Brand new information! See What Has Changed with the FHA 203k Renovation Loan  as of late 2015

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4 FHA 203k Myths Busted

“Wait, the government?! Oh no! They take forever to do things! It’s like time’s standing still” Paperwork. Time. Bids. Big loan. These are all things we hear that are keeping people from taking advantage of the FHA 203k loan for home improvements, renovations and repairs. They also keep real estate agents from suggesting this option to clients. From needed structural repairs to desired improvements like carpet and paint, this government backed program can roll the cost of work into the life of the mortgage.

Download our FHA 203k Survival Guide here and learn more.

Well, it’s true. Sometimes it takes our government takes awhile to get through the red tape. And yes, some 203k loans we’ve heard of have taken “forever.” But here’s the secret: We’re closing loans in 30-45 days (just like any other loan). Let’s put 4 myths of the 203k to rest right now.

Paperwork. 

Yes, there is a little more work involved in a 203k loan. The good news is that we’re experts on the loan, and we know the steps it takes, so we’re efficient at getting whatever paperwork is necessary together all at once. This way you’re not waiting around for your application process to unfold. Our team has completed comprehensive training so everyone understands what HUD wants from the borrower. We can walk you through it.

Time. 

We’ve heard the horror stories of 203k loans taking forever to close. Time frames including 60 days, 90 days or more have been tossed around. (Read: Don’t Wait 90 Days for Your Mortgage Loan to Close) There could be several reasons for this to happen. The bank handling the loan may not understand the difference between a full 203k and a streamline 203k mortgage (the basic difference is that a full takes care of structural stuff, the streamline is more for smaller repairs and upgrades). A lot of loans get hung up in the bid process. When looking for a lender, look for one with a network of qualified contractors who have done this work before. In short, the loan should not take significantly longer than any other loan to close.

Bids. 

Some people are natural negotiators. I’m not one of them. So dealing with getting bids and finding the most appropriate one for the work doesn’t sound like a good time. Lots of people are the same way. We make sure we do our homework when it comes to contractors, so you’re not running around getting bids from a bunch of them. AmeriFirst now has a Renovation Lending Department to help take care of the behind-the-scenes work that goes into this part of the process.

Big Loan. 

“Buying a house and borrowing more money for repairs goes against the advice of financial planners. I don’t want to pay for the carpet for 30 years.” Here’s the great part about the 203k: you can borrow money based on the future value of that home when the repairs are done. So you’re amortizing the cost of the repairs and upgrades into the investment. This means you’re getting instant equity. If you buy a home for $60,000 that’s in the neighborhood of $100,000 homes, and put $20,000 worth of work into it, you’re now the owner of a more valuable home that you paid $80,000 to buy. You have $20,000 instant equity.

Whether it’s finding a great deal on a foreclosure, or working to improve your own home with a refinance, rolling the cost of the repairs and upgrades into the life of the home mortgage loan can really help add value to the house.

The takeaway:

Make sure you find a 203k specialist to help with this process. You want someone who’s done these loans, who knows the government requirements and who knows certified contractors to get the work done.

Related:  Helping More Home Buyers Realize Their Dream: Becoming a Top FHA 203k Lender

Get the Free FHA 203k Guide

BONUS:

Check out the short video below for a look at why 203k loans get a bad image, that you can watch on your smartphone or tablet.

(photo: ..stiina..)

Topics: Mortgage Questions, FHA 203k

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Down payment and terms shown are for informational purposes only and are not intended as an advertisement or commitment to lend.  Please contact us for an exact quote and for more information on fees and terms.  Not all borrowers will qualify.
AmeriFirst Home Mortgage is a division of AmeriFirst Financial Corporation. 950 Trade Centre Way Suite 400 Kalamazoo, MI 269.324.4240 Equal housing lender

This is an article submitted by a guest author. Not all views expressed are those of AmeriFirst Home Mortgage or its employees. 

As Tax Day approaches this year, you may still be feverishly working on your taxes or perhaps you are avoiding them altogether until the last minute because you are fearful of what you will discover. With an average refund from the IRS of $2,800, chances are good that you will qualify for a refund this year if you prepare your taxes correctly. Here are five secrets that you should know if you invest in real estate as you prepare your 2016 year-end taxes.

 

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Selling Your Main Home

The IRS allows you to exclude any gain that you have received if you have sold your home this year. Of course, a real estate agent is the best person to help you get a high price for your home. This exclusion does not apply to rental homes or homes that you use for business but only to your primary residence. In addition, you can only exclude up to $250,000 if you file singly or $500,000 if you file a joint return. If you can exclude the entire portion, you will not need to report the sale of your home on your taxes.

