HUD & FHA Loan Programs and Grants!

22 Replies

Hello there everyone-

Not too sure if this qualifies as an announcement but I would like to let people know a little bit more about HUD (Housing and Urban Development) and FHA (Federal Housing Administration). HUD does not only offer people discounted homes to purchase but the ability to finance their purchase or consolidation of existing debt.

FHA does not lend you money but instead much like mortgage insurance they have the lender charge a premium (anually .5% of the loan balance in most cases), and if you do the math (Usually a 0% to 3% simple interest loans) it makes perfect sense for homebuyers and investors. Yes I said investors too, most people think that FHA loans are only meant for low & moderate income families that can't afford conventional lending. But that is just not the case, think of it like this someone tells you hey it is really windy right now (just because you can not see the wind does not mean it is there and you know cause you can feel it) and you know that they are telling you the truth.

Just because you can't see the advertisement on FHA loans and government programs does not mean that it doesn't exist. It just means that you are not looking hard enough or in the right places and for that matter most people ask the wrong questions when looking in the right place.

If you would like to know more just join me in the HUD, VA, and Tax liens sales forum and I may be able to help you. I do realize that it is a bit confusing being that so many people only want to know about the HUD homes for sale. The truth is you do not need to purchase a HUD home in order to qualify for an FHA backed loan (want to know why I just said that then just ask me).

Thank you for your time!

P.S. You would even be surprise at how many grants there are to fix up your home (some grants are monies from the government that does not have to be paid back :shock: yes you heard right), and there are loan programs that are based on timeline (the loan is forgiven after so much time has gone by).

Thanks again hope to hear from many of you soon enough and remember I only want to spead what needs to be known!

Hello there everyone-

If you are all to proud to ask what is out there to benefit you and your family then I will just list them off for you. This is not the case in most situations though, most people do not even know that there are government loan programs and grants available to them. Listed below is some info I thought that the average (not for investors, but do not get worried I have some really awesome stuff instore for you people too) homebuyer would enjoy and benefit from. Thanks and enjoy!

[size=18]Mortgage Insurance for One to Four Family Homes - Section 203(b) [/size]

Summary:
Through this program, HUD's Federal Housing Administration (FHA) insures mortgages made by qualified lenders to people purchasing or refinancing a home of their own.

Purpose:
FHA's mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make mortgages to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the lender against default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities.

Section 203(b) is the centerpiece of FHA's single-family mortgage insurance programs—the successor of the program that helped save homeowners from default in the 1930s, that helped open the suburbs for returning veterans in the 1940s and 1950s, and that helped shape the modern mortgage finance system. Today, FHA One- to Four-Family Mortgage Insurance is still an important tool through which the Federal Government expands homeownership opportunities for first-time homebuyers and other borrowers who would not otherwise qualify for conventional mortgages on affordable terms, as well as for those who live in underserved areas where mortgages may be harder to get. These obligations are protected by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely by borrower premiums.

Type of Assistance:
This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified buyers. Insured mortgages may be used to finance the purchase of new or existing one- to four-family housing, as well as to refinance debt. Section 203(b) has several important features:

-- Downpayment requirements can be low. In contrast to conventional mortgage products, which frequently require downpayments of 10 percent or more of the purchase price of the home, single-family mortgages insured by FHA under Section 203(b) make it possible to reduce downpayments to as little as 3 percent. This is because FHA insurance allows borrowers to finance approximately 97 percent of the value of their home purchase through their mortgage, in some cases.

-- Many closing costs can be financed. With most conventional mortgages, the borrower must pay, at the time of purchase, closing costs (the many fees and charges associated with buying a home) equivalent to 2-3 percent of the price of the home. This program allows the borrower to finance many of these charges, thus reducing the up-front cost of buying a home. FHA mortgage insurance is not free: borrowers pay an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

-- Some fees are limited. FHA rules impose limits on some of the fees that lenders may charge in making a mortgage. For example, the mortgage origination fee charged by the lender for the administrative cost of processing the mortgage may not exceed one percent of the amount of the mortgage.

-- HUD sets limits on the amount that may be insured. To make sure that its programs serve low- and moderate-income people, FHA sets limits on the dollar value of the mortgage. The current FHA mortgage limit ranges from $172,632 to $312,895. These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two- to four-family properties).

Eligible Participants:
FHA-approved lending institutions, such as banks, mortgage companies, and savings and loan associations, can make insured Section 203(b) mortgages.

Eligible Customers:
Anyone intending to use the mortgaged property as their primary residence is eligible to apply for an FHA insured mortgage through FHA-approved lenders. This program is not open to investors.

Application:
Any person able to meet the cash investment, the mortgage payments, and credit requirements can apply. The program is limited to owner-occupants. Applications are made through an FHA-approved lending institution. Most lenders who use this mortgage insurance product, however, make their requests through a provision known as Direct Endorsement, which authorizes them to consider applications without submitting paperwork to HUD. Borrowers can locate FHA-approved lenders through the searchable listing provided on HUD's homepage.

Technical Guidance:
This program is authorized under Section 203, National Housing Act (12 U.S.C. 1709 (b), (i)). Program regulations are in 24 CFR Part 203. The program is administered by HUD's Office of Housing-Federal Housing Administration.

For More Information:
General—To learn more about this program and other financing options, homebuyers should contact a HUD-approved lender for a searchable listing of approved lenders nationwide, a HUD-approved housing counseling agency.

Visit the FHA Resource Center for more information on all FHA programs.

Link for more info: http://www.hud.gov/offices/hsg/sfh/ins/203b--df.cfm

On the link page you will be able to find HUD approved lenders near you that can help you acheive the loan program for you. You can also find out what the FHA loan limits are for your particular situation (1-4 units) and area.

Note: Please do note that when some of these programs state that it is a single-family program they are speaking of 1 to 4 unit properties. I do not know why HUD considers multi-family 5 units or more but they do so you can still qalify for a single-family program if you have a duplex, triplex, or a quadraplex!

Thank you for your time.

Hello again-

I know what you are all ready thinking. Why read this for so many people have loss their homes due to ARM's recently. This is a true statement but the only reason the did was due to the fact that they were not properly educated on the mattter. Read through this and I will break it down for you and give you tips and hints on how to edge on the market.
Thanks again people!

[size=18]Insurance for Adjustable Rate Mortgages (Section 251)[/size]

Summary:
Section 251 insures home purchase or refinancing loans with interest rates that may increase or decrease over time, enabling consumers to purchase or refinance their home at a lower initial interest rate.

Purpose:
FHA's mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, protecting the lender against loan default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities. The basic FHA mortgage insurance program is Mortgage Insurance for One- to Four-Family Homes (Section 203(b)). FHA administers a number of programs, based on Section 203(b), that have special features. One of these programs, Section 251, insures adjustable rate mortgages (ARMs) which, particularly during periods when interest rates are high, enable borrowers to obtain mortgage financing that is more affordable by virtue of its lower initial interest rate. This interest rate is adjusted annually, based on market indices approved by FHA, and thus may increase or decrease over the term of the loan.

Type of Assistance:
This program provides insurance for adjustable-rate mortgages, used in conjunction with other widely used FHA single-family products—Mortgage Insurance for One- to Four-Family Homes (Section 203(b)), Single-Family Rehabilitation Mortgage Insurance (Section 203(k)), and Single-Family Mortgage Insurance for Condominium Units (Section 234(c)). Under this FHA-insured mortgage product, the initial interest rate and monthly payment are low, but these may change during the life of the loan. FHA uses 1-year Treasury Constant Maturities Index to determine interest rate changes. The maximum amount the interest rate may increase or decrease in any one year is 1 percentage point. Over the life of the loan, the maximum interest rate change is 5 percentage points from the initial rate. Lenders must disclose to the borrower the terms of the ARM at the time of loan application. In addition, borrowers must be informed at least 25 days in advance of any adjustment to the monthly payment. In most other respects, Section 251 loans are similar to basic FHA-insured single-family loans:

-- Downpayment.requirements can be low—as little as 3 percent. This is because FHA insurance allows borrowers to finance approximately 97 percent of the value of their home purchase through their mortgage.

-- Many closing costs can be financed. This program allows the borrower to finance many of these charges, thus reducing the up-front cost of buying a home. However, not all of these up-front expenses can be folded into the mortgage. In addition to the downpayment, the purchaser must pay for items such as the appraisal and the title search. FHA mortgage insurance is not free: borrowers pay an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

-- Some fees are limited. FHA rules impose limits on some of the fees that lenders may charge in making a loan. For example, the loan origination charge charged by the lender for the administrative cost of processing the loan may not exceed one "point"—that is, one percent of the amount of the mortgage (minus the mortgage insurance premium, if it is being financed). In addition, property appraisal and inspection fees are set by FHA.

-- HUD sets limits on the amount that may be insured. To make sure that its programs serve low- and moderate-income people, FHA sets limits on the dollar value of the mortgage loan. The current limit ranges from $81,548 to $160,950. These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two- to four-family properties).

Eligible Grantees:
FHA-approved lending institutions, such as banks, mortgage companies, and savings and loan associations, can make insured loans under Section 251 through HUD Field Offices.

Eligible Customers:
All persons intending to occupy the property as their principal residence are eligible to apply. (All FHA-approved lenders may make adjustable rate mortgages; creditworthy applicants may qualify for such loans.)

Application:
Any person able to meet the cash investment, the mortgage payments, and credit requirements can apply. The program is generally limited to owner-occupants. Applications are made through an FHA-approved lending institution. Borrowers can locate FHA-approved lenders through the searchable listing provided on HUD's homepage.

Funding Status:
In FY 1996, 184,213 units valued at about $17 billion were insured under Section 251. Through September 30, 1996, 874,838 units valued at $75.6 billion had been insured.

Technical Guidance:
Insurance for ARMs is authorized under Section 251 of the National Housing Act (12 U.S.C. 1715z-16). Program regulations are at 24 CFR 203.49. The program is administered by HUD's Office of Housing-Federal Housing Administration. Prospective lenders should contact the Director of Single Family Programs at the nearest HUD Field Office about participating in this program. Loan processing and administration for this and other FHA single-family mortgage insurance products are handled through one of four consolidated Single Family Homeownership Centers.

For More Information:
General—To learn more about this program and other financing options, homebuyers should contact a HUD-approved lender for a searchable listing of approved lenders nationwide, a HUD-approved housing counseling agency, or the toll-free FHA Mortgage Hotline, 1-800-CALLFHA. The Federal Reserve Board has prepared a booklet on ARMs, Consumer Handbook on Adjustable Rate Mortgages, which is available on the Internet or by mail from HUD.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/ins/251--df.cfm

Okay before I start the break down for you let me bring something to your attention, there are non-profit orginizations that offer down payment assistance for first time homebuyers and repeat buyers as well (the only one I know for sure that offers the repeat Nehemiah Foundation).

1. Nehemiah Foundation= 3%
2. Ameridream Inc.= 10%
3. Genesis Foundation= $22,500
4. Home Downpayment Gift Foundation= $30,000
5. Partners in Charity Inc.= 2%-10%
6. Future Home Assistance Program= 6% and more
7. The Sovereign Grant Alliance= 3%
8. Hart Gift Program= $15,000

Note: You can find all of their web-pages online via yahoo or Google and the percentage is according to the final purchase price agreement.

Now to get started: An adjustable Rate Mortgage (ARM) is a loan program that is meant to change according to market. This may seem scary right well that is only because we have all ways been taught that a fixed rate mortgage is the best way to go. But this is not all ways the case if you know the ins and outs and how to profit from this type of program.

Usually (the biggest reason people went into default) people choose from the ARM pick a payment plan and got themselves in asticky situation. here is how the loan works and how it looks for the most part when you receive your bill in the mail. You will have four options to choose from to make a payment and it will go according to whichever payment option you have made (let's us do this on a $300,000 mortgage).

1. 15 year payment = $2851.25
2. 30 year payment = $2103.37
3. interest only payment = $1775.00
4. negam payment = $1446.63

Well lets see 9 out of 10 times I am guessing the average borrower will make the negam payment because it looks like the best payment plan right. Wrong let me explain really fast what each payment mean and what will happend if you use this route.

1. If you choose this payment plan your bill will be much higher than any of the others but you you will pay off the loan in 15 years. Depending on what type of ARM you have it will be fixed for a cetain time (3/27, 5/25,10/20, etc. note that the first number stands for how many years the payment will be fixed and the second stands for how many years the payment will be adjustable) and then adjust according to your program, but plan and simple you will pay it off sooner.

