment April, 1 months impounds required
• Closing month March – First Payment May, 2 months impounds required
• Closing month April – First Payment June, 3 months impounds required
• Closing month May – First Payment July, 4 months impounds required
• Closing month June – First Payment August, 5 months impounds required
• Closing month July – First Payment September, 6 months impounds required
• Closing month August – First Payment October, 7 months impounds required
• Closing month September – First Payment November, 8 months impounds required
• Closing month October – First Payment December, 9 months impounds required
• Closing month November – First Payment January, 4 months impounds required
• Closing month December – First Payment February, 5 months impounds required

The months are collected up front and held in trust to make sure that property taxes are paid upon when they are due. You are required to pay one-twelfth of the estimated cost of the escrow items each month. 

Be mindful, these amounts can change, you usually have to put some additional money into the account as well. Property tax bills increase, especially if you bought a home where the seller was taxed at a lower rate than the current purchase price. You will receive a whopping supplemental tax bill in about six months after your close, or as soon as the county catches the increase. Expect any supplemental tax or insurance increase that can affect how much is needed to be collected on your impound account. If you experience a supplemental tax bill the amount you have in escrow may not cover the entire amount due and therefore a shortage would be applied to your new impound account balance.

Lenders  require impound accounts for a single-family, owner-occupied dwelling if:

1. state or federal regulatory  requires the account
2. a state or federal governmental lending or insuring agency (like FHA or VA  Fannie FReddie Ginnie) made or guaranteed the mortgage
3.  borrower fails to pay two consecutive cycles of property taxes 
4. the original loan to value is 90% or more of the sale price or appraised value
5. there are two or more loans secured by the property, and the combined principal amount exceeds 80% of the appraised value of the property
6. the loan is a higher-priced mortgage loans established in Regulation Z, whether or not the loan is a higher-priced mortgage loan (a HOEPA or High Cost)
7. the loan is refinanced  in connection with a lender’s home-ownership preservation program
8. if the borrower does a modification 

Happy Teacher Appreciation Day!

Mother's Day May 12th

HAPPY MOTHER'S DAY

to my Mom
my sisters
my sisters in law
and sisters at work

and to you as well

May 12th Sunday!

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