An Ohio FHA 203k streamline program provides up to $35,000 (this includes all 203k fees, inspections, title updates, supplemental origination, and contingency fund) toward the repair and rehabilitation of a primary residence. The FHA 203k loan program combines funds needed to purchase along with the funds needed to repair and rehabilitate the property. In essence, what you are putting down on one of these loans is 3.5% of the purchase price of the property and 3.5% of the rehab costs. A 203k borrower and contractor have six months from the day you sign your mortgage loan to complete all the repair and rehabilitation work. The maximum loan amount allowed on the 203k loan follows the same FHA loan limits which are determined by county.
My employer American Midwest Mortgage Corporation performs more 203k loans than any other lender in the state of Ohio. The following 203k loan topics should answer most of the questions you would have on the topic. If you are considering using the 203k loan program and want to work with a company and a loan officer with experience, you are in the right place. You have many options, but your experience will be a much better one when chosing a business partner who excels in these types of loans.
Hopefully you will find everything you are looking for in regards to 203k loans can be found in the content below. If you have any questions in regards to the 203k loan program please do not hesitate to contact me.
FHA 203k streamline loan requirements
Minimum credit score of 600 is required to obtain an FHA 203k loan with American Midwest Mortgage Corporation.
There is a mandatory 10% contingency required on all 203K Streamline loans, 15% contingency reserive if utilities aren’t working at the time of appraisal and 15% as well for HUD properties. The contingency is held until final disbursement. If the contingency is not used it will be applied to the principal mortgage balance.
Completed copies of a Homeowner/Contractor Agreement plus all bids are required for loan submission.
A Supplemental Origination Fee will be collected in addition to any points reflected on reservation of funds. The Supplemental Origination Fee is calculated as the greater of $350 or 1.5% of rehabilitation cost.
FHA 203k loan process
- Borrower applies for a mortgage loan.
- Lender determines the maximum mortgage amount for borrower.
- Borrower decides what improvements are desired to be done on the home.
- Borrower interviews contractors for work to be performed and gathers bids.
- Once all bids are obtained borrower will need to provide ail bid to the lender and let lender know which bids have been accepted.
- Lender uses 203K max mortgage worksheet to calculate mortgage amount, based on bids being used, 10% contingency (15% if vacant or HUD home) and misc. fee/inspections.
- Contractor package contains the following: Copy of contractor’s license (If applicable), liability insurance, contractor’s business card, contractor profile, homeowner/contractor agreement and bid figned by all parties.
- Borrower meets with each of the chosen contractors and gives them the contractor package 10 be completed. These items are needed to submit for loan approval prior to closing. Borrower is to sign all documents as well.
- Lender orders appraisal and submits to appraiser all bids.
- Appraiser will inspect the property to determine if after Improved value will support Improvements and will note any additional deficiencies that must be correct to meet HUD guidelines.
- Lender receives appraisal and contractor packages and submits loan to underwriting for approval
- Loan closed and escrow account is set up. Please allow 30 days for Initial draw process.
- Borrower notifies contractor and works with him to schedule work process. Work must begin within 30days from closing and you have 6 months for all repairs to be completed. Work con never cease for a period that is longer than 30 days. If this happens, AMMC must be notified ASAP.
- If during the repairs, there are unforeseen repairs necessary to complete the original work, a change order must be completed by the underwriter and signed by homeowner and contractor. These funds will be taken from the contingency.
- Once improvements are completed, homeowner and contractor will sign a letter of completion and forward to the lender. Also, lender will order a final inspection and a title update. Once all items are received and deemed satisfactory, final checks will be issued. Any unused 203k funds will be applied to the principal balance of the account.
If you have other questions about the 203k loan process, please contact me today.
FHA 203k streamline eligible improvements
The FHA 203k loan program can be used to repair, replace or upgrade:
- Roofs, gutters and downspouts
- HVAC systems
- Plumbing
- Electrical
- Flooring
- Painting, both exterior and interior
- Minor remodeling, such as kitchen but no structural repairs Weatherization, including storm windows and doors, insulation, weather stripping, etc.