2. If you choose this plan it will be just like the first instead it is based on a 30 year mortgage (meaning it will take longer to pay off), and have a lower payment. But remember you will spend twice the time paying if off then your first option if you follow you amotization schedule.

3. If you choose this payment the only difference is that you only pay lender interest and no principle. Mean you will have a much lower payment than the other two but will not apply any of you payment to pay down the mortgage. After the fixed period is done it will adjust accordingly to your program and then when your 30 payment plan is over with you will have a ballon payment. A ballon payment is one lump sum that you have to pay to the lender in order to pay off your loan balance. Meaning since you had 30 years of interest only you never applied anything to the principle and would have to pay $300,000 ballon payment when it comes due. (I will let you know how this can be the most profitable way to pay off your mortgage and possibly a lot sooner)

4. If you choose this payment it will be the lowest one of them all and you will be happy for a short period of time. It works just like the rest according to its fix period and adjustment period but there is a slight catch. Since you have a lower payment this is what happened the lender cut the amount of interest you have to pay and deferred it. This does not mean that you have a lower payment and you do not have to account for the interest, it only means that you made a payment that didn't account for that months interest and it has become deferred. Well you ask what happens to that interest that I didn't pay? The lender simply puts it to the back of the loan and it gets stacked on top of you loan balance.

Your balance is = $300,000.00
regualr interest payment = $1000.00
You pay = $500.00
New Balance is = $300,500.00
You get the picture of doing this every month and remember since you balance goes up then you payment will increase as well.

But wait the lender isn't all that bad they will only let you go to 110% of the LTV (Loan to Value of your property) and then they will take a recourse and have you make principle and interest payments to pay it down again.

New loan balance = $330,000.00
New Payment Plan = $2167.55

So you can see why people got into trouble in the first place, ARM's were meant for the business man not the average home buyer. Typically a business man would get this so that he could make the 30 yr payment or interest only payment. And if the business got into a tight situation then he would resolve to the negam for sometime until the problem was cured.

Now really fast here is the tip for you if rates change (they go up) typically inflation happens and when that does you usually get a pay raise. So you will in most situations account for the increased payment with your pay raise and that is why ARM's are not so bad. But do know all the ins and outs of an ARM before getting one and realize the good from the bad. Also when this happens APY's (annual percentage yeild) go up as well so the logical way to do it (with proper care and training), is get the interest only payment for 30 years well you are applying the money that would have went to the principle, into an IRA account that can yeild 7% to 8%. If done correctly when you do have to make that ballon payment (we talked about this earlier so please follow along) you will be able to make that payment from the interest earned on the IRA account no problem and have no mortgage and about $250,000 + in your IRA. Remeber Rooth IRA contributions do not get taxed, are taxed deferred and can be withdrawed tax free (if money is taken out prior to the age of 59.5 years you are subject to a 10% penalty tax).

Thank you for your time!

P.S. There are some rules and regulations one must abide by when using the services of any IRA or interest building account. Remember you will need a high earning account in order for this to work and the ones that are tax deferred are your best options.

Thank you Josh-

And I am only getting started my friend in hopes to have more people educated as to what assistance is out there for them and their families!

[size=18]Mortgage Insurance for Disaster Victims - Section 203 (H) [/size]

Summary:
The Section 203(h) program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home.

Purpose:
Through Section 203(h), the Federal Government helps victims in Presidentially designated disaster areas recover by making it easier for them to get mortgages and become homeowners or re-establish themselves as homeowners.

Type of Assistance:
This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified disaster victims. Individuals are eligible for this program if their homes are located in an area that was designated by the President as a disaster area and if their homes were destroyed or damaged to such an extent that reconstruction or replacement is necessary. Insured mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner. Like the basic FHA mortgage insurance program it resembles (Section 203(b) Mortgage Insurance for One- to Four-Family Homes), Section 203(h) offers features that make homeownership easier:

-- No downpayment is required. The borrower is eligible for 100 percent financing. Closing costs and prepaid expenses must be paid by the borrower in cash or paid through premium pricing or by the seller, subject to a 6 percent limitation on seller concessions.

-- FHA mortgage insurance is not free. Mortgagees collect from the borrowers an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

-- Some fees are limited. FHA rules impose limits on some of the fees that lenders may charge in making a mortgage. For example, the lender's mortgage origination charge for the administrative cost of processing the mortgage may not exceed one "point"—that is, one percent of the amount of the mortgage excluding any financed upfront mortgage insurance premium. In addition, property appraisal and inspection fees are set by FHA.

--HUD sets limits on the amount that may be insured. To make sure that its programs serve low- and moderate-income people, FHA sets limits on the dollar value of the mortgage. The current FHA mortgage limit ranges from $172,632 to $312,895. These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two- to four-family properties).

Eligible Participants:
FHA-approved lending institutions, such as banks, mortgage companies, and savings and loan associations, are eligible for Section 203(h) insurance.

Eligible Customers:
Anyone whose home has been destroyed or severely damaged in a Presidentially declared disaster area is eligible to apply for mortgage insurance under this program.

Application:
The borrower's application for mortgage insurance must be submitted to the lender within one year of the President's declaration of the disaster. Applications are made through an FHA-approved lending institution, who make their requests through a provision known as "Direct Endorsement," which authorizes them to consider applications without submitting paperwork to HUD. Mortgage insurance processing and administration for this and other FHA single-family mortgage insurance products are handled through HUD's Homeownership Centers.

Technical Guidance:
This program is authorized under Section 203, National Housing Act (12 U.S.C. 1709, 1715(b)). Program regulations are in 24 CFR Part 203. These regulations, as well as handbooks, notices, and letters relevant to this program, are available through HUDCLIPS. The program is administered by the Office of Single-Family Housing Programs in HUD's Office of Housing-Federal Housing Administration.

For More Information:
Contact the FHA Resource Center. Homebuyers can also contact a HUD-approved lender for a searchable listing of approved lenders nationwide, a HUD-approved housing counseling agency, or the toll-free FHA Mortgage Hotline, 1-800-483-7342.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/ins/203h-dft.cfm

For those of you who were victims of the Katrina diaster this program state that you will have to make no down payment!

Hello there everybody-

This is a new program to me but I find it a bit useful and a bitter taste was left in my mouth when I found out that only 3 mortgages were insured under this program for 1996. Take a look at this program for it may benefit you if you fall under its guidelines.

[size=18]Mortgage Insurance for Homes in Outlying Areas (Section 203(i))[/size]

Summary:
Through Section 203(i) HUD's Federal Housing Administration (FHA) insures mortgages made by qualified lenders to individuals purchasing homes in outlying areas, where lack of a normal market could make resale in case of default difficult.

Purpose:
FHA's mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the initial costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, protecting the lender against loan default on mortgages for properties that meet certain minimum requirements.

Section 203(i) is one more tool for expanding homeownership opportunities for borrowers who would not otherwise qualify for conventional loans on affordable terms and who live in historically underserved areas where mortgages may be harder to get. This program is rarely used today--only 3 mortgages were insured under Section 203(i) in FY 1996.

Type of Assistance:
This program provides mortgage insurance to protect lenders against the risk of default on loans to qualified buyers. Insured loans may be used to finance the purchase of proposed, under-construction, or existing one-family housing, or new farm housing on 2 ½ or more acres adjacent to an all-weather public road. Like other FHA mortgage insurance programs, Section 203(i) has several important features:

-- Downpayment requirements can be low. In contrast to conventional mortgage products, which frequently require downpayments of 10 percent or more of the purchase price of the home, single-family mortgages insured by FHA under Section 203(i) make it possible to significantly reduce downpayments. Through this program, FHA insurance allows most borrowers to finance approximately 97 percent of the first $25,000 of a home purchase (including total allowable closing costs), 95 percent of the first $125,000 of the mortgage, and 90 percent of any amount over $125,000. The mortgage may never exceed 98.75 percent of value for properties worth up to $50,000 or 97.75 percent for properties worth more than $50,000.

-- FHA mortgage insurance is not free. Morgagees collect from the borrowers an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

-- Some fees are limited. FHA rules impose limits on some of the fees that lenders may charge in making a loan. For example, the lender's loan origination charge for the administrative cost of processing the loan may not exceed one "point"-that is, one percent of the amount of the mortgage (minus the mortgage insurance premium, if it is being financed). In addition, property appraisal and inspection fees are based on what is "reasonable and customary" in a given area.

-- HUD establishes the maximum mortgage term, which is normally 30 years.

-- HUD sets limits on the amount that may be insured. To make sure that its programs serve low- and moderate-income people, FHA sets limits on the dollar value of the mortgage loan. The current limit for the buyer of a one-family home under this program is 75 percent of the loan limit under standard FHA mortgage insurance program, which ranges from $81,548 to $160,950.These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two- to four-family properties).

Eligible Providers:
FHA-approved lending institutions, such as banks, mortgage companies, and savings and loan associations, are eligible for Section 203(i) insurance.

Eligible Customers:
Anyone trying to finance a housing purchase in an outlying area who is able to meet the cash investment, mortgage payments, and credit requirements is eligible to apply for Section 203(i) mortgage insurance. The program is generally limited to owner-occupants.

Application:
Applications are made through FHA-approved lending institutions, who make their requests through a provision known as "Direct Endorsement," which authorizes them to consider applications without submitting paperwork to HUD. Borrowers can locate FHA-approved lenders through the searchable listing provided on HUD's homepage.

Technical Guidance:
This program is authorized under Section 203, National Housing Act (12 U.S.C. 1709, 1715(b)). Program regulations are in 24 CFR Part 203. These regulations, as well as applicable handbooks and notices, are available electronically through HUDCLIPS. Section 203(i) is administered by HUD's Office of Housing-Federal Housing Administration.

For More Information:
Prospective lenders should contact the Director of Single Family Programs at the nearest HUD field office about participating in this program. Loan processing and administration for this and other FHA single-family mortgage insurance products are handled through one of four consolidated Single Family Homeownership Centers.

General-To learn more about this program and other financing options, homebuyers should contact a HUD-approved lender for a searchable listing of approved lenders nationwide. Locate a HUD-approved housing counseling agency through a searchable online list, or call the Housing Counseling Clearinghouse at 1-800-569-4287.

A recent general study, HUD's Analysis of FHA's Single Family Mortgage Insurance Program (Office of Policy Development and Research, 1996), describes this program and its place in today's mortgage finance system. It is available from HUD USER, 1-800-245-2691.

This is a perfect example of why I am bothered at the fact that so much government money is not used every year. Please do take the time to at least acknowledge that these programs exist and thay are here to benefit you and your family as well.

Thanks again people.

Back again everyone-

[size=18][b]Graduated Payment Mortgage
Insurance (Section 245) [/b][/size]

Summary:
Section 245 enables a household with a limited income that is expected to rise to buy a home sooner by making mortgage payments that start small and increase gradually over time.

Purpose:
HUD's Federal Housing Administration (FHA) administers mortgage insurance programs that help low- and moderate-income families become homeowners by lowering some of the initial costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise creditworthy borrowers who might not be able to meet conventional underwriting requirements by protecting the lender against loan default. Section 245 contributes to these goals by helping first-time buyers and others with limited incomes--particularly young families, who expect their income to rise but may not yet be able to handle all of the upfront and monthly costs involved in homebuying--to tailor their mortgage payments to their expanding incomes and buy a home sooner than they could with regular financing.

Type of Assistance:
Section 245 insures mortgages for first-time (and other) buyers who have low and moderate incomes--and who thus cannot meet standard mortgage payments--but who expect that their income will increase substantially in the next 5-10 years. Potential homeowners who are considering using a graduated-payment mortgage to purchase a home must remember that their monthly payments to principal and interest will increase each year for up to 10 years, depending on which of five available plans they select.

Three of the five plans permit mortgage payments to increase at a rate of 2.5, 5, or 7.5 percent during the first 5 years of the loan. The other two plans permit payments to increase 2 and 3 percent annually over 10 years. Starting at the sixth year of the 5-year plans and the eleventh-year of the 10-year plans, payments will stay the same for the remaining term of the mortgage. The greater the rate of increase and the longer the period of increase, the lower the mortgage payments in the early years.

Before using this type of financing, would-be homebuyers need to assess their potential for increased income to offset mortgage payment increases. Also, they need to be aware that over the life of the mortgage they will pay more interest than if they had a mortgage with payments that stayed the same.

