Myths regarding the FHA 203(k) Streamline
A couple of years ago my business partner and I were looking for a good niche to be the anchor for our business in addition to being able to help our Realtor partners build their business. We had just hired on with Alterra Home loans (November of 2009) who underwrites and funds the FHA 203(k) Streamline in-house so we thought that this would be a great program to market considering the many homes for sale that are either dated or are in need of some rehab / repair since so many of the homes being sold are short sales or REOs where there is probably some deferred maintenance or even bigger issues to resolve.
We spoke to lots of Realtors as we began to visit every real estate office we knew of to get the word out and we got a lot of the same answers from all the Realtors we spoke with. They were all under the impression that the FHA 203(k) Streamline was 1) harder to qualify for than a regular FHA loan, 2) took much longer to close, 3) the rate is much higher and 4) problems with contractors. The first three issues are very easy to resolve since 1) the qualifying for an FHA 203(k) Streamline is exactly the same as a regular FHA loan - the guidelines are the same; 2) we are closing them in less than 30 days, in fact we have closed one in 21 days, another in 25 and most of them are closed in 25-30 days. It's really not that hard to get them closed in 30 days as long as there aren't any delays with the contractor getting the bids or with the appraiser doing the appraisal; 3) the rate is typically about .25% higher and depending on the yield curve it can be as much as .5% higher. In the end, that is relatively minor and it's much better than trying to finance the repairs with your credit card or depleting your savings.
The contractor issue is a bit more challenging since not everyone has a contractor they know and trust. In July of 2010, I received a call from a contractor who specialized in the FHA 203(k) Streamline and was building his business around this great opportunity. He had been a construction manager / superintendent for Pulte Homes for five years and had all the experience and contacts he needed to do a great job for people who were buying homes that needed to be remodeled. We asked around about him and we heard nothing but positive things from everyone we talked to. We then began to plan out what we could do to make this a great experience for the buyer in terms of a fast, on-time close and then expedient, high-quality work after the close so that the buyer could move in to their new home within one month after the close (in most cases). So far all of the clients who we have financed have chosen to use our preferred contractor and have been extremely happy with the results. Check out a couple of videos here: www.YouTube.com/thewunderliteam.
In Las Vegas, this is a very under-utilized program and one that I think can help Realtors attract more business by specializing in a program that will allow buyers to truly get the home they really want instead of settling for a turnkey home that isn't to the buyer's exact tastes. Homes that are listed for "Cash Only" can usually qualify for an FHA 203(k) Streamline loan which means that buyers using FHA financing now have more options and since many homes that aren't move-in ready tend to sit on the market for a while, prices of these homes are often more negotiable.
With only about 7-10 FHA 203(k) Streamline loans being done per month Las Vegas, the opportunity for Realtors to make this their niche is incredible. I'd love to get your thoughts / ideas / comments. Please feel free to share them in the comments section. If you have any questions, please feel free to call me at 702-812-1214.