- Purchase and installation of appliances including:
- Free standing ranges
- Refrigerators
- Washers/Dryers
- Dishwashers
- Microwave ovens
- Accessibility Improvements for persons with disabilities
- Repair / replacement / add exterior decks, patios, porches
- Basement-finishing and remodeling, but no structural repairs
- Basement waterproofing
- Window and door replacements and exterior wall re-siding
- Septic system and/or well repair or replacement
If you have any other items that you are unsure about please ask.
FHA 203k streamline ineligible improvements
- Major rehabilitation/remodeling, such as the relocation of a load bearing wall
- New Construction (including room additions)
- Repair of structural damage
- Repairs requiring detailed drawings or architectural exhibits landscaping or similar site amenity improvements
- Any repair or improvement requiring a work schedule longer than 6 months; or rehabilitation activities that require more than 2 payments per specialized contractor
- Any repair or improvement that would necessitate a “consultant” to develop a “Specification of Repairs/Work Write-Up” require plans or architectural exhibits
- Require a plan reviewer
- Require more than 6 months to complete
- Because the mortgagor to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted. (FHA anticipates that, in a typical case, the mortgagor would be able to occupy the property after mortgage loan closing)
- Lead-based paint stabilization or abatement of lead-based paint hazards
If you have any other items that you are unsure about do not hesitate to ask me.
FHA 203k contractor requirements
- Borrowers must use contractors to complete repairs/rehabilitation. American Midwest Mortgage does not allow self help.
- The contractor(s) must be a licensed contractor with the State of Ohio (if applicable) and provide evidence of insurance at time of loan submission.
- Two bids are required for each work item to show cost is customary for area.
- The cost estimate must clearly state the nature and type of repair I and the cost for completion of the work items(s). Breakdown of material and labor cost must also be shown. The Ohio Housing Corporation may require the mortgagor to provide additional cost estimates if necessary.
- The contractor must agree in writing, by signing a “Homeowner / Contractor’s Agreement” to complete the work for the amount of the cost estimate and within the allotted time frame.
- Lender Indicates in loan submission which contractor’s bid has been chosen by the borrower.
- Bid(s) for work to be completed must be provided to the appraiser so the appraisal is properly documented.
- The rehabilitation-period begins when the mortgage loan is closed.
- When purchasing appliances as part of the rehabilitation, invoices from retail dealer must be provided. Payment will be disbursed to retail dealer at closing.
- Appraiser is provided with Information regarding proposed rehabilitation and all contractors’ cost estimates.
- Only one “after improved” appraisal subject to completion of proposed repairs/improvements is required. The appraiser must re-inspect the home at the end to verify and document with photos that the work has been completed.
- Property value must be sufficient to purchase and complete rehabilitation.
- Single family residences, including HUD REP properties, that have been completed for at least one year (from date ready for occupancy) are eligible for the 203k loan.
If you have questions in regards to the 203k loan program, please ask.
A message to the FHA 203k contractor
Dear Contractor,
The homebuyer you are currently working with has applied for an American Midwest Mortgage Corporation for an FHA 203k mortgage loan. This program allows the borrower to repair/improve their home by including the cost in their mortgage loan. At closing, monies for the repairs will be put in an escrow account, with two draws being paid out. This package will guide you thru the contractor process and program procedures. Please familiarize yourself with the process and feel free to call the borrowers loan officer with questions. Below is a list of the items the homebuyer will need to supply to their lender to obtain loan approval. Please give the following information to the borrower as quickly as possible:
■Copy of contractor’s liability insurance, minimum $1,000,000 coverage
■Copy of contractor’s license
■Copy of business card
■Copy of detailed bids, signed by homeowner and contractor
■Signed homeowner/contractor agreement (borrower will be provided with by lender)
■Completed Contractor profile sheet (provided by borrower from lender)
■Completed W-9
■If you cannot meet the demands and requirements listed above, we will not be able to move forward with the loan. Please let the borrower know immediately if you cannot meet the minimum requirements above.