In most other respects, Section 245 loans are similar to basic FHA-insured single-family mortgage loans. Downpayment requirements can be low--3 percent or less--because FHA insurance allows homebuyers to finance about 97 percent of the home's cost through their mortgage. In addition, some closing costs can be financed, reducing up-front costs. FHA also limits some fees that lenders charge--for example, the loan origination charge. Finally, FHA sets limits on the size of the mortgage loan that vary with the location and the number of units in the property.

Eligible Grantees:
FHA-approved lending institutions, such as banks, mortgage companies, and savings and loan associations, can make loans protected by Section 245 insurance.

Eligible Customers:
Anyone who intends to use the mortgaged property as their primary residence and who expects to have a rising income is eligible to apply for Section 245 mortgage insurance. However, the program is not open to investors.

Application:
Any person can apply who is able to meet the cash investment and credit requirements and to make the mortgage payments. The program is limited to owner-occupants. Applications are made through an FHA-approved lending institution. Borrowers can find FHA-approved lenders in a searchable list on HUD's homepage.

Technical Guidance:
This program is authorized under Section 245, National Housing Act (12 U.S.C. 1715z-10); by Public Law 73-479; Housing and Community Development Act of 1974, Section 308; and by Public Law 93-383, as amended. Program regulations are in 24 CFR Part 203.45. These regulations, as well as handbooks, notices, and letters relevant to this program, are available through HUDCLIPS. Section 245 insurance is administered by HUD's Office of Housing-Federal Housing Administration.

For More Information:
To learn more about this program and other financing options, homebuyers should contact a HUD-approved lender for a searchable listing of approved lenders nationwide, a HUD-approved housing counseling agency. Prospective lenders should contact the FHA Resource Center for more information on all FHA programs.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/ins/245--dft.cfm

Thanks again everyone!

Hello there everyone-

I have just begun and the party is about to get started, for those of you who can not see the trend I am stating single family (remember HUD views this a one to four units) programs as of right now and will soon be moving onto different programs as well. Here goes!


[size=18][b]Growing Equity Mortgage
Insurance (Section 245(a)) [/b][/size]

Summary:
Section 245(a) enables a household with a limited income that is expected to rise to buy a home sooner by making mortgage payments that start small and increase gradually over time. The increased payments are applied to reduce the principal owed on the mortgage and thus shorten the mortgage term.

Purpose:
HUD's Federal Housing Administration (FHA) administers mortgage insurance programs that help low- and moderate-income families become homeowners by lowering some of the initial costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, protecting the lender against loan default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities.

Like HUD's Graduated Payment Mortgage Insurance (Section 245), Section 245(a) contributes to these goals by helping first-time buyers and others with limited incomes--particularly young families, who expect their income to rise but may not yet be able to handle all of the upfront and monthly costs involved in homebuying--to tailor their mortgage payments to their expanding incomes and buy a home sooner than they could with regular financing. However, this program adds an innovative twist to this basic product: growing equity mortgages (GEMs) enable the homeowner to apply scheduled increases in monthly payments to the outstanding principal balance of their mortgage and thereby to considerably shorten the term of the mortgage. This reduced term and the faster repayment of principal make GEMs more attractive to lenders and investors than other fixed-rate investments.

Type of Assistance:
GEMs are eligible for insurance under Section 203(b) for one- to four-family homes, Section 203(k) for home purchase or refinancing and rehabilitation, Section 203(n) for shares in cooperatives housing, and Section 234(c) for units in condominiums. GEMs must meet all the requirements of the section under which they are being insured, with certain exceptions.

There are five GEM plans. Each plan provides for the monthly payments to be increased by a fixed percentage during each year of the loan. For the initial year, the monthly payments to principal and interest are based on a 30-year level-payment schedule. Thereafter, the amount of the monthly payments due for the next 12 months will increase each year by between 1 percent and 5 percent, depending upon the plan selected. The actual term of the mortgage will not be more than 22 years and may be less, depending on the GEM plan used and the interest rate. As part of its effort to streamline and terminate obsolete programs, HUD is considering eliminating GEM and removing its regulations.

Eligible Grantees:
FHA-approved lending institutions, such as banks, mortgage companies, and savings and loan associations, can provide Section 245(a) insurance through HUD Field Offices.

Eligible Customers:
Anyone who intends to use the mortgaged property as their primary residence and who expects to see their income rise appreciably in the future is eligible to apply for Section 245 mortgage insurance.

Application:
Applications are made through an FHA-approved lending institution. Most lenders that use this mortgage insurance product make their requests through a provision known as "Direct Endorsement," which authorizes them to consider applications without submitting paperwork to HUD.

Technical Guidance:
This program is authorized under Section 245(a), National Housing Act, as amended (12 U.S.C. 17152-10(a)). Its regulations, as well as handbooks, notices, and letters relevant to this program, are available through HUDCLIPS. Section 245(a) is administered by HUD's Office of Housing-Federal Housing Administration.

For More Information:
To learn more about this program and other financing options, homebuyers should contact a HUD-approved lender for a searchable listing of approved lenders nationwide, a HUD-approved housing counseling agency, or the toll-free FHA Mortgage Hotline, 1-800-CALLFHA.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/ins/245a--df.cfm

Another profitable loan program offered by FHA for the benefit for low & moderate income families that expect their incomes to increase over the years. Who wouldn't want their mortgage to be paid off a lot sooner than the bank would have you? I know I would!

Thanks again everyone.

Hello there again-

[size=18][b]
Mortgage Insurance for Older, Declining Areas (Section 223(e))[/b][/size]

Summary:
Section 223(e) provides mortgage insurance to enable people to purchase or rehabilitate housing in older, declining urban areas. Section 223(e) can be used only to supplement other HUD mortgage insurance programs.

Purpose:
HUD's Federal Housing Administration (FHA) administers mortgage insurance programs that help low- and moderate-income families become homeowners by lowering some of the initial costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, protecting the lender against loan default on mortgages for residential properties that meet certain minimum requirements,.

Section 223(e) provides mortgage insurance for a home or project that may be otherwise difficult to finance because it is located in an older, declining urban area. By agreeing to insure the property under this program, HUD places the obligation under the Special Risk Insurance Fund, which is separate from the Mutual Mortgage Insurance Fund (which finances most of its single-family mortgage insurance) and the General Insurance Fund (which finances most of its multifamily mortgage insurance). This allows HUD to manage more effectively the greater risk supposed to be inherent in these loans, thus lowering the insurance premiums for the vast majority of borrowers.

Type of Assistance:
To meet the need for adequate housing for low- and moderate-income families, Section 223(e) insures lenders against the risk of default on mortgage loans to finance the purchase, rehabilitation, or construction of housing in older, declining, but still viable urban areas where requirements for other mortgage insurance cannot be met. The property must be in a reasonably viable neighborhood and an acceptable risk under mortgage insurance rules.

This is not a separate program--it supplements other HUD mortgage insurance programs. Mortgages for housing eligible under Section 223(e) may be insured under any one of several HUD programs. The terms of the loan vary according to the HUD/FHA program under which the mortgage is insured. The maximum amount of the loan, the down payment, and other mortgage terms vary according to the HUD program under which the mortgage is insured. The mortgage insurance premium is 0.5 percent per year on the outstanding loan balance. Fees are established under the applicable HUD program.

Eligible Grantees:
HUD-approved lenders, such as banks, mortgage companies, and savings and loan associations, can make insured loans for single-family mortgages under other FHA programs, which HUD processors may then elect to insure under Section 223(e).

Eligible Customers:Individuals and families whose property is located in an older, declining urban area are eligible to apply for Section 223(e) mortgage insurance. The program is also open to sponsors of multifamily housing located in older, declining urban areas. These sponsors may wish to arrange for a preapplication conference with the local HUD Field Office for advice on the best program for the sponsor, and to discuss HUD procedures and requirements.

Application:
Any person or sponsor can apply who is able to meet the cash investment and credit requirements and to make the mortgage payments. Applications are made through a HUD-approved lending institution, which in turn submits the application to the local HUD Field Office for approval. Borrowers can find HUD-approved lenders through a searchable list on HUD's homepage.

Technical Guidance:
Section 223(e) is authorized by the National Housing Act, as amended, Section 223(e), Public Law 90-448, 12 U.S.C. 1715(b), 1715(n). Program regulations are at 24 CFR 200.23 (for multifamily dwellings) and 24 CFR 203.43a (for single-family homes). These regulations, as well as handbooks, notices, and letters relevant to this program, are available through HUDCLIPS. Section 223(e) is administered by HUD's Office of Insured Single-Family Housing and Office of Insured Multifamily Housing Development. Prospective lenders should contact the Director of Single Family Programs or the Director of Multifamily Housing Development at the nearest HUD Field Office about participating in these programs.

For More Information:
To learn more about this program and other financing options, homebuyers should contact a HUD-approved lender for a searchable listing of approved lenders nationwide, a HUD-approved housing counseling agency, or the toll-free FHA Mortgage Hotline, 1-800-CALLFHA.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/ins/223e--df.cfm

Enjoy my friends!

I'm back once again-

Now this one is a true favorite for me due to the fact that if you read between the lines and ask the right questions you will find what you need. After much research I have found out that this program is meant only for owner occupants, but due to the fact that there are areas in California (check with you state if they provide the same or you will see when you bid on a HUD home if you can use this program) that need much revitalization and new growth FHA has allowed investors to use this program if a home falls in one of these areas.
www.hud.gov/cr

[size=18]Rehabilitation Mortgage Insurance (Section 203(k)) [/size]

Summary:
Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage - or to finance the rehabilitation of their existing home.

Purpose:
Section 203(k) is one of many FHA programs that insure mortgage loans - - and thus encourage lenders to make mortgage credit available to borrowers who would not otherwise qualify for conventional loans on affordable terms (such as first - time homebuyers) and to residents of disadvantaged neighborhoods (where mortgages may be hard to get).

Section 203(k) fills a unique and important need for homebuyers in another way as well. When buying a house that is need of repair or modernization, homebuyers usually have to follow a complicated and costly process, first obtaining financing to purchase the property, then getting additional financing for the rehabilitation work, and finally finding a permanent mortgage after rehabilitation is completed to pay off the interim loans. The interim acquisition and improvement loans often have relatively high interest rates and short repayment terms. However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long - term, fixed - or adjustable - rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money, and also protect lenders by allowing them to have the loan insured even before the condition and value of the property may offer adequate security. Insurance commitments for 17,000 homes were made in FY 1996; the estimated number of homes to be insured under Section 203(k) for FY 1997 is 19,000, and 15,000 for FY 1998. For housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD's Title I Home Improvement Loan program.

Type of Assistance:
Section 203(k) insures mortgages covering the purchase or refinancing and rehabilitation of a home that is at least a year old. A portion of the loan proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area. The value of the property is determined by either (1) the value of the property before rehabilitation plus the cost of rehabilitation, or (2) 110 percent of the appraised value of the property after rehabilitation, whichever is less.

Many of the rules and restrictions that make FHA's basic single - family mortgage insurance product (Section 203(b)) relatively convenient for lower income borrowers apply here. But lenders may charge some additional fees, such as a supplemental origination fee, fees to cover the preparation of architectural documents and review of the rehabilitation plan, and a higher appraisal fee. However, unlike other FHA single - family mortgages, Section 203(k) borrowers do not pay an upfront mortgage premium.

Eligible Grantees:
FHA - approved lending institutions - which include many banks, savings and loan associations, and mortgage companies - can make loans covered by Section 203(k) insurance.

Eligible Customers:
All persons who can make the monthly mortgage payments are eligible to apply. Cooperative units are not eligible; individual condominium units may be insured if they are in projects that have been approved by FHA or the Department of Veterans Affairs, or meet certain Fannie Mae guidelines.

Eligible Activities:
The extent of the rehabilitation covered by Section 203(k) insurance may range from relatively minor (though exceeding $5000 in cost) to virtual reconstruction: a home that has been demolished or will be razed as part of rehabilitation is eligible, for example, provided that the existing foundation system remains in place. Section 203(k) - insured loans can finance the rehabilitation of the residential portion of a property that also has non - residential uses; they can also cover the conversion of a property of any size to a one - to four - unit structure. The types of improvements that borrowers may make using Section 203(k) financing include:

structural alterations and reconstruction.
modernization and improvements to the home's function.
elimination of health and safety hazards.
changes that improve appearance and eliminate obsolescence.
reconditioning or replacing plumbing; installing a well and/or septic system.
adding or replacing roofing, gutters, and downspouts.
adding or replacing floors and/or floor treatments.
major landscape work and site improvements.
enhancing accessibility for a disabled person.

making energy conservation improvements.
HUD requires that properties financed under this program meet certain basic energy efficiency and structural standards. However, luxury items and improvements that do not become a permanent part of the property are not eligible uses of a 203(k) loan.

