Mortgage Loans

[larryb]

1. How is the amount of money available for renovations determined?

2. Can I gift down payment money to my wife if she is the only one applying for the mortgage? 

3. Would I need to provide verification of where the gifted funds came from?

Thanks for the help!

[crichter]

Whoa...Howdy Stranger.

Larry, you're confusing me...I thought you were non 203k (although I love the program)

Renovations work off the budget.  They are easy.  203k has two flavors---streamlined and full.  The difference is "$35k" max on streamline, but that really means probably $29-30k in work to leave appropriate contingencies.

For 2/3, why? I thought you were anchoring the DTI per the other posts?   Either way, DTI/asset questions for married couples are the same from every state, but the answer depends if you're in a community property state...where are you again?

[BrianB_The_Loan_Professor]

The amount you are allowed to borrow is determined by the as completed appraisal

The appraiser needs to know what work will be done and then they will estimate the value based on current market with the work donw

You can then borrow up to 96.5% of that

You cannot gift to your wife to avoid showing where the money came from

These days when a gift is given the person gioving the gift is almost always asked to provide a bank statement to show that the money didnt just show up magically

they would be even more suspicous if it were to come from a spouse

Thats not saying you cannot give her the money but in the eyes of the lender what is yours is hers

so be prepared to source the funds

Good Luck

B

[larryb]

I do not think the property I'm looking at would go regular FHA because of the amount of work needed.  Therefore I am now looking to go with a streamline 203K.  I do not live in a community property state...

[ShanetheMortgageMan]

Very good primers about the FHA 203k loan:

http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

http://www.hud.gov/offices/hsg/sfh/203k/faqs203k.cfm

Here is the worksheet that any lender will be using to determine the maximum dollar amount for the repair/rehab work:

http://www.hud.gov/offices/adm/hudclips/forms/files/92700.pdf

If your agent is good, they'll be able to go through the home and recognize items that would prevent the home from meeting FHA property requirements.  If you'd like to research on your own, you can find HUD's minimum property requirements (for existing homes) at http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502c3HSGH.pdf

You can also ask/pay for a FHA inspector or 203k inspector to come out to the home.

http://www.hud.gov/offices/hsg/sfh/insp/inspectr.cfm

[isisblue]

We are in the tail end of our renovoation, completed and waiting for everything to be finalized.  it wasn't as bad as I thought it was going to be, (at least the 203k paperwork process, the contractor side of things was a nightmare)

After you close, a week later  you can get up to 50% upfront if streamlined if the contractor has a need. The check is overnighted.

 If you go that route, DON'T do what we did.  We gave him the whole 50% upfront and his irresponbility with handling of that 50% caused a 1 month job to turn into 4 months and him claiming his didn't have funds.  (The bank in our case, Wells Fargo will not approve additional draws past 2.) Make a joint account between you and the contractor, allow draws from that account per specific portion of the renovation.  The interest rate was slightly higher (5.15% for us).

We did our homework, checked his references and everything and still had a bad experience.

Would we do it again? Absolulately!  Our house was a shortsale and it looks so much better.  Ours needed some repairs and our wish list were hardwood floors for 4 rooms and tile in the kitchen. Plus all brand new appliances.