Once the homebuyer’s loan is approved and closed, the homeowner will contact you to begin the repairs and improvements. Since the funds for repairs are escrowed, you may be asking how you will be paid. This program dictates a maximum of 2 draws per contractor. The first draw begins once the borrower’s loan is funded. Once we advise the borrower their loan is funded, they will contact their servicer to begin the first draw process. The first draw can take up to at least 30 days. The final draw will not be disbursed until work is complete, appraiser Inspects, we have an acceptable title update showing no mechanic liens and completed draw and changes forms (will be provided by lender). All repairs must be completed in 6 months and never stop for a period of more than 30 days. If there are unforeseen repairs during the repair process, a change order must be completed and then approved by the lender/ servicer.
Thank you for helping homebuyers repair and improve their new home by participating in our FHA 203K Streamlined Loan Program. Your participation is a vital part of the success of this program. Our ability to administer this program successfully had been due in no small part to the professionalism and co-operation of the contractors who have agreed to participate in this program. We look forward to a rewarding and prosperous relationship.
Thank you,
Todd Lipps
tlipps@ammcorp.net
440-666-6069
American Midwest Mortgage Corporation
6363 York Road, Suite 300
Parma Heights, OH 44130
FHA 203k condominiums
Condominiums must be FHA eligible properties.
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 is the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit.
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. This does not mean that the condominium project as a whole can only have four units or that all the individual units must be detached.
Example: A project might consist of six buildings each containing four units for a total of twenty four units in the project and still be eligible for section 203K. Also, a project could contain a row of more and four attached townhouses and are eligible because HUD considers each townhouse as one structure,
I provided each unit is separated by a 1 hour firewall (from foundation to the roof).
Only the lesser of five units per condominium association or twenty-five percent of the total number of units in the project can be undergoing rehabilitation at any one time.
If you need a 203k lender in Ohio who can work with condos, please do not hesitate to call me at 440-666-6069.
FHA 203k rehabilitation period and costs
All work must be completed within six months from the loan closing. No more than two payments may be made to each contractor. The first payment is intended to defray material costs and shall permits. This must be accompanied with an invoice from the retail not be more than 50% of the estimated costs of materials and outlets that will be providing the materials and a defray statement. Checks will be cut to contractor and retailer (i.e. Home Depot). If the contractor wishes not to do this, they can get 35% upfront, along with a defray statement and a list of materials with this. The final payment to the contractor(s) will be made following completion of all work, verified by a final Inspection, and release of any and all liens arising out of the contract.
Before a final release is made, the mortgagor must sign the mortgagor’s letter of completion acknowledging that the work has been completed in a workmanlike and satisfactory manner.
If during the repair/improvements process there are unforeseen repairs necessary to complete the original work a change order must be approved by an AMMC Underwriter. The following must be submitted to AMMC Underwriting Department;
A new bid with labor and materials broken down for the change request. If there are any new contractors we will require the new contractor license, and contractors insurance.
Homeowner/Contractor form completed HUD Form 92577 (change order request form). When completing this form, enter the dollar amount from the contractor estimate. The borrower will be using in the “Builder’s estimate of cost on each change area. Borrower, Builder, and Lender need to sign where applicable.
Lien waiver and statement from previous contractor (showing no money due) and title update ordered by AMMC. Once received, AMMC will review the forms and compare the escrow balance sheet to work estimates approved prior to closing to determine if there is enough money in the escrow account. If forms are acceptable and there are sufficient funds in the escrow account, the underwriter will sign and date form 92577.
Hiring an FHA 203k contractor
When choosing an FHA 203k contractor I suggest that you talk to people you trust who have hired general contractors. Gather references from lumberyards, architects, home Inspectors and real estate agents. Go online or telephone your state’s contractor licensing board to verify credentials and confirm that a Contractor’s license. You’ll be able to type in their license number and get information directly. Note that there are several sub-categories of licenses for various specialties’, requirements vary by state. Also call the local building Inspection department and ask what they think of a contractor’s Work.