Application:
Applications must be submitted to the local HUD Field Office through an FHA - approved lending institution. HUD's website offers an interactive directory of approved lenders.

Technical Guidance:
Insurance for rehabilitation is authorized under Section 203(k) of the National Housing Act (12 U.S.C. 1709(4k)). Program regulations are at 24 CFR 203.50. This and other FHA programs are administered by the Office of Single - Family Housing in HUD's Office of Housing - Federal Housing Administration. Contact the Director of Single - Family Housing at the nearest HUD field office.

For More Information:
A handbook, Rehab a Home with HUD's 203(k), is available at HUD's website or by mail from HUD. A set of questions and answers about 203(k) loans is also available.

The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer's credit approved. These lenders fund the mortgage loans which the Department insures. HUD does not make direct loans to help people buy homes.

The Section 203(k) program is the Department's primary program for the rehabilitation and repair of single family properties. As such, it is an important tool for community and neighborhood revitalization and for expanding homeownership opportunities. Since these are the primary goals of HUD, the Department believes that Section 203(k) is an important program and we intend to continue to strongly support the program and the lenders that participate in it.

Many lenders have successfully used the Section 203(k) program in partnership with state and local housing agencies and nonprofit organizations to rehabilitate properties. These lenders, along with state and local government agencies, have found ways to combine Section 203(k) with other financial resources, such as HUD's HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers. Several state housing finance agencies have designed programs, specifically for use with Section 203(k) and some lenders have also used the expertise of local housing agencies and nonprofit organizations to help manage the rehabilitation processing.

The Department also believes that the Section 203(k) program is an excellent means for lenders to demonstrate their commitment to lending in lower income communities and to help meet their responsibilities under the Community Reinvestment Act (CRA). HUD is committed to increasing homeownership opportunities for families in these communities and Section 203(k) is an excellent product for use with CRA-type lending programs.

If you have questions about the 203(k) program or are interested in getting a 203(k) insured mortgage loan, we suggest that you get in touch with an FHA-approved lender in your area or the Homeownership Center in your area.

Introduction
Section 10 1 (c) (1) of the Housing and Community Development Amendments of 1978 (Public Law 95557) amends Section 203(k) of the National Housing Act (NHA). The objective of the revision is to enable HUD to promote and facilitate the restoration and preservation of the Nation's existing housing stock. The provisions of Section 203(k) are located in Chapter II of Title 24 of the Code of Federal Regulations under Section 203.50 and Sections 203.440 through 203.494. Program instructions are in HUD Handbook 4240-4. HUD Handbooks may be ordered online from The HUD Compendium or from HUDCLIPS.

203(k) - How It Is Different
Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

Eligible Property
To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.

Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.

In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit.

An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.

A 203(k) mortgage may be originated on a "mixed use" residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

Condominium Unit
The Department also permits Section 203(k) mortgages to be used for individual units in condominium projects that have been approved by FHA, the Department of Veterans Affairs, or are acceptable to FNMA under the guidelines listed below.

The 203(k) program was not intended to be a project mortgage insurance program, as large scale development has considerably more risk than individual single-family mortgage insurance. Therefore, condominium rehabilitation is subject to the following conditions:

Owner/occupant and qualified non-profit borrowers only; no investors;
Rehabilitation is limited only to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of exteriors or other areas which are the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit;
Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehabilitation at any one time;
The maximum mortgage amount cannot exceed 100 percent of after-improved value.

After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached.

Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for Section 203(k). Likewise, a project could contain a row of more than four attached townhouses and be eligible for Section 203(k) because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof).

Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units.

How the Program Can Be Used
This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways: To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
To refinance existing indebtedness and rehabilitate such a dwelling.

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.

To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.

Eligible Improvements
Luxury items and improvements that do not become a permanent part of the real property are not eligible as a cost rehabilitation. However, the homeowner can use the 203(k) program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements. All health, safety and energy conservation items must be addressed prior to completing general home improvements.

Required Improvements

All rehabilitation construction and/or additions financed with Section 203(k) mortgage proceeds must comply with the following:

A. 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.

B. Smoke Detectors. Each sleeping area must be provided with a minimum of one (1) approved, listed and labeled smoke detector installed adjacent to the sleeping area.

Required Appraisals
In order to determine the maximum mortgage amount, the 203(k) valuation analysis consists of two separate determinations of value.

A. As-is Value. A separate appraisal (Uniform Residential Appraisal Report) may be required to determine the as-is value. However, the lender may determine that an as-is appraisal is not feasible or necessary. In this instance, the lender may use the contract sales price on a purchase transaction, or the existing debt on a refinance transaction, as the as-is value, when this does not exceed a reasonable estimate of value.

Further, on a refinance transaction, when a large amount of existing debt (i.e., first and second mortgages) suggests that the borrower has little or no equity in the property, the lender must obtain a current as-is appraisal on which to base the estimated as-is value.

On a refinance, the borrower may have substantial equity in the property to assure that no further down payment is required on the new loan amount. In some cases, the borrower will not have an existing mortgage on the property. In this case, the lender should obtain some comparables from a real estate agent/ broker to estimate an approximate as-is value of the property.

Another way of establishing the as-is value is to obtain a copy of the local jurisdiction tax valuation on the property.

B. Value After Rehabilitation. The expected market value of the property is determined upon completion of the proposed rehabilitation and/or improvements.

For a HUD-owned property an as-is appraisal is not required and a DE lender may request the HUD Field Office to release the outstanding HUD Property Disposition appraisal on the property to the lender to establish the maximum mortgage for the property. The HUD appraisal will be considered acceptable for use by the lender if. (1) it is not over one year old prior to bid acceptance from HUD; and (2) the sales contract price plus the cost of rehabilitation does not exceed 110 percent of the "As Repaired Value" shown on the HUD appraisal. If the HUD appraisal is insufficient, the DE Lender may order another appraisal to assure the market value of the property will be adequate to make the purchase of the property feasible. For a HUD-property, down payment for an owner-occupant or non-profit organization is three percent of the accepted bid price of the property and 100 percent financing on all other costs.

Recently Acquired Properties
Homebuyers who purchase a property with cash can refinance the property using 203(k) within six (6) months of purchase, the same as if the buyer purchased the property with a 203(k) insured loan to begin with. Evidence of interim financing is not required; the mortgage calculations will be done the same as a purchase transaction. Cash back will be allowed to the borrower in this situation less any down payment and closing cost requirement for the 203(k) loan. A copy of the Sales Contract and the HUD-1 Settlement Statement must be submitted to verify the accepted bid price (as-is value) of the property and the closing date.

Architectural Exhibits
The improvements must comply with HUD's Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1) and all local codes and ordinances. The homebuyer may decide to employ an architect or a consultant to prepare the proposal. The homebuyer must provide the lender with the appro priate architectural exhibits that clearly show the scope of work to be accomplished. The following list of exhibits are recom mended, but may be modified by the local HUD Field Office as required.

A. A Plot Plan of the Site is required only if a new addition is being made to the existing structure. Show the location of the structure(s), walks, drives, streets, and other relevant details. Include finished grade elevations at the property corners and building corners. Show the required flood elevation.

B. Proposed Interior Plan of the Dwelling. Show where structural or planning changes are contemplated, including an addition to the dwelling. (An existing plan is no longer required.)

C. Work Write-up and Cost Estimate. Any format may be used for these documents, however, quantity and the cost of each item must be shown. Also include a complete description of the work for each item (where necessary). The Rehabilitation Checklist in Appendix 1 of Handbook 4240.4 REV-2 should be used to ensure all work items are considered. Transfer the costs to the Draw Request (form HUD-9746-A).

Cost estimates must include labor and materials sufficient to complete the work by a contractor. Homebuyers doing their own work cannot eliminate the cost estimate for labor, because if they cannot complete the work there must be sufficient money in the escrow account to get a subcontractor to do the work. The Work Write-up does not need to reflect the color or specific model numbers of appliances, bathroom fixtures, carpeting, etc., unless they are nonstandard units.

The consultant who prepares the work write-up and cost estimate (or an architect, engineering or home inspection service) needs to inspect the property to assure: (1) there are no rodents, dryrot, termites and other infestation; (2) there are no defects that will affect the health and safety of the occupants; (3) the adequacy of the existing structural, heating, plumbing, electrical and roofing systems; and (4) the upgrading of thermal protection (where necessary).

Definitions for Use in the 203(k) Program
A. Insurance of Advances. This refers to insurance of the 203(k) mortgage prior to the rehabilitation period. A mortgage that is a first lien on the property is eligible to be endorsed for insurance following mortgage loan closing, disbursement of the mortgage proceeds, and establishment of the Rehabilitation Escrow Account.

The mortgage amount may include funds for the purchase of the property or the refinance of existing indebtedness, the costs incidental to closing the transaction, and the completion of the proposed rehabilitation. The mortgage proceeds allocated for the rehabilitation will be escrowed at closing in a Rehabilitation Escrow Account.

B. Rehabilitation Escrow Account. When the loan is closed, the proceeds designated for the rehabilitation or improvement, including the contingency reserve, are to be placed in an interest bearing escrow account insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). This account is not an escrow for the paying of real estate taxes, insurance premiums, delinquent notes, ground rents or assessments, and is not to be treated as such. The net income earned by the Rehabilitation Escrow Account must be paid to the mortgagor. The method of such payment is subject to agreement between mortgagor and mortgagee. The lender (or its agent) will release escrowed funds upon completion of the proposed rehabilitation in accordance with the Work Write-Up and the Draw Request (Form HUD-9746,A).

C. Inspections. Performed by HUD-approved fee inspectors or on the HUD-accepted staff of the DE lender. The fee inspector is to use the architectural exhibits in order to make a determination of compliance or non-compliance. When the inspection is scheduled with a payment, the inspector is to indicate whether or not the work has been completed. Also, the inspector is to use the Draw Request form (Form HUD-9746-A). The first draw must not be scheduled until the lender has determined that the applicable building permits have been issued.

D. Holdback. A ten (10) percent holdback is required on each release from the Rehabilitation Escrow Account. The total of all holdbacks may be released only after a final inspection of the rehabilitation and issuance of the Final Release Notice. The lender (or its agent) may retain the holdback for a maximum of 35 calendar days, or the time period required by law to file a lien, whichever is longer, to ensure that no liens are placed on the property.

E. Contingency Reserve. At the discretion of the HUD Field Office, the cost estimate may include a contingency reserve if the existing construction is less than 30 years old, or the nature of the work is complex or extensive. For properties older than 30 years, the cost estimate must include a contingency reserve of a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If the utilities were not turned on for inspection, a minimum fifteen (15) percent is required. If the scope of work is well defined and uncomplicated, and the rehabilitation cost is less then $7500, the lender may waive the requirement for a contingency reserve.

The contingency reserve account can be used by the borrower to make additional improvements to the dwelling. A Request for Change Letter must be submitted with the applicable cost estimates. However, the change can only be accepted when the lender determines: (1) It is unlikely that any deficiency that may affect the health and safety of the property will be discovered; and (2) the mortgage will not exceed the appraised value of the property less the statutory investment requirement. If the mortgage exceeds the appraised value less the statutory investment, then the contingency reserve must be paid down on the mortgage principal. If a borrower feels that the contingency reserve will not be used and he wishes to avoid having the reserve applied to reduce the mortgage balance after issuance of the Final Release Notice, the borrower may place his own funds into the contingency reserve account. In this case, if monies are remaining in the account after the Final Release Notice is issued, the monies may be released back to the borrower.

If the mortgage is at the maximum mortgage limit for the area or for the particular type of transaction, but a contingency reserve is necessary, the contingency reserve must be placed into an escrow account from other funds of the borrower at closing. Under these circumstances, if the contingency reserve is not used, the remaining funds in the escrow account will be released to the borrower after the Final Release Notice has been issued.

F. Mortgage Payment Reserve. Funds not to exceed the amount of six (6) mortgage payments (including the mortgage insurance premium) can be included in the cost of rehabilitation to assist a mortgagor (whether a principal residence or an investment property) when the property is not occupied during rehabilitation. The number of mortgage payments cannot exceed the completion time frame required in the Rehabilitation Loan Agreement. The lender must make the monthly mortgage payments directly from the interest bearing reserve account. Monies remaining in the reserve account after the Final Release Notice must be applied to the mortgage principal.

