The document summarizes several FHA loan programs for home rehabilitation and energy efficiency improvements:
- The FHA 203(k) Rehabilitation Loan and Streamlined 203(k) Loan programs allow homeowners to finance the purchase and repair of a home in a single loan. The Streamlined program has lower repair cost limits and fewer requirements.
- The Energy Efficient Mortgage (EEM) allows borrowing up to $15,000 to fund energy efficiency improvements, determined by property value percentages.
- Additional funds up to $3,500 can be included to fund weatherization items, and solar energy system costs may also be added to the loan amount.
- The webinar provides details on eligible
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Rehab eem weatherization other repairs dec 2010
1. FHA Programs: Rehabilitation Loan,
EEM, & Solar and Weatherization
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3. Todays Agenda
FHA Rehabilitation Loan Programs (203ks)
Regular Rehabilitation Loan
203(k)
Streamline Rehabilitation Loan
Streamlined 203(k)
Energy Efficient Mortgage
EEM
Solar and Weatherization Programs
4. Two Rehabilitation Programs
Regular Rehabilitation
Also known as 203(k)
Streamline Rehabilitation
Also known as Streamlined 203(k)
Announced in 2005
Mortgagee Letter 2005 50
Both available for purchase or refinance
5. Two Rehabilitation Programs (Cont.)
Both allow for repairs to be financed
One loan
Repair costs funded at time loan
closes
Sale proceeds disbursed at closing
Lender or escrow holds repair funds
Funds disbursed as work completed
May require FHA inspections and/or
lender inspections
6. How It Works
Borrower required to meet FHAs
minimum cash investment
Based on total combined purchase price or
appraised value plus rehabilitation costs
Minimum 3.5%
Downpayment if purchase
More if sales price exceeds appraised
value
Equity if refinance
7. How It Works Continued
Loan amount determined based on 110% of
After Improved Value or As Is Value plus
cost of repairs
Whichever is less
Both programs require work to be complete
Within six (6) months of closing
Landscaping and luxury items not allowed
under either program
8. How It Works Continued
Maximum 96.5% loan-to-value (LTV)
Determined based on purchase price or
appraised value (whichever is less)
Purchase or refinance if owned < 12
months
Appraised value if refinance and owned >12
months
Excluding upfront mortgage insurance
premiums
9. Example:
Purchase Price/Appraised Value $300,000.00
Rehabilitation Cost $ 14,700.00
Total Needed Financing Repairs $314,700.00
Required Investment (3.5%) 11,014.50
Base Loan Amount $303,685.00
*Note: Required investment only $514
more with rehabilitation loan
*Note: Upfront Mortgage Insurance added
to base loan amount
10. Rehabilitation Program Comparisons
All features on Regular Rehab not
available on Streamlined Rehab
Streamline Rehab intended to facilitate
uncomplicated repairs
Both are great tools for Real Estate
Owned properties
Both are great tools for First Time
Homebuyers
Easier transition from renter to homeowner
11. Rehabilitation Program Comparisons
Streamline Rehab Regular Rehab
No minimum required $5,000 minimum
repair threshold repair cost threshold
Maximum limit on No maximum limit on
repairs = $35,000 repairs
No general contractor or General contractor and
architectural drawings normal architectural
required drawings required
Allows for two payments Maximum five
per contractor payments total to
general contractor
12. Rehabilitation Program Comparisons
Streamline Rehab Regular Rehab
No special FHA FHA Inspector
required inspections required for all repairs
Under $15,000 All loan amounts
Must use Must use
licensed/bonded licensed/bonded
contractor contractor
Self-help Self-help
discouraged discouraged
13. Rehabilitation Program Comparisons
Streamline Rehab Regular Rehab
Accessibility Accessibility
improvements improvements
Persons with Persons with
disabilities disabilities
No contingency 10% contingency reserve
reserve required required
Lender may require Lender may require more
14. Streamlined Rehab Eligible Repair Items
Repair/Replace
Roofs, gutters, downspouts
Heating, ventilation, and A/C systems
Plumbing and electrical systems
Flooring
Windows, doors, exterior siding
Well; septic systems
15. Streamline Rehab Eligible Repairs
(Continued)
Minor remodeling
Not structural
Painting
Exterior/Interior
Lead based paint abatement
Free standing appliances
Range, refrigerator, washer/dryer, etc.