Selling Your Rental Home

If, however, you have sold a rental home in 2016, you can only exclude the gain from the sale of the home if you meet several qualifications. First, you must solely own the home. Second, you must have lived in the house for more than two years while you owned it. Keep in mind that the depreciation due to renting out the home cannot be excluded from the gain.

Home Renovations

If you have renovated a home in order to meet medical needs, you may be able to claim the renovations as a deduction on your taxes. This could include the cost of adding grab bars or wheelchair ramps. However, the changes must have been made for medical necessity and not simply for improving the value of the home.

Mortgage Insurance Premiums and Mortgage Interest

Mortgages obtained from 2007 and on qualify for premium payment deductions on your taxes. In addition, you can deduct the interest that you paid on mortgages of up to $1 million if you are filing jointly and $500,000 if you are filing singly. This rule changes for 2017 taxes, but you can still claim it for the year ending 2016.

Foreclosures

This is the last year that you will be able to receive tax relief if you were foreclosed on in 2016. In 2014, the average amount that homeowners were able to exclude from their incomes due to foreclosure was $94,210, which is a sizable amount. For the upcoming year, a CPA may be able to help you find ways to deduct this money from your taxes in a different way because the mortgage debt forgiveness exclusion expires.

If you have numerous real estate investments, you will most likely find that it will be worth the cost to find a CPA who specializes in preparing taxes for someone like you. He or she will most likely be able to find you all the refunds for which you qualify. However, whether you prepare your taxes yourself or hire a CPA this year, be sure to take advantage of these secrets for getting the best refund possible.

 

*AmeriFirst Home Mortgage is not an agency that handles taxes. Be sure to talk to your accountant or tax advisor for actual tax advice

Author Bio: Dixie Somers is a freelance writer and blogger for business, home, and family niches. Dixie lives in Phoenix, Arizona, and is the proud mother of three beautiful girls and wife to a wonderful husband.

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Down payment and terms shown are for informational purposes only and are not intended as an advertisement or commitment to lend.  Please contact us for an exact quote and for more information on fees and terms.  Not all borrowers will qualify.
AmeriFirst Home Mortgage is a division of AmeriFirst Financial Corporation. 950 Trade Centre Way Suite 400 Kalamazoo, MI 269.324.4240 Equal housing lender

The HomeStyle Renovation mortgage enables a borrower to obtain a purchase transaction mortgage or a limited cash-out refinance mortgage and receive funds to cover the costs of repairs, remodeling, renovations or energy efficient improvements to the property.

There are no required improvements or restrictions on the types of repairs allowed or a minimum dollar amount for the repairs. Repairs or improvement, however, must be permanently affixed to the real property and add value to the property.

When HomeStyle is used for energy-related improvements, borrowers are required to obtain an energy report to identify recommended energy improvements to the property and the estimated cost savings associated with those improvements.

With a 5% down payment you can add your taste & style to a house to make it your home with remodeling projects like a new kitchen, bathroom, room addition or energy efficient upgrades. HomeStyle Renovation allows you to buy a home and fix it up, or refinance and remodel your current home.

  • Purchase or refinance & remodel
  • 5% minimum down payment for primary, single-family residences (10% for second homes)
  • You can use gift funds for down payment & closing costs for owner occupied, primary residences after you contribute a minimum 3% down payment
  • 3% seller contribution allowed
  • Cosmetic and structural renovations allowed
  • Allowable improvements can include landscaping, appliances, swimming pools and more

One of the most popular and diverse home improvement loans is the FHA 203k. You can make home improvements to the house you want, or the home you already own. Use the funds for simple upgrades to your home like a kitchen or bath improvement, or to completely reconstruct a home that is presently unlivable. You can even use a 203k Rehabilitation Loan to tear down an existing structure and build a new one using some portion of the existing foundation. You can borrow up to 96.5% of the appraised value – based on the value when the improvements or repairs are completed.