G. Approval of Non-Profit Agencies. A non-profit agency, before it can be approved as an eligible mortgagor and obtain the same mortgage amount as available to owner-occupants on Section 203(k) mortgages, must demonstrate its experience as a housing provider to HUD and meet all other requirements described in HUD Handbook 4155.1 REV-4, paragraphs 1-5. It must also be able to provide satisfactory evidence that it has the financial capacity to purchase the properties.

Maximum Mortgage Amount
The mortgage amount, when added to any other existing indebtedness against the property, cannot exceed the applicable loan-to-value ratio and maximum dollar amount limitations prescribed for similar properties under Section 203(b). The Mortgage Payment Reserve is considered a part of the cost of rehabilitation for determining the maximum mortgage amount.

A. Maximum Mortgage Calculation. The value is defined as the lesser of:

1) The as-is value of the property before rehabilitation plus the cost of rehabilitation; or

2) 110 percent of the expected market value of the property upon completion of the work.

Principal Residence (Owner-Occupant) & HUD Approved Non-Profit Organization. For purchases with 203(k) financing: the maximum mortgage amount is to be based upon the HUD estimate of value in 1) or 2) above, less the statutory investment requirement. For refinances under the 203(k) program: the maximum mortgage amount is to be based upon 97/95/90 percent of the HUD estimate of value in 1) or 2) above.

B. Cost of Rehabilitation. Expenses eligible to be included in the cost of rehabilitation are materials, labor, contingency reserve, overhead and construction profit, up to six (6) months of mortgage payments, plus expenses related to the rehabilitation such as permits, fees, inspection fees by a qualified home inspector, licenses and consultant and/or architectural/engineering fees. The cost of rehabilitation may also include the supplemental origination fee which the mortgagor is permitted to pay when the mortgage involves insurance of advances, and the discounts which the mortgagor will pay on that portion of the mortgage proceeds allocated to the rehabilitation.

C. Exemption of the Market Value Limitation. The 203(k) regulations allow for a waiver of the market value limitation, which allows the appraiser to go outside the targeted area to obtain the value of comparable properties. Such requests must be forwarded to the Assistant Secretary of Housing-Federal Housing Commissioner at the HUD Headquarters.

Requests must include documentation that the following conditions are present:

1) The property is located within an area which is subject to a community sponsored program of concentrated redevelopment or revitalization (See 24 CFR Part 220).

2) The market value loan limitation prevents the use of the program to accomplish rehabilitation in the subject area.

3) The interests of the borrower and the Secretary of HUD are adequately protected.

D. Solar Energy Increase. The mortgage is eligible for an increase of up to 20 percent in the maximum insurable mortgage amount if such an increase is necessary for the installation of solar energy equipment.

The solar energy system's contribution to value will be limited by its replacement cost or by its effect on the value of the dwelling.

E. Energy Efficient Mortgage Program. Under the FHA EEM Program, a borrower can finance into the mortgage 100 percent of the cost of eligible energy efficient improvements, subject to certain dollar limitations, without an appraisal of the energy improvements and without further credit qualification of the borrower. To be eligible for inclusion into the mortgage, the energy efficient improvements must be "cost effective," i.e., the total cost of the improvements (including maintenance costs) must be less than the total present value of the energy saved over the useful life of the improvements. The cost of any improvement to the property that will increase the property's energy efficiency and that is determined to be "cost effective" is eligible for financing into the mortgage and its cost may be added to the mortgage amount up to the greater of:

1) 5 percent of the property's value (not to exceed $8000) or,

2)$4000.

"Cost effective" means that the total cost of the improvements, including any maintenance costs, is less than the total present value of the energy saved over the useful life of the energy improvement. The FHA maximum loan limit for the area may be exceeded by the cost of the energy efficient improvements. However, the entire mortgage cannot exceed 110 percent of the value of the property

The cost of the energy improvements and the estimate of the energy savings must be determined based upon a physical inspection of the property by a home energy rating system (HERS) or energy consultant. For a 203(k) loan, the entire cost of the HERS or the energy consultant can be included in the mortgage.

On new construction (an addition or new building on an existing foundation), the energy improvement must be over and above those required for compliance with the current FHA energy conservation standards for new construction. The estimate of the energy savings in new construction must be based upon a comparison of plans and specification of the house with the additional energy saving improvements to those of the basic house which complies with the current FHA energy conservation standards. Presently, these standards are those of the 1992 CABO Model Energy Code (MEC).

The energy inspection of the property must be performed prior to completion of the work writeup and cost estimate to assure there is no duplication of work items in the mortgage. After the completion of the appraisal, the cost of the energy improvements are calculated by the lender to determine how much can be added to the mortgage amount.

Seven Unit Limitation
HUD regulations and policies state that an investor should not be allowed to rapidly accumulate FHA insured properties that clearly and collectively constitute a multifamily project. In general, a borrower may not have an interest in more than seven rental units (FHA, VA, conventional or owned free and clear of any mortgage) in the same subdivision or contiguous area. For 203(k) purposes, HUD defines a contiguous area as within a two block radius.

The seven unit limitation does not apply if (1) the neighborhood has been targeted by a State or local government for redevelopment or revitalization; and (2) the State or local government has submitted a plan to HUD that defines the area, extent and type of commitment to redevelop the area. A restriction may still be imposed (by HUD) within a redevelopment area (or sub-area) in order to prevent undesirable concentrations of units under a single (or group) ownership. H U D will determine that the seven unit limit is inapplicable only if: (1) the investor will own no more than 10 percent of the housing units (regardless of financing type) in the designated redevelopment area or sub-area; and (2) the investor has no more than eight units on adjacent lots.

Interest Rate and Discount Points
These are not regulated and are negotiable between the borrower and the lender. The amortization of the loan will be for 30 years; however, provisions of the Section 203(k) mortgage (described in Section 203.21 of the Regulations) are the same as prescribed under Section 203(b).

Maximum Charges and Fees
The statutory requirements and administrative policies of Section 203(k) result in deviations from the maximum amount of charges and fees permitted under Section 203(b).

A. Supplemental Origination Fee. When the Section 203(k) mortgage involves insurance of advances, the lender may collect from the mortgagor a supplemental origination fee. This fee is calculated as one and one-half percent (1-1/2%) of the portion of the mortgage allocated to the rehabilitation or $350, whichever is greater. This supplemental origination fee is collected in addition to the one percent origination fee on the total mortgage amount.

B. Independent Consultant Fee. A borrower can have an independent consultant prepare the required architectural exhibits. A borrower can also use a contractor to prepare the construction exhibits or prepare the exhibits themselves. The use of a consultant is not required; however, the borrower should consider using this service in order to expedite the processing of the 203(k) loan. When a consultant is used, HUD does not warrant the competence of the consultant or the quality of the work the consultant may perform for the borrower. The consultant must enter into a written agreement with the borrower that completely explains what services the consultant will perform for the borrower and the fee charged. The fee charged by the consultant can be included in the mortgage. A fee of $400 is acceptable for a property with repairs less than $7,500; $500 for repairs between $7,501 and $15,000; $600 for repairs between $ 15,001 and $ 30,000; and $ 700 for repairs between $30,001 and $50,000; $800 for repairs between $50,001 and $75,000; $900 for repairs between $75,001 and $100,000; and $ 1,000 for repairs over $100,000. An additional fee of $25 can be charged for each additional unit in the property under the same FHA case number. For this fee, the consultant would inspect the property and provide all the required architectural exhibits. State licensed architect or engineer fees are not restricted by this fee schedule. The architect and engineer fees must be customary and reasonable for the type of project.)

C. Plan Review Fee. 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. The fee is as follows and may not be changed without HUD Headquarters approval:

1) Initial review prior to appraisal:

Cost of Repairs/Fee: <15>$15,001 but less than or equal to<30>$30,001=$200.00

2) Additional unit review (two to four units with same case number)-$50.00/unit.

3) Additional review (reinspection of the same unit)-$50.00. When travel distance exceeds 30 miles round trip from the reviewer's place of business, a mileage charge (established by HUD Field Office) may be applied to the above charges, including toll road and other charges where applicable.

D. Appraisal Fee. 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. The maximum fee which a lender may collect for these two appraisals is one and one-half times the amount permitted for a Section 203(b) proposed construction appraisal, as established by the HUD Field Office. If only one appraisal is done, the fee will be the same as a proposed construction appraisal.

E. Inspection Fee (during the rehabilitation construction period). Established by the local HUD Field Office.

(1) Fees for a maximum of five draw inspections will be allowed for inclusion in the cost of rehabilitation. If all inspections are not required, remaining funds will be applied to the principal after the Final Release Notice is issued.

(2) If additional inspections are required by the lender to ensure satisfactory compliance with exhibits, the borrower or contractor will be responsible for payment; however, the lender has ultimate responsibility.

F. Title Update Fee. To protect the validity of the mortgage position from mechanic's liens on the property, reasonable fees charged by a title company may be included as an allowable cost of rehabilitation. When the mortgage position is protected and is not in jeopardy, this fee may not apply Borrowers may wish to obtain lien protection, but the fees must be paid by the borrower where such lien protection is not required to ensure the validity of the security instrument. The allowable fee should not exceed $50.00 per draw release. If all draw inspections are not made, monies left in escrow must be applied to reduce the mortgage balance.

Application Process
This describes a typical step-by-step application/mortgage origination process for a transaction involving the purchase and rehabilitation of a property. It explains the role of HUD, the mortgage lender, the contractor, the borrower, consultant, the plan reviewer, appraiser and the inspector.

A. Homebuyer Locates the Property.

B. Preliminary Feasibility Analysis. After the property is located, the homebuyer and their real estate professional should make a marketability analysis prior to signing the sales contract. The following should be determined:

1) The extent of the rehabilitation work required;

2) Rough cost estimate of the work; and

3) The expected market value of the property after completion of the work. Note: The borrower does not want to spend money for appraisals and repair specifications (plans), then discover that the value of the property will be less than the purchase price (or existing indebtedness), plus the cost of improvements.

C. Sales Contract is Executed. A provision should be included in the sales contract that the buyer has applied for Section 203(k) financing, and that the contract is contingent upon loan approval and buyer's acceptance of additional required improvements as determined by HUD or the lender.

D. Homebuyer Selects Mortgage Lender. Call HUD Field Office for a list of lenders.

E. Homebuyer Prepares Work Write-up and Cost Estimate. A consultant can help the buyer prepare the exhibits to speed up the loan process. If a plan reviewer is the consultant, item G can be skipped and the exhibits can go directly to the appraisal stage.

F. Lender Requests HUD Case Number. Upon acceptance of the architectural exhibits, the lender requests the assignment of a HUD case number, the plan reviewer, appraiser, and the inspector.

G. Plan Reviewer Visits Property. The homebuyer and contractor (where applicable) meet with the plan reviewer to ensure that the architectural exhibits are acceptable and that all program requirements have been properly shown on the exhibits.

H. Appraiser Performs the Appraisal.

I. Lender Reviews the Application The appraisal is reviewed to determine the maximum insurable mortgage amount for the property

J. Issuance of Conditional Commitment/Statement of Appraised Value. This is issued by the lender and establishes the maximum insurable mortgage amount for the property.

K. Lender Prepares Firm Commitment Application. The borrower provides information for the lender to request a credit report, verifications of employment and deposits, and any other source documents needed to establish the ability of the borrower to repay the mortgage.

L. Lender Issues Firm Commitment. If the application is found acceptable, the firm commitment is issued to the borrower. It states the maximum mortgage amount that HUD will insure for the borrower and the property.

M. Mortgage Loan Closing. After issuance of the firm commitment, the lender prepares for the closing of the mortgage. This includes the preparation of the Rehabilitation Loan Agreement. The Agreement is executed by the borrower and the lender in order to establish the conditions under which the lender will release funds from the Rehabilitation Escrow Account. Following closing, the borrower is required to begin making mortgage payments on the entire principal amount for the mortgage, including the amount in the Rehabilitation Escrow Account that has not yet been disbursed.

N. Mortgage Insurance Endorsement. Following loan closing, the lender submits copies of the mortgage documents to the HUD office for mortgage insurance endorsement. HUD reviews the submission and, if found acceptable, issues a Mortgage Insurance Certificate to the lender.

O. Rehabilitation Construction Begins. At loan closing, the mortgage proceeds will be disbursed to pay off the seller of the existing property and the Rehabilitation Escrow Account will be established. Construction may begin. The homeowner has up to six (6) months to complete the work depending on the extent of work to be completed. (Lenders may require less than six months.)