*NOTE: This list is not all-inclusive
16. Ineligible Work Items Under the
Streamlined Rehab
Major rehabilitation
Relocation of load bearing wall
Room additions
New construction
Repairs requiring detailed drawings
or architectural exhibits
Repair of structural damage
17. Regular Rehabilitation Eligible
Repairs (203 (k))
Same items as in Streamlined Rehabilitation
(Streamlined Rehab 203(k) loan)
See previous list (not all inclusive)
Structural changes
Room additions
Additional living units (if allowed by city)
For more information on the 203(k) program
please visit:
http://www.hud.gov/offices/hsg/sfh/203k/203k--df.cfm
18. Final Notes On Rehab Programs
Repair funds not used
Not given to borrower
Applied as principal reduction to mortgage
No change of terms of mortgage
Repair funds insufficient to complete work
Borrower must pay out of own funds or may
reapply for another rehabilitation loan if eligible
Regular Rehabilitation program can finance up
to six months of mortgage payments
Not available on Streamline Rehabilitation
19. Energy Efficient Mortgage
(A.K.A. EEM)
May be used with other FHA
mortgages
No special underwriting or appraisal
requirements
May be able to finance 100% of the
energy improvement
Based on lesser of three calculations
20. Energy Efficient Mortgage (A.K.A.
EEM) Continued
Lesser of three calculations used to determine
amount of maximum financed energy
improvement
5% of the property value
115% of the median area price
150% of the Freddie Mac conforming loan limit
21. Energy Efficient Mortgage
(A.K.A. EEM) Example
Appraised Value/Sales Price $300,000
Energy improvement costs $10,000
5% of value $300,000 x .05 = $15,000
115% of $265,250 median price = $305,000
150% of GSE is $417,000 = $625,500
The maximum allowable financing for EEM
funding would be 115% calculation or $5,000
Lesser of the three
Would have to adjust energy improvements to fit
within limits or borrower pays difference
22. Other Repairs & Improvements
Repairs & Improvements required by appraiser as
essential for property eligibility and to be paid by the
borrower
May be added to sales price before calculating
mortgage amount
Sales contract must identify borrower as responsible
for paying or completing repairs
Amount added is lesser of three calculations
Amount the value of the property exceeds sales price
Appraisers estimate of repairs and improvements
Amount of contractors bid (if available)
23. Energy Related Weatherization
Mortgage amount may be increased for cost of
items by
$2,000 without a separate value determination or
Up to $3,500 if supported by a value determination
by FHA approved appraiser or DE underwriter or
More than $3,500 subject to value determination
by FHA approved appraiser or DE underwriter and
a separate site inspection
Items include
Thermostats, insulation, storm windows/doors,
weather stripping, caulking, etc.
24. Solar Energy Systems
The cost of both active and passive solar
energy systems may be added directly to the
mortgage amount
Before adding the Up Front Mortgage Insurance
Premium (UFMIP)
After applying applicable Loan-to-value limits
Statutory mortgage limit may be exceeded by 20% to
accommodate the cost of the system
Limited to the lesser of
Solar energy systems replacement cost
Its effect on the propertys market value
25. Where to Get More Information
1 800 CALL FHA (1 800 225 5342)
A source for all FHA questions
Industry partners and Consumers
www.hud.gov
On-line resource for info about FHA and FHA
programs
On-line source for all other HUD programs, grants,
forms, press releases, etc.
User friendly
www.fhaoutreach.gov/FHAFAQ
On-line resource to frequently asked questions
29. The U.S. Department of Housing and Urban
Development
would like to thank the
California Association of Mortgage Professionals
And
Oregon Association of Mortgage Professionals
for your interest in
FHA and FHA programs