Contact your local or state consumer protection office or Better Business Bureau (http://bbb.org), find out if the contractor has any unresolved complaints on file. Speak with and get quotes from at least two contractors. Confirm that they and their subcontractors are licensed and bonded, describe your project and ask if they’ve handled comparable jobs in the past year. Check their availability for your Intended time frame, and discuss your budget with them.
Ask for names and numbers of current and former customers. Interview them about each contractor’s strengths and weaknesses, and ask how the job went. Was the quality of the work and materials what you expected? Was the project completed on time and within budget? During work, did the contractor keep you Informed? Old the crew and subcontractors treat your property and family respectfully? Would you hire him or her again? Ask a customer from tour or five years ago how the job held up.
Do not make bottom line cost your ultimate deciding factor. The old adage sometimes does apply, “You get what you pay for.” Hire a licensed contractor (if licensing applicable for profession) for any job over $500 in value (laws vary by state). Contractors know the building codes; only they can give bids and are liable for the work they do. If an unlicensed contractor is hired, you accept responsibility for any damage. Discuss the contractor’s guarantee or warranty programs. If something seems amiss, go elsewhere.
Ask for the payment schedule; execute a written contract specifying the work to be done, the estimated start and finish dates, and total cost and payment schedule. A detailed contract protects both you and the contractor.
If you need a recommendation for a contractor ask me or your agent.
FHA 203k CONTRACTOR PROFILE REPORT
FHA CASE NUMBER ________________________________________________________
DATE ______________
BORROWER (S) NAME ________________________________________
PROPERTY ADDRESS ________________________________________
CONTRACTOR NAME ______________________________________
ADDRESS _________________________________________
PHONE NUMBER __________________________FAX ______________________
EMAIL _____________________________________________________________
COMPANY NAME_____________________________________
TYPE OF ORGANIZATION:
Corporation __ Joint Venture __ Partnership __ Sole Proprietor __Other_____
NUMBER OF YEARS ORGANIZATION HAS BEEN INBUSINESS UNDER PRESENT NAME: _______________
JURISDICTION IN WHICH YOU ARE LEGALL Y LICENSED/QUALIFIED TO DO BUSINESS:
_____________________________________________________________________
LICENSE NUMBER: ___________________________________________________
TYPE OF WORK EXPERIENCE
LIST THE TYPES OF WORK PERFORMED DIRECTLY BY YOUR ORGANIZATION: PROVIDE INFORMATION ON AT LEAST THREE PROJECTS CONPLETED BY YOU OR YOUR ORGANIZATION WITHIN THE LAST YEAR. INCLUDING THE NAME AND LOCATION OF THE PROJECTS, CONTACT INFORMATION, CONTRACT AMOUNTS AND DATES OF COMPLETION:
1)_______________________________________________
2) _____________________________________________
3) _________________________________________________
ARE THERE ANY JUDGEMENTS, CLAIMS, ARBITRATION PROCEEDINGS OR SUITS PENDING OR OUTSTANDING AGAINST YOU OR YOU’RE ORGANIZATION OR IT’S OFFICER? IF SO, DESCRIBE IN AN ATTACHED DOCUMENT. HAVE YOU OR YOUR ORGANIZATION FILED ANY LAWSUITS OR REQUESTED ARBITRATION WITH REGARD TO CONSTRUCTION CONTRACTS WITHIN THE LAST 5 YEARS? IF SO, DESCRIBE IN AN ATTACHED DOCUMENT.