P. Releases from Rehabilitation Escrow Account. As construction progresses, funds are released after the work is inspected by a HUD-approved inspector. A maximum of four draw inspections plus a final inspection are allowed. The inspector reviews the Draw Request (form HUD-9746-A) that is prepared by the borrower and contractor. If the cost of rehabilitation exceeds $10,000, additional draw inspections are authorized provided the lender and borrower agree in writing and the number of draw inspections is shown on form HUD-92700, 203(k) Maximum Mortgage Worksheet.

Q. Completion of Work/Final Inspection. When all work is complete according to the approved architectural exhibits and change orders, the borrower provides a letter indicating that all work is satisfactorily complete and ready for final inspection. If the HUD-approved inspector agrees, the final draw may be released, minus the required 10 percent holdback. If there is unused contingency funds or mortgage payment reserves in the Account, the lender must apply the funds to prepay the mortgage principal.

Questions & Answers!

1. Is there a secondary mortgage market for Section 203(k) mortgage loans? Yes. The Government National Mortgage Association (GNMA) permits the Section 203(k) mortgage to be placed in both GNMA I and II pools with Section 203(b) mortgages. GNMA accepts the 203(k) mortgage once it has been endorsed by HUD. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) will also purchase a Section 203(k) first mortgage.

2. Is the Section 203(k) program restricted to single-family dwellings? No. The program can be used for one-to-four unit dwellings. Maximum mortgage limitations are the same as for properties under Section 203(b).

3. Can Section 203(k) be used to improve a condominium unit? Yes, however, condominium rehabilitation is subject to the following conditions:

A. Owner/occupant and qualified non-profit borrowers only;

B. Rehabilitation is limited only to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of exteriors or other areas which are the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit;

C. Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehabilitation at any one time;

D. The maximum mortgage amount cannot exceed 100 percent of after-improved value. After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached. Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for Section 203(k). Likewise, a project could contain a row of more than four attached townhouses and be eligible for Section 203(k) because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof). Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units.

4. Can Section 203(k) be used to convert a one family dwelling to a two-, three-, or four-family dwelling (or vice versa)? Yes.

5. Can Section 203(k) be used to move an existing house onto another site? Yes, however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation. At closing, funds would be released to purchase the site and the rest of the mortgage proceeds would be placed in the Rehabilitation Escrow Account. The borrower would have the site prepared to accept the dwelling. The first release would be based on the improvements made to the site, including the installation of the existing structure on the new foundation.

6. What is the minimum amount of rehabilitation required for a Section 203(k) mortgage? There is a minimum $5,000 requirement for the eligible improvements on the existing structure on the property. Minor or cosmetic repairs by themselves are unacceptable; however, they may be added to the minimum requirement.

7. What eligible improvements are acceptable under the $5,000 minimum requirement?

A. Structural alterations and reconstruction (e.g., repair or replacement of structural damage, chimney repair, additions to the structure, installation of an additional bath(s), skylights, finished attics and/or basements, repair of termite damage and the treatment against termites or other insect infestation, etc.).

B. Changes for improved functions and modernization (e.g., remodeled bathrooms and kitchens, including permanently installed appliances, i.e., built-in range and/or oven, range hood, microwave, dishwasher).

C. Elimination of health and safety hazards (including the resolution of defective paint surfaces or lead-based paint problems on homes built prior to 1978).

D. Changes for aesthetic appeal and elimination of obsolescence (e.g., new exterior siding, adding a second story to the home, covered porch, stair railings, attached carport).

E. Reconditioning or replacement of plumbing (including connecting to public water and/or sewer system), heating, air conditioning and electrical systems. Installation of new plumbing fixtures is acceptable, including interior whirlpool bathtubs.

F Installation of well and/or septic system. The well or septic system must be installed or repaired prior to beginning any other repairs to the property. A property less than 1/2 acre with a separate well or septic system is not acceptable; also, a property less than 1 acre with both a well and a septic system is unacceptable. Lots smaller than these sizes, usually have problems in the future; however, the local HUD Field Office can approve smaller lot size requirements where the local health authority can justify smaller lots. The installation of a new well or the repair of an existing well (used for the primary water source to the property) can be allowed provided there is adequate documentation to show there is reason to believe the well will produce a sufficient amount of potable water for the occupants. (A well log of surrounding properties from the local health authority is acceptable documentation.) Refer to HUD Handbook 4910.1, Appendix K, for additional information.

G. Roofing, gutters and downspouts.

H. Flooring, tiling and carpeting.

I. Energy conservation improvements (e.g., new double pane windows, steel insulated exterior doors, insulation, solar domestic hot water systems, caulking and weather stripping, etc.).

J. Major landscape work and site improvement (e.g., patios, decks and terraces that improve the value of the property equal to the dollar amount spent on the improvements or required to preserve the property from erosion). The correction of grading and drainage problems is also acceptable. Tree removal is acceptable if the tree is a safety hazard to the property. Repair of existing walks and driveway is acceptable if it may affect the safety of the property. (Fencing, new walks and driveways, and general landscape work (i.e., trees, shrubs, seeding or sodding) cannot be in the first $5000 requirement.)

K. Improvements for accessibility to a disabled person (e.g., remodeling kitchens and baths for wheelchair access, lowering kitchen cabinets, installing wider doors and exterior ramps, etc.). Related fixtures such as new cooking ranges, refrigerators, and other appurtenances, as well as general painting are also eligible; however, it must be in addition to the $5,000 requirement.

8. Can a detached garage or another dwelling be placed on the mortgaged property? Yes, however, a new unit must be attached to the existing dwelling, and must comply with HUD's Minimum Property Standards in 24 CFR 200.926d and all local codes and ordinances.

9. Is there a time period on the rehabilitation construction period? Yes, the Rehabilitation Loan Agreement contains three provisions concerning the timeliness of the work. The work must begin within 30 days of execution of the Agreement. The work must not cease prior to completion for more than 30 consecutive days. The work is to be completed within the time period shown in the Agreement (not to exceed six months); the lender should not allow a time period longer than that required to complete the work.

10. What happens if the borrower fails to perform under the terms of the Agreement? The lender may refuse to make further releases from the Rehabilitation Escrow Account. The funds remaining in the Account can be applied to reduce the mortgage principal. Also, the lender has the option to call the mortgage loan due and payable.

11. Does the rehabilitation construction have to comply with HUD's Minimum Property Standards? Yes. The improvements must comply with HUD's Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1) and all local codes and ordinances.

12. Can Section 203(k) be processed under the Direct Endorsement program? Yes. Direct Endorsement Lenders are required to attend special training prior to processing 203(k) loans and they must submit test cases as determined by the local office.

13. Does HUD always require a contingency reserve to cover unexpected cost increases? Typically, yes. On properties older than 30 years and over $7,500 in rehabilitation costs, the cost estimate must include a contingency reserve. The reserve must be a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If utilities were not turned on for inspection, a minimum fifteen (15) percent is required.

14. How many draw releases can be scheduled during the rehabilitation period? As many as five releases (four plus a final) can be scheduled. The number of releases is normally dictated by the cash-flow requirements of the contractor. An inspection is always required with a scheduled release; however, inspections may be scheduled more often than releases if necessary to ensure compliance with the architectural exhibits, HUD's Minimum Property Standards and all local codes and ordinances. If the cost of rehabilitation exceeds $ 10,000, then additional draw inspections may be authorized under certain circumstances.

15. Can the architectural exhibits, including the cost estimate, be modified after the mortgage loan is closed? Yes. The changes must be approved by HUD or a DE lender prior to beginning the work. If the change affects the health, safety or necessity of the dwelling, the contingency reserve can be used to pay for the change. However, if the health, safety or necessity of the dwelling is not affected and an increase in cost occurs, the borrower must apply monies into the contingency reserve fund to pay for the change. Should the change result in a reduced cost of rehabilitation, the difference will be placed in the contingency reserve fund; if unused, it will be applied as a mortgage prepayment after completion of construction.

16. What happens if the cost of the rehabilitation increases during the rehabilitation period? Can the 203(k) mortgage amount be increased to cover the additional expenses? No. This emphasizes the importance of carefully selecting a contractor who will accurately estimate the cost of the improvements and satisfactorily complete the rehabilitation at or below the estimate.

17. How long will it take after the sales contract is signed to go to closing? If the cost estimates are completed within two weeks of signing the sales contract, the loan should close within 60 to 90 days, assuming there are no title problems and, of course, your borrower is qualified.

18. Can a Section 203(k) mortgage be an Adjustable Rate Mortgage? Yes. An Adjustable Rate Mortgage is available to an owner-occupant only. Investors and non-profits are not eligible for an ARM.

19. Does a Direct Endorsement lender who is approved for the 203(k) program need to be approved in another HUD office? No. However, the lender needs to submit their approval to the other HUD office where they wish to originate 203(k) loans. A preclosing review in the new HUD office will not be necessary.

20. Can a DE lender sponsor a correspondent lender to originate 203(k) loans? Yes. The correspondent lender can even use the DE sponsor's staff appraisers, inspectors and plan reviewer /consultants for processing.

21. Can an investor use the 203(k) program? No. In October, 1996, the Department placed a moratorium on investor participation in the 203(k) Rehabilitation Mortgage Program. (Remember that on the HUD web-site they do not tell you that as an investor you can use this program in targeted areas)

22. Can a local government agency or a nonprofit organization use the 203(k) program? Yes. The same qualification requirements will be used as for an owner-occupant of the property

23. Can mortgage payments (PITI) be included in the mortgage? Yes. Up to six months of payments may be included in the mortgage if the property is not occupied during the rehabilitation period.

24. Can a six (or more) unit building be done using the 203(k) program? No. However, the building could be renovated and reduced to a four unit building.

25. Can a dwelling be converted to provide access for a disabled person? Yes. A dwelling can be remodeled to improve the kitchen and bath to accommodate a wheelchair access. Wider doors and handicap ramps can also be included in the cost of rehabilitation.

26. Is a contractor required to do the work? No. However, if the borrower wants to do any work or be the general contractor, they must be qualified to do the work, and do it in a timely and workmanlike manner. It is very important that the work be done in a time frame that will assure the completion of the work that will be agreed upon in the Rehabilitation Loan Agreement (signed at closing). A borrower doing their own work can only be paid for the cost of the materials. Monies saved can be allocated to cost overruns or additional improvements.

27. If the borrower does the work, how is the cost for work estimated? The cost estimate must be the same as if a contractor is doing the work, in case the borrower cannot (for some reason) complete the work.

28. Can cost savings on the rehabilitation be given back to the borrower? No. However, the savings can be transferred to cost overruns in other work items or can be used to make additional improvements to the property If the cost savings are not used, the money must be applied to the mortgage principal, but the mortgage payments will remain the same, because the loan has already closed. To use the cost savings, it will be necessary for a Change Order to be completed and approved by the lender.

29. Can any rehabilitation money be paid upfront to offset the startup costs for the contractor? No. However, an exception can be allowed for kitchen and bath cabinetry, or floor covering, where a contract is established with the supplier and an order is placed with the manufacturer for delivery at a later date.

30. Is there anyone available who can prepare the Work Write-up and cost estimates? Yes. HUD allows fee inspectors to be an independent consultant with the borrower. This is a time saver, because it can be completed in about two weeks. After this step is completed, closing should occur within 60 to 90 days.

31. Can the borrower do their own work write up and cost estimate? Yes. However, it will take them between three to six months to complete. This slows down the process and will save only about $200, but waste a lot of valuable time. Hiring an independent consultant will help the closing occur within 60 to 90 days from completion of the Work Write-up.

32. What is the definition of a First-Time Homebuyer? A single person or an individual and his or her spouse who have not owned a home (as a tenant in common or as a joint tenant by the entirety) during the three years immediately preceding the date of application for the 203(k) loan. Any individual who is legally separated or divorced cannot be excluded from consideration, because the three-year waiting period does not apply, provided the individual no longer has an interest in the home.

33. Is there a limitation on how many properties a person or organization can have in any area of the community? Yes. A borrower can have not more than seven (7) units within a two block radius of the property they want to purchase. However, if the property is in a local community area that has been designated for redevelopment or revitalization, then this seven unit limitation does not apply.

34. Can nonresidential (storefront) property be eligible for a 203(k) insured loan? Yes. Mixed-use residential property is acceptable provided the property has no greater than 25% (for a one story building); 33% (for a three story building); and 49% (for a two story building) of its floor area used for commercial (storefront) purposes. The rehab funds can only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

35. Is only one appraisal required to establish the "after-rehab" value of the property? Basically, yes, provided the lender can be assured that the contract sales price is reasonable or the existing debt on the property is low enough to assure a good equity position by the homeowner. On a HUD-owned property, the lender can use HUD's appraisal for the after-rehab value.