With the FHA 203k you can:

  • Replace a roof
  • Re-side the home
  • Re-paint inside and outside of the house
  • Replace appliances
  • Put in new flooring
  • Build or replace a deck/patio/porch
  • Replace windows
  • Remodel the kitchen
  • Repair or replace the septic system
  • Learn what else you can do in our FHA 203k articles

Watch the AmeriFirst Mortgage Minute TV “FHA 203k Playlist” below:

A fixed rate mortgage (FRM) is a home loan where the interest rate is fixed for the life of the loan, regardless of what rates do over the life of your loan. This ensures that your payment remains the same each month, which can make budgeting a lot easier. The portion of the payment that goes to your principal (the loan amount) increases, however, your interest payment will decrease in the same amount. Your property taxes may go up (or rarely, down), and so might the homeowner’s insurance in your monthly payment. But generally payments on your fixed-rate loan will increase very little.

When you first take out a fixed-rate loan, most of your payment is applied to interest. The amount applied to your principal amount increases up gradually each month. Furthermore, if your loan has an escrow account that is collecting for taxes or insurance, that likely will change over time and cause your payment amount to change annually.

You can choose a fixed-rate loan in order to lock in a low rate. People choose these types of loans because interest rates are low and they want to lock in this lower rate. If you have an Adjustable Rate Mortgage (ARM) now, refinancing into a fixed-rate loan can offer more monthly payment stability.

While the Federal Housing Administration (FHA) does not actually issue mortgage loans, it does provide mortgage insurance to protect lenders like AmeriFirst Home Mortgage from defaults. Customers like FHA mortgage loans because they have more liberal qualification requirements.

They also typically have a lower down payment requirement (as low as 3.5%), lower monthly insurance premiums and often have lower closing costs. This makes an FHA loan a very attractive loan for the first time home buyer and also for families with low and moderate income levels.

You can learn more about this mortgage option in the FHA mortgage loan section of the AmeriFirst Corporate Blog, or in these articles:

FHA Loans: One Option for the First Time Home Buyer
FHA Loans: A Low Down Payment Home Buying Option
Conventional Mortgage vs FHA Loans

There are many different types of Adjustable Rate Mortgages. Generally, interest on ARMs are determined by an outside index. Some examples of outside indexes are: the 6-month CD rate, the 1 year rate on Treasure Securities, the Federal Home Loan Bank’s 11th District Cost of Funds Index (COFI), or others.

Most ARM programs feature a “cap” that protects borrowers from sudden monthly payment increases. Your ARM may feature a cap on how much your interest rate can go up in one period. For example: no more than two percent per year, even if the underlying index increases by more than two percent. Your loan may have a “payment cap” that instead of capping the interest directly, caps the amount the monthly payment can increase in one period. Most ARMs also cap your interest rate over the life of the loan.

ARMs most often feature the lowest, most attractive rates toward the start. They provide that rate from a month to ten years. You’ve probably heard of 5/1 or 3/1 ARMs. In these loans, the introductory rate is set for three or five years. It then adjusts every year. These types of loans are fixed for 3 or 5 years, then adjust. Loans like this are often best for people who anticipate moving within three or five years. These types of adjustable rate programs are best for people who plan to sell their house or refinance before the initial lock expires.

Most borrowers who choose ARMs do so when they want to get lower introductory rates and don’t plan to remain in the home for any longer than the initial low-rate period. ARMs can be risky when housing prices go down because homeowners can get stuck with increasing rates if they can’t sell their home or refinance with a lower property value.

VA mortgage loan is the home loan available only to ex-servicemen and women as well as those on active duty, on which the lender is insured against loss by the Veterans Administration. A VA mortgage loan has the option for 100% financing, or zero down payment. See the VA mortgage loan fact sheet here.

With the USDA Rural Development option, you can borrow 100% of the appraised value. This means you don’t need to come up with the down payment. In fact, you can actually borrow 2% more than the appraised value, and use the extra to make some light repairs or home improvements. The main requirement for a USDA Rural Development mortgage is that the property must fall within certain geographical areas, outside the city limits of major metropolitan centers. 

Click here for USDA Rural Development Eligibility (on this page click “Single Family Housing” under “Property Eligibility”)

Now, this doesn’t mean you have to live “way out in the country.” While that is an option if it appeals to you, many areas that fall under the Rural Development umbrella are actually more suburban than you’d expect. As an example, rural development in northern Indiana covers most areas except Gary, South Bend and Fort Wayne. Other villages, towns and areas are eligible.

Under the Guaranteed Loan program, USDA Rural Development guarantees loans made by private sector lenders like AmeriFirst Home Mortgage. A loan guaranteed through RD means that, should the individual borrower default on the loan, RD will pay the private financier for the loan. You work with AmeriFirst and make your payments to us.

Watch the video below for a little more information.