FINANCIAL REFERENCES
BANK/CREDITORS/BONDING COMPANY
1) _____________________________________________________
2) ______________________________________________________
INSURANCE CO. __________________________________________
TYPE_____________________________________________________
AMOUNT__________________________________________________
CONTACT PHONE_____________________________________________
CONTRACTOR REPRESENTS AND WARRANTS THAT ALL INFORMATION IN THIS CONTRACTOR PROFILE IS COMPLETE AND ACCURATE. CONTRACTOR AUTHORIZES THE BORROWER AND/OR
LENDER TO CONTACT THE REFERENCES LISTED IN ABOVE TO VERIFY THE INFORMATION REPRESENTED IN THIS CONTRACTOR PROFILE IS COMPLETE AND ACCURATE
CONTRACTOR NAME___________________________________________
TITLE ____________________________________________________
SIGNATURE: __________________________________________
DATE: __________________________________________________
FHA 203k homeowner contractor agreement
OWNER’S NAME _________________________________________________
FHA CASE NO. ___________________________________________________
ADDRESS _______________________________________
CITY _________________________________________________
STATE ______________________
ZIP CODE ____________________
CONTRACTORS NAME __________________________________________________________
COMPANY NAME ___________________________________________
ADDRESS _____________________________________________
CITY ________________________________________________
STATE ________________________________________________
ZIP CODE _________________________
Business Phone ___________________________________
CELL _____________________________________________
FAX NUMBER _______________________________
E-MAIL____________________________________
This Agreement, made this date, _____/_____/_____ between the above mentioned Homeowner (Owner) and Contractor, is for the
rehabilitation of the property located at__________________________________________________________ that has been approved for FHA mortgage insurance under Section 203(k) of the National Housing Act. The Owner(s) shall pay the Contractor the sum of $______________________ for completion of the work, Including all sales tax due by law, together with such increases or decreases In the contract price as may be approved in writing by the Lender. The work will begin within 30 days of the loan closing with the Lender and will be completed by _____________________________________, unless delayed beyond the Contractor’s control. The general provisions listed below are made a part of this agreement, between the Owner(s) and the Lender, or as described below (or on an attached sheet)
Owner(s) Signature(s) and Date:
X__________________________________________ X_______________________________
Contractor’s Signature and Date:
X_________________________________________________________
Contract Documents – This Agreement includes all general provisions, special provisions and architectural exhibits that were accepted by the lender. Work not covered by this agreement will not be required unless it is required by reasonable inference as being necessary to produce the intended result. By executing this Agreement, the contractor represents that he/she has visited the site and understands local conditions, including state and local building regulations and conditions under which the work is to be performed.
Owner – Unless otherwise provided for in the Agreement, the owner will secure and pay for necessary easements, exceptions from zoning requirements, or other actions which must precede the approval of a permit for this project. If owner fails to do so then this contract is void. If the contractor fails to correct defective work or persistently fails to carry out the work In accordance with the agreement or general provisions, the owner may order the contractor in writing to stop such work, or a part of the work, until the cause for the order has been eliminated.
Contractor – The contractor will supervise and direct the work and the work of all subcontractors. He/she will use the best skill and attention and will be solely responsible for all construction methods and materials for coordinating all portions of the work. Unless otherwise specified in the Agreement, the contractor will provide for and/or pay for all labor, materials, equipment, tools, machinery, transportation, and other goods, facilities and services necessary for the proper execution and completion of the work. The contractor will maintain order and discipline among employees and will not assign anyone unfit for the task. The contractor warrants to the owner that all materials and equipment incorporated are new and that all work will be of good quality and free of defects or faults. The contractor will pay all sales, use and other taxes related to the work and will secure and pay for building permits and/or other permits, fees, inspections and licenses necessary for the completion of the work unless otherwise specified in the Agreement. The contractor will indemnify and hold harmless the owner from and against all claims, damages, losses, expenses, legal fees or other costs arising or resulting from the contractor’s performance of the work or provisions of this section. The contractor will comply with all rules, regulations, laws, ordinances and orders of any public authority or HUD inspector bearing on the performance of the work. The contractor is responsible for, and indemnifies the owner against acts and omissions of employees, subcontractors and their employees, or others performing the work under this Agreement with the contractor. The contractor will provide shop drawings, samples, product data or other information provided for In this agreement where necessary.