36. Can HUD-owned properties be purchased using the 203(k) loan? Yes. However, the property must be advertised that it is eligible for financing with a 203(k) loan. If the HUD-owned property is purchased with other funds, a 203(k) loan can be made after the property is in the buyers name. In this case, cash back will be allowed to the borrower for a period of six months from purchasing the HUD-owned property

37. Is the borrower required to enter into a contractual agreement with the general contractor who will do the work on the property? No. However, it is strongly suggested that the lender protect their interests to assure no liens are placed on the property

38. Can an Energy Efficient Mortgage (EEM) be allowed using the 203(k) program? Yes. A borrower can finance into the mortgage 100 percent of the cost of eligible energy efficient improvements, subject to certain dollar limitations, without an appraisal of the energy improvements and without further credit qualificat

Link to HUD: http://www.hud.gov/

[size=18]Energy Efficient Mortgages Program [/size]

The Energy Efficient Mortgages Program (EEM) helps homebuyers or homeowners save money on utility bills by enabling them to finance the cost of adding energy-efficiency features to new or existing housing as part of their FHA-insured home purchase or refinancing mortgage.

Purpose:
This program seeks to help achieve national energy-efficiency goals (and reduce pollution) and provide better housing for people who might not otherwise be able to afford it. By considering the savings on monthly utility bills when determining how large a mortgage the household can afford, as many as 250,000 more new homebuyers could qualify per year, according to a 1986 study by the Joint Center for Housing Studies. Although EEMs have been available in some States since 1980, they have been little understood or marketed. With EEMs, borrowers do not need to get a separate, costly loan for energy improvements when buying an existing home.

Type of Mortgage:

EEM is one of many FHA programs that insure mortgage loans--and thus encourage lenders to make mortgage credit available to borrowers who would not otherwise qualify for conventional loans on affordable terms (such as first-time homebuyers) and to residents of disadvantaged neighborhoods (where mortgages may be hard to get). Borrowers who obtain FHA's popular Section 203(b) Mortgage Insurance for One- to Four-Family Homes are eligible for approximately 97 percent financing, and are able to fold closing costs and the up-front mortgage insurance premium into the mortgage. The borrower must also pay an annual premium.

EEM can also be used with the FHA Section 203(k) rehabilitation program and generally follows that program's financing guidelines. For energy-efficient housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD's Title I Home Improvement Loan program.

How to Get a EEM:

FHA-approved lending institutions-which include many banks, savings and loan associations, and mortgage companies-can make loans covered by EEM insurance.

Eligible Customers:

All persons who meet the income requirements for FHA's standard Section 203(b) insurance and can make the monthly mortgage payments are eligible to apply. The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating system (HERS) or an energy consultant. Up to $200 of the cost of an energy inspection report may be included in the mortgage. Cooperative units are not eligible; individual condominium units may be insured if they are in projects that have been approved by FHA or the Department of Veterans Affairs, or meet certain Fannie Mae guidelines.

EEM can also be used with FHA's Section 203(h) program for mortgages made to victims of presidentially declared disasters. The mortgage must comply with both Section 203(h) requirements, as well as those for EEM. However, the program is limited to one-unit detached houses.

Eligible Activities:
EEM can be used to make energy-efficient improvements in one to four existing and new homes. The improvements can be included in a borrower's mortgage only if their total cost is less than the total dollar value of the energy that will be saved during their useful life. The cost of the improvements that may be eligible for financing as part of the mortgage is either 5 percent of the property's value (not to exceed $8,000) or $4,000--whichever is greater. The maximum mortgage limit for a single-family home is $160,950, plus the cost of the eligible energy-efficient improvements. (Limits may be lower in some areas of the country.) .

Application:
Applications must be submitted to the local HUD Field Office through an FHA-approved lending institution. HUD's homepage offers a searchable list of approved lenders.

Funding Status:
In FY 1996, 3,500 loans were endorsed. In FY 1997, 4,700 loans were endorsed.

Technical Guidance:
EEM is authorized under Section 513 of the Housing and Community Development Act of 1992. Program regulations are in Mortgage Credit Analysis for Mortgage Insurance on One-to-Four-Family Properties (HUD Handbook 4155.1), paragraph 2-20. This and other FHA programs are administered by the Office of Single-Family Housing in HUD's Office of Housing-Federal Housing Administration. Contact the Director of Single-Family Housing at the nearest HUD Homeownership Center.

For More Information:

The Department of Energy (DOE) and HUD established a Joint Initiative on Energy Efficiency in Housing. To learn more about this collaborative effort, see DOE/HUD Initiative on Energy Efficiency in Housing: A Federal Partnership, Program Summary Report, which is available from HUD USER (1-800-483-2209).

Link to HUD: http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm

I hope you enjoyed this segment!

[size=18]Single-Family Cooperative Mortgage Insurance - 203(n) [/size]

Summary:
The Section 203(n) program insures mortgages for persons buying a unit in a cooperative housing project. The mortgage is made by a lending institution, such as a mortgage company, bank, or savings and loan association, and is insured by HUD's Federal Housing Administration (FHA).

Purpose:
The purpose of FHA's mortgage insurance programs is to encourage lenders to make mortgage credit available to borrowers who would not otherwise qualify for conventional loans on affordable terms (such as lower income families and first-time homebuyers) and to residents of disadvantaged neighborhoods (where mortgages may be hard to get).

The basic FHA mortgage insurance program is Mortgage Insurance for One- to Four-Family Homes (Section 203(b)), which offers homebuyers lower initial costs and lower downpayment requirements, and allows borrowers to fold some of the closing costs into the loan. Section 203(n) is one of several FHA programs based on Section 203(b) that have special features--in this case, financing structured to meet the needs of persons who are buying a corporate certificate and occupancy certificate, the instruments that enable them to own a share of and live in a cooperative housing project (co-op).

Type of Assistance:
The program insures a mortgage to purchase an apartment in a residential cooperative--which can be a detached or semidetached building, a rowhouse, or a multifamily building.

HUD sets limits on the amount that may be insured. To make sure that its programs serve low- and moderate-income people, FHA sets limits on the dollar value of the mortgage. The current FHA mortgage limit ranges from $172,632 to $312,895. These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two- to four-family properties).

Many of the terms of Section 203(n) insurance are the same as those governing basic FHA single-family mortgage insurance. Borrowers can finance 97 percent of the price of their cooperative ownership, and that financing can include many of the closing costs involved in buying a home. Because they can borrow so much of the price of their unit, the downpayment can be a low as 3 percent.

Eligible Participants:
FHA-approved lending institutions can make insured loans under Section 203(n) through HUD Field Offices.

Eligible Customers:
All potential owner-occupants who can make the monthly mortgage payments are eligible to apply.

Application:
Applications must be submitted to the local HUD Field Office through a FHA-approved lending institution. HUD's website offers an interactive directory of approved lenders.

Technical Guidance:
This program is authorized under Section 203(n) of the National Housing Act (12 U.S.C.) and the Emergency Home Purchase Assistance Act of 1974, Public Law 93-449, 88 Stat. 1364. Program regulations are in 24 CFR 203.43c and 203.437. These regulations, as well as handbooks, notices, and letters relevant to this program, are available through HUDCLIPS. The program is administered by the Office of Single-Family Housing Programs in HUD's Office of Housing-Federal Housing Administration

For More Information:
Contact the HUD Homeownership Center that serves your state. Homebuyers can also contact a HUD approved lender for a searchable listing of approved lenders nationwide, a HUD approved housing counseling agency, or the toll-free FHA Mortgage Hotline, 1-800-483-7342

Link to HUD: http://www.hud.gov/offices/hsg/sfh/ins/203n--df.cfm

Hope you enjoyed the info my friends.

[size=24]Home Equity Conversion Mortgage Program [/size]

Summary:
The Home Equity Conversion Mortgage program enables older homeowners to withdraw some of the equity in their home in the form of monthly payments for life or a fixed term, or in a lump sum, or through a line of credit.

Purpose:
The Home Equity Conversion Mortgage Program (HECM) can enable an older home owning family to stay in their home while using some of its built up equity. The program allows such a household to get an insured reverse mortgage-a mortgage that converts equity into income. Because older persons can be vulnerable to fraudulent practices, the program requires that persons receive free reverse mortgage housing counseling from a HUD-approved reverse mortgage counseling agency before applying for a reverse mortgage. FHA insures HECM loans to protect lenders against loss if amounts withdrawn exceed equity when the property is sold.

Type of Assistance:
HECM can be used by homeowners who are 62 years of age and older. The total income that an owner can receive through HECM is the maximum claim amount, which is calculated with a formula including the age of the owner(s), the interest rate, and the value of the home. For example, on the basis of a loan at recent interest rates, a 65-year-old could borrow up to 26 percent of the home's value, a 75-year-old could borrow up to 39 percent, and an 85-year-old could borrow up to 56 percent.

Borrowers may choose one of five payment options: (1) tenure, which gives the borrower a monthly payment from the lender for as long as the borrower lives and continues to occupy the home as a principal residence; (2) term, which gives the borrower monthly payments for a fixed period selected by the borrower; (3) line of credit, which allows the borrower to make withdrawals up to a maximum amount, at times and in amounts of the borrower's choosing; (4) modified tenure, which combines the tenure option with a line of credit; and (5) modified term, which combines the term option with a line of credit.

The borrower remains the owner of the home and may sell it and move at any time, keeping the sales proceeds that exceed the mortgage balance. A borrower cannot be forced to sell the home to pay off the mortgage, even if the mortgage balance grows to exceed the value of the property. A HECM loan need not be repaid until the borrower moves, sells, or dies. When the loan must be paid, if it exceeds the value of the property, the borrower (or the heirs) will owe no more than the value of the property. FHA insurance will cover any balance due the lender.

Two mortgage insurance premiums are collected to pay for HECM: an up front premium (2 percent of the home's value), which can be financed by the lender, and a monthly premium (which equals 0.5 percent per year of the mortgage balance). The lender's loan origination charge can vary, but only up to $1,800 in such charges may be financed by HECM. Borrowers may be charged appraisal and inspection fees set by HUD; these charges can also be financed.

As part of the HECM program, HUD has provided for free reverse mortgage counseling (with training for the counselors) for persons considering using such an instrument, and a toll-free information line.

Eligible Grantees:
Any lender authorized to make HUD-insured loans- such as banks, mortgage companies, and savings and loan associations-can participate in the HECM program.

Eligible Customers:
To be eligible for HECM, a homeowner must (1) be 62 years of age or older, (2) have a very low outstanding mortgage balance or own their home free and clear, and (3) have received HUD-approved reverse mortgage counseling to learn about the program.

An eligible property must be a principal residence, but it can be a single-family residence, a one- to four-unit building with one unit occupied by the borrower, a manufactured home (mobile home), a unit in an FHA-approved condominium, or a unit in a planned unit development. The property must meet FHA standards, but the owner can pay for repairs using the reverse mortgage.

Application:
Homeowners who meet the eligibility criteria above can apply through an FHA-approved lending institution, which in turn submits the application to the local HUD Field Office for approval. Borrowers can locate FHA-approved lenders through HUD's searchable listing.

Because there has been a problem of some senior citizens being charged thousands of dollars for information on HECM that is available free, HUD recently directed HECM lenders to stop doing business with companies that charge such fees.

Funding Status:
In FY 1996, the HECM program insured 3,604 homes with a value of $369 million. Through September 30, 1996, approximately 16,000 HECM loans had been made.

Technical Guidance:
TECHNICAL GUIDANCE: This program is authorized by the Housing and Community Development Act of 1987, Section 417, Public Law 100-242 (12 U.S.C. 1715z-20). Program regulations are in 24 CFR 200 and 206. This program is administered by the Office of Single-Family Housing in HUD's Office of Housing-Federal Housing Administration.

For More Information:
Homeowners who want to learn more about this program, or who were charged for HUD approved reverse mortgage counseling should call HUD's toll-free housing counseling information line, 1-800 569-4287 or see the searchable list of HUD approved reverse mortgage housing counseling agencies.

Additional information is available from two nonprofit organizations: the American Association of Retired Persons' (AARP) Home Equity Conversion Information Center (202-434-6044) and the National Center for Home Equity Conversion (NCHEC) at 7373 147th St., Room 115, Apple Valley MN 55124.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/hecm/hecm--df.cfm

enjoy everyone.....

