FHA Title 1 Loans?

[Anonymous]

Hello,

Does anyone know if these are still alive and well? Are the rates reasonable? I hear that there are closing costs involved? About how much are they and what do they cover? Do typical banks (Citizens, TD, etc.) usually offer the FHA Title one loan?

I am considering a home renovation and I may want to look into a Title 1 loan for financing, but I'm not sure where to begin. Any information is helpful.

Thanks!!

[BrianB_The_Loan_Professor]

they are alive not sure i would say they are doing well

most banks will not do them

look for the 203k loan thats what it is referred to these days

havent heard title 1 in a long time

can be used for a purchase or a refi but the repairs MUST be within the guidelines

B

[Anonymous]

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@Anonymous wrote:

Hello,

Does anyone know if these are still alive and well? Are the rates reasonable? I hear that there are closing costs involved? About how much are they and what do they cover? Do typical banks (Citizens, TD, etc.) usually offer the FHA Title one loan?

I am considering a home renovation and I may want to look into a Title 1 loan for financing, but I'm not sure where to begin. Any information is helpful.

Thanks!!

---

I am doing a 203(k) as we speak.  They are OK, but it's a LOT of paperwork upfront and a little on the stressful side.  in order to get the financing, you need to decide what you are going to do as far as repairs/renovations upfront. 

Time is of the essence, and it requires a lot of coordination to meet  with contractors, inspectors, loan officers, realtors, etc etc. All of the work that is being done via the 203(k) escrowed funds has to be documented and included in a bid or bill of materials.  Everything.  So, again, lots of documentation, paperwork and the like.

In my case, our closing date was set at 60 days from the offer date.  I thought this would be enough time, but two weeks (almost) has gone by now and I'm still working on bids.  Once I get the bids in, then the LO will order the appraisal which is our last big hurdle. 

According to our offer, we have 30 days to remove the financing contingency and that can't happen until after the appraiser comes out and gives his/her blessing on the house, since it's FHA. 

Sounds like I'm complaining, which I suppose I am, but in the end I know it's worth the extra effort (at least in our case).  The house requires a lot of work and this gets the ball bouncing.  We're only doing things that we can't do ourselves and sticking to a very tight budget.

On the bright side, I have learned a TON about the process and how to make the deal work.  And, it's definitely exciting - every day is a new story.  :-)

[Anonymous]

Thanks guys,

This would be a refinance for me since I just purchased my house a little over a year ago. I just looked up FHA 203K and found something about a "Streamlined" FHA 203K that doesn't require as much paperwork - that would be nice.

I really don't feel like going through the whole home loan process again, but I'm thinking it will be worth it if I can get a lower rate and have my attic finished (if it's within the FHA guidelines) and add value to my home.

Does anyone know if a down payment is required for a refinance?

[BrianB_The_Loan_Professor]

Taylor Bean was the last lender I knew of doing the streamline

It was a little easier but not much

it also capped you at 35k for the improvements

For the streamline refi

You will be able to borrow up to 96.5% of the after improved value (appraiser will estimate based on work to be done)

so if the attic work makes it more valuable then you may not need any cash

it isnt always the case that you get everything back in value that you put in so there may be a need for cash at close

You can also wrap in the closing costs up to that amount as well

That does not include upfront MIP which will be financed on top of the loan amount

Brian

[Anonymous]

I know TBW went out of business about 18 month ago..

As far as needing cash, alot is going to depend on the LTV of your home.  If you bought it a year ago and only put down the minimum FHA 3.5 % down, it is quite possible the home is currently technically underwater so this could be tough.  Also as Brian pointed out, since with 203K you usually ned up having to pay someone to do the work, you do not generally get a very high erturn on the investment.  Finishing an attic is likely to get you  60-70% return or so would be my guess.  There are alot of variables that go into that so it could be as low as 50% and possible as high as 80%, but you see the dilemna.  You have to pay for stuff that is not covered by either current equity and/or expected equity gains from the loan.  Only having had the loan a year that may be an issue. 

[Anonymous]

The 203k that I am doing is the streamline variety.  A few things that make it easier...

- You don't need a 203k consultant (saves you $$)

- Fewer inspections

- Less draws (means less paperwork, yay!)

- Reduced doc requirements (no architectural drawings needed, etc)

My LO said that they always start with streamline and if things escalate or tons of repairs are needed then they go full blown.  But the streamline is the norm for  him anyway. 

The max like brian said is 35k.  No structural repairs or changes are allowed.  Walls can be (re)moved provided they are not load bearing.  There's other rules and restrictions, but I'm guessing you'vfe found your way to the FHA website by now if you're researching.

[Anonymous]

Thanks Mickie. Looking at the comparables in my neighborhood, I believe that my LTV may be between 96-100% right now. I don't think I'm underwater, but worse case scenario, I'm right at 100%. Looking at comparables for after the renovation, and contractor estimates for the work, I believe that the value will rise considerably, hopefully leaving me with at least the 3.5% in equity.

Brian, you mention an upfront MIP. My current Mortgage is an FHA and I heard that the insurance premium has gone up since last year. So does refinancing mean that I will lose my current MIP rate and will have to pay the higher amount?

Cardmaster, actually, I have not found the official FHA site, I’ve been looking on Google. Can you give that web address please? Thanks!

I’m a little concerned about the 203k repair guidelines. I don’t want to get a loan and not be able to use it for certain renovations. Are there any other refinance options without those constraints? Any home equity loans that will go by the future value of the home (after renovations)?

Thanks so much for all of your feedback. It is really helping me out.

[Anonymous]

I doubt there are any other options other than FHA.  Any normal cash out refi is going to have a lower LTV limitation, alot of costs, and MIP/PMI will have to be purhcased on the private market which is expensive.

As far as the upfront MIP, they will refund to your escorw account a rprated amoutn that you paid last year I believe.  That will then be applied towards the new upfront MIP balance.  The monthly amount is quite a bit higher now...around .90% or so I believe.  IT used to be arounf . 55% or so.  So yeah, it will raise your payment along with the raise for the improvements and added taxes for the improvements. 

As far as the LTV goes, you can go up to 96.5 I believe.  That means that if you are at 100% now, you have to get over 100% return on the additions which is almost unheard of unless you are doing the work yourself.  There are rare instances of it, but it is pretty uncommon.

AS far as the restrictions go, there is nto really a way around them.  They only offer the program for certain type of remodel jobs.  If you are looking to go beyond that, then the program will not work for you.

[BrianB_The_Loan_Professor]

There will be a prorates return on your original upfront MIP

The good news is the upfront MIP is now lower so you should get a wash and maybe even a credit for that

The bad news is you will be paying almost twice as much monthly as you currently do

How much are you thinking you need to do the work?

Maybe there are other options that wont cost as much?

A 203k Refi is going to have considerable costs and they will not allow you to do the work unless you are a licensed professional in that field.

Brian