Subcontractor – Selected by the contractor, except that the contractor will not employ any subcontractor to whom the owner may have a reasonable objection, nor will the contractor is required by the owner to employ any subcontractor to Whom the contractor has a reasonable objection.
Binding Arbitration – Claims or disputes relating to the Agreement or General Provisions will be resolved by the Construction Industry Arbitration Rules of the America Arbitration Association (AAA) unless both parties mutually agree to other methods. The notice of the demand for arbitration must be filed in writing with the other party to this Agreement and with the AAA and must be made in a reasonable time after the dispute has arisen. The award rendered by the arbitrator(s) will be considered final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.
Cleanup and Trash Removal – The contractor will keep the owner’s residence free from waste or rubbish resulting from the work. The contractor will remove all waste, rubbish, tools, construction materials, and machinery promptly after completion of the work.
Time – With respect to the scheduled completion of the work, time is of the essence. If the contractor is delayed at any time in the progress of work by change orders, fire, labor disputes, acts of God or other causes beyond the contractor’s control, the completion schedule for the work or affected parts of the work may be extended by the same amount of time caused by the delay. The contractor must begin work no later than 30 days after loan closing and will not cease work for more than 30 consecutive days.
Payments and Completion- Payments may be withheld because of, (1) defective work not remedied: (2) failure of contractor to make proper payments to subcontractors, workers, or suppliers; (3) persistent failure to carry out work in accordance with this Agreement or these general conditions, or (4) legal claims. Final payment will be due after complete release of any and all liens arising out of the contract or submission of receipts or other evidence of payment covering all subcontractors or suppliers who could file such a lien. The contractor agrees to indemnify the Owner against such liens and will refund all monies including costs and reasonable attorney’s fees paid by the owner in discharging the liens. A 10 percent holdback may be required by the DE Underwriter to assure the work has been properly competed and there are no liens on the property.
Protection of Property and Persons – The contractor is responsible for initiating, maintaining, and supervising all necessary or required safety programs. The contractor must comply with all applicable laws, regulations, ordinances, orders or laws or federal, state, county or local governments. The contractor will indemnify the owner for all property loss or damage to the owner caused by his/her employees or his/her direct or subcontractors.
Insurance – The contractor will purchase ,and maintain such insurance necessary to protect from claims under workers compensation and from any damage to the owner(s) property resulting from the conduct of this contract.
Changes in the Contract – The owner may order changes, additions or modifications (using HUD form HUD-92577) without invalidating the contract. Such changes must be In writing, Signed by the owner, and accepted by the lender. Not all change order requests may be accepted by the lender; therefore, the contractor proceeds at his/her own risk if work is completed without an accepted change order. If a change is approved, a corresponding item in the repair category must be deleted. The new repair item must also be included in the allowable repair items.
Correction of Deficiencies – The contractor must correct promptly any work of his/her own or his/her subcontractors found to be defective or not complying with the terms of the contract.
Warranty – The contractor will provide a one-year warranty on all labor and materials used in the rehabilitation of the property. This warranty must extend one year from the date of completion of the contract or longer if prescribed by law unless otherwise specified by other terms of this contract. Disputes will be resolved through the Construction Industry Arbitration Rules of the American Arbitration Association.
Termination- If the owner fails to make a payment under the terms of this Agreement, though no fault of the contractor, the contractor may, upon ten working days written notice to the owner, and if not satisfied, terminate this Agreement. The owner will be responsible for paying the contractor for all work completed.
If the contractor fails or neglects to carry out the terms of the contract, the owner, after ten working days written notice to the contractor may terminate this agreement. The owner may finish the job by whatever reasonable method the owner deems expedient. If the cost of completion exceeds the contract balance, the difference, as well as reasonable attorney’s fees if necessary, will be paid to the owner by the contractor.
If you are planning on buying or refinancing a home in Ohio using the the FHA 203k loan, and would like to work with someone who understands the program and can guide you through the process, please contact me.