[size=18]Mortgage Insurance for Condominium Units (Section 234(c)) [/size]

Summary:
This program insures the loan for a person who purchases a unit in a condominium building.

Purpose:
One of the many purposes of FHA's mortgage insurance programs is to encourage lenders to make affordable mortgage credit available for non-conventional forms of ownership. Condominium ownership, in which the separate owners of the individual units jointly own the development's common areas and facilities, is one particularly popular alternative. Insurance for condominiums, such as is provided through Section 234(c), can be important for low- and moderate-income renters who wish to avoid being displaced by the conversion of their apartment building into a condominium.

Type of Assistance:
The program insures a loan for as many as 30 years to purchase a unit in a condominium building--which must contain at least four dwelling units and can be detached or semidetached, a rowhouse, a walk-up, or an elevator structure. The loan is made by a lending institution, such as a mortgage company, bank, or savings and loan association, and is insured by HUD's Federal Housing Administration (FHA). Most of the features of Section 234(c) mortgage insurance are the same as those governing HUD's basic FHA mortgage insurance program, Mortgage Insurance for One- to Four-Family Homes (Section 203(b)). For example, downpayment requirements can be low--3 percent or less--because FHA insurance allows homebuyers to finance about 97 percent of the home's cost through their mortgage. In addition, some closing costs can be financed, reducing up-front costs. And FHA limits some fees that lenders charge—for example, the loan origination charge. Finally, FHA sets limits on the size of the mortgage loan that vary with location and the number of units being purchased.

However, Section 234(c) does have some additional, unique restrictions. If the apartment is in a building that was converted from rental housing, no insurance may be provided under Section 234(c) unless: (1) the conversion occurred more than one year before the application for insurance; (2) the potential buyer or co-buyer was a tenant of that rental housing; or (3) the conversion of the property is sponsored by a tenant's organization that represents a majority of the households in the project. Eighty percent of FHA-insured mortgages in the project must be made to owner-occupants.

Developers may obtain FHA-insured mortgages to finance the construction or rehabilitation of housing projects that they intend to sell as individual condominium units under HUD's Section 234(d) program.

Eligible Customers:
Any creditworthy potential owner-occupant who meets FHA underwriting criteria and will make the condominium unit their principal residence is eligible for a mortgage insured under this program.

Application:
Applications must be submitted to the local HUD Field Office through a FHA-approved lending institution. HUD's Website offers an interactive directory of approved lenders.

Technical Guidance:
This program is authorized under Section 234(c) of the National Housing Act (12 U.S.C. 1715y[c]). Program regulations are at 24 CFR 234, Subpart A. These regulations, as well as handbooks, notices, and letters relevant to this program, are available through HUDCLIPS. Section 234(c) is administered by the Single-Family Development Division in HUD's Office of Housing-Federal Housing Administration.

For More Information:
See HUD's website to learn more about this program, or ask the Director of Single-Family Programs in your local HUD Field Office. A booklet, Questions about Condominiums, document 365-H(7), is available by mail from HUD or through the toll-free FHA Mortgage Hotline, 1-800-CALLFHA. Homebuyers can also learn more by contacting a HUD-approved lender for a searchable listing of approved lenders nationwide or a HUD-approved housing counseling agency.

Eligible Grantees:
Most FHA-approved lending institutions can make Section 234(c) loans through Direct Endorsement, which authorizes them to consider mortgage insurance applications without submitting paperwork to HUD.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/ins/234c--df.cfm

Hope you enjoyed some light reading!

[size=24]Manufactured Home Loan Insurance (Title I) [/size]

Summary:
This program insures mortgage loans made by private lending institutions to finance the purchase of a new or used manufactured home.

Purpose:
HUD has been providing loan insurance on manufactured homes under Title I since 1969. By protecting mortgage lenders against the risk of default, HUD's participation has encouraged them to finance manufactured homes, which had traditionally been financed as personal property through comparatively high-interest, short-term consumer installment loans. The program thereby increases the availability of affordable financing and mortgages for buyers of manufactured homes and allows buyers to finance their home purchase at a longer term and lower interest rate than with conventional loans.

Type of Assistance:
The program insures lenders against loss from default on loans of up to $48,600. The program insures private lenders against losses of up to 90 percent of the value of a single loan. Total insurance coverage is limited to 10 percent of the lender's Title I portfolio. The buyer must agree to make a 5 percent downpayment and interest rate payments determined by the lender. Annual insurance charges start at $1 per $100 of the loan amount, but are reduced in the later years of the loan. The maximum loan term varies from 20 to 25 years.

Eligible Grantees:
Private lending institutions are eligible for insurance on loans made under the program.

Eligible Customers:
All buyers who plan to use the manufactured home as their principal place of residence are eligible for the program.

Application:
Buyers of manufactured homes may apply for a loan through a HUD-approved lender or through a lender's approved Retailer.

Technical Guidance:
The program is authorized under Title I, Section 2 of the National Housing Act (12 U.S.C. 1703). Program regulations are in 24 CFR Part 201. Administered by the Office of Housing-Federal Housing Administration. Debt collection activities have been consolidated at the Albany Financial Operations Center, 800-669-5152.

For More Information:
For more information, refer to "Financing Manufactured Homes, HUD-265-H(10), available from the HUD Customer Service Center, 1-800-767-7468. Information can also be found at the HUD-approved Title I lender page or you can contact a HUD-approved housing counseling agency. To learn more about manufactured housing options and opportunities, try HUD's Manufactured Housing web page or the Manufactured Housing Institute website.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/title/manuf14.cfm

Thanks again!

[size=18]Manufactured Home Lot and Combination Loan Insurance[/size]

Summary:
This program insures mortgage loans made by private lenders to buyers of manufactured homes and the lots on which to place them.

Purpose:
HUD has been providing mortgage insurance on manufactured homes under Title I since 1969. By protecting mortgage lenders against the risk of default, HUD's participation has encouraged them to finance manufactured homes, which had traditionally been financed as personal property through comparatively high-interest, short-term consumer installment loans. The program thereby increases the availability of affordable financing and mortgages for buyers of manufactured homes and allows the buyers to finance purchase of their home at a term and interest rate comparable with the commercial loans typically used to finance manufactured homes.

Type of Assistance:
Title I programs offer coinsurance--HUD insures private lenders against losses of up to 90 percent of the value of a single loan, while the lender retains responsibility for the remaining 10 percent. In addition, the insurance coverage is limited to 10 percent of the lender's Title I portfolio. The buyer must agree to make a downpayment and interest rate payments determined by the lender.

Title I insurance may be used for loans of up to $64,800 for a manufactured home and lot and $16,200 for a lot only. The lot must be appraised by a HUD-approved lender. The dollar limits for combination and lot loans may be increased up to 85 percent in designated high-cost areas. The maximum loan term is 20 years for a single-module home and lot, 25 years for a multiple module home and lot, and 15 years for a lot only.

Eligible Grantees:
Private lending institutions are eligible for insurance on loans made under the program.

Eligible Customers:
All buyers of manufactured homes who plan to use the homes as their principal residence are eligible for the program.

Application:
Buyers of manufactured homes may apply for insurance through a HUD-approved lender or through a lender's approved Retailer. CLICK HERE to find a nearby HUD-approved Title I lender.

Technical Guidance:
The program is authorized under Title I, Section 2 of the National Housing Act (12 U.S.C. 1703). Program regulations are in 24 CFR Part 201. These regulations, as well as applicable handbooks and notices, are available electronically through www.hud.gov/hudclips. The program is administered by the Office of Housing, Federal Housing Administration. Contact the Home Improvement Branch at (202) 708-2121 for more information.

For More Information:
For more information, refer to "Financing Manufactured Homes, HUD-265-H(10), available from the HUD Customer Service Center, 1-800-767-7468. Information can also be found at the HUD-approved Title I lender page or you can contact a HUD-approved housing counseling agency. To learn more about manufactured housing options and opportunities, try HUD's Manufactured Housing web page or the Manufactured Housing Institute website.

Link to HUD: http://www.hud.gov/offices/hsg/sfh/title/manuf146.cfm

Thanks!

[size=24]Property Improvement Loan Insurance (Title I) [/size]

Summary:
Under Title I, HUD insures lenders against most losses on home improvement loans.

Purpose:
The Federal Housing Administration (FHA) makes it easier for consumers to obtain affordable home improvement loans by insuring loans made by private lenders to improve properties that meet certain requirements. "Lending institutions make loans from their own funds to eligible borrowers to finance these improvements."

Type of Assistance:
The Title I program insures loans to finance the light or moderate rehabilitation of properties, as well as the construction of nonresidential buildings on the property. This program may be used to insure such loans for up to 20 years on either single- or multifamily properties. The maximum loan amount is $25,000 for improving a single-family home or for improving or building a nonresidential structure.

For improving a multifamily structure, the maximum loan amount is $12,000 per family unit, not to exceed a total of $60,000 for the structure. These are fixed-rate loans, for which lenders charge interest at market rates. The interest rates are not subsidized by HUD, although some communities participate in local housing rehabilitation programs that provide reduced-rate property improvement loans through Title I lenders.

FHA insures private lenders against the risk of default for up to 90 percent of any single loan. The annual premium for this insurance is $1 per $100 of the amount advanced; although this fee may be charged to the borrower separately, it is sometimes covered by a higher interest charge.

Eligible Lenders:
Only lenders approved by HUD specifically for this program can make loans covered by Title I insurance. Title I loans can be disbursed directly to the borrower or, if the loan is made through a dealer, the disbursement will be made jointly to the dealer and the borrower. While most lenders and dealers/contractors use this program responsibly, HUD urges consumers to use caution in choosing and supervising home repair dealers/contractors conducting Title I repair/renovation work. Previously HUD had reviewed some Title I dealer loans and discovered several instances of unscrupulous dealers/contractors performing shoddy work, falsifying documents, overcharging homeowners and use of deceptive advertising. HUD has taken new measures in an attempt to prevent further occurrences in dealer originated loans.

Eligible Customers:
Eligible borrowers include the owner of the property to be improved, the person leasing the property (provided that the lease will extend at least 6 months beyond the date when the loan must be repaid), or someone purchasing the property under a land installment contract.

Eligible Activities:
Title I loans may be used to finance permanent property improvements that protect or improve the basic livability or utility of the property--including manufactured homes, single-family and multifamily homes, nonresidential structures, and the preservation of historic homes. The loans can also be used for fire safety equipment.

Application:
Applications must be submitted to a Title I-approved lender. Our web site offers a searchable list of approved lenders.

Funding Status:
In FY 2006 HUD insured 4,711 Title I loans with a value of $101 million. HUD estimates that Title I loans made in FY 2007 may reach $105 million.

Technical Guidance:
This program is authorized under Title I, Section 2, of the National Housing Act (12 U.S.C. 1703). Program regulations are in 24 CFR Part 201. The program is administered by the Home Mortgage Insurance Division of HUD's Office of Housing-Federal Housing Administration (FHA).

For More Information:
Lenders may contact FHA's Home Mortgage Insurance Division at (202) 708-2121 for information about how to participate in the Title I loan insurance program. Consumers can register complaints about Title I lenders or contractors by contacting the Home Mortgage Insurance Division or State or local consumer protection agencies.

Link to HUD: Summary: http://www.hud.gov/offices/hsg/sfh/title/title-i.cfm

I like this program cause you do not need to an owner occupied home in order to qualify for this progam. It makes perfect sense with the loan term financing and the low insurance premium you pay which in the case of units your tenants will pay the cost of the loan.

Hope you enjoyed this as much as I did!

Loki005,

Thanks for Sharing the Info. Very, Very Thorough and helpful!

Best Regards & Much Success As You Invest!
MoneyMakers,

Thank you G.D. Haizlip!

Lito-
Is there a HUD or FHA product you know of which can be used to purchase a 44 unit apartment building which is vacant and needs to be rehabbed in FL? Or are you aware of grant product which could be used to make this a no money down purchase? It is currently bank owned and can be bought at a discount.

I am currently going through the 203(k) program and will continue to report on the process I experience. But you mentioned something of note that I was not aware of:

Homebuyers who purchase a property with cash can refinance the property using 203(k) within six (6) months of purchase, the same as if the buyer purchased the property with a 203(k) insured loan to begin with.

That means you could refinance a hard money deal or any cash deal? That could prove very useful.

I am interested in the grants. Can you expound on those?
Also looking for a program someone could purchase an 18 unit apartment that is in a rural area and serves very low income people.

:D Are you still here to answer questions? Noticed the post was a while back. I wanted to know more about renovation loans through HUD.

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