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.

HUD report shows that you are missing the boat if you aren't partnering with a lender who can help your clients take advantage of the FHA 203(k) Streamline loan

If you haven't found a good lender who offers the FHA 203(k) Streamline loan, then you are missing out on a fantastic niche.  You may have read a recent post I wrote about two FHA 203(k) Streamline closings I had last Friday.  I closed one in 25 days and the other in 21 days - the latest 203(k) Streamline was closed in 29 days (the holidays slowed everyone down).  This is very fast for any loan but especially for the FHA 203(k) Streamline.  More importantly is how excited all of the clients are, especially when they move into their "new" home.  Most people are generally excited about closing on their home and moving in but these clients are so much more excited - I attend all of my closings and can tell a dramatic difference between the level of enthusiasm from the clients who are getting ready to have their new house renovated and customized to their specifications as opposed to those clients who are just buying a house.

As a "for instance," would you rather sell your client this home which is functional:


Or do you think your clients would be just a bit more excited if you helped them get the same great house but remodeled to their tastes like:

I would venture to say that we will all get more referrals from these clients than from the regular clients.  Additionally, we plan to help these clients throw an open house for their friends when the homes are finished and what a great marketing tool to share the experience of helping the clients show off their new home; what lender and Realtor does that?  We are going to also start pushing the Energy Efficient Mortgage which with some reasonable modifications will help clients save 20-40% on their energy bills.  If the budget allows for photovoltaic cells on the roof, the client might be in a situation where they pay little to nothing for their energy.  How cool (no pun intended) would that be to be able to call the client every month after they have received their energy bill to see how much it was - this will be a great reminder of what we did to help them and a great time to ask for referrals.
Any niche that allows you to stand out from your competition is a great thing.  There aren't a whole lot of Realtors taking advantage of this as evidenced by the statistics from HUD's website below.  Help rebuild your community one FHA 203(k) Streamline at a time and you will have happier clients, more referrals, and you will be helping to restore the value and pride of ownership in homes while being able to keep those in the building industry employed.  It's a winning situation for everyone.

This is a very under-utilized loan in the Vegas market the HUD report shows what great opportunity we have if we embrace this, market it, and educate our clients about this great opportunity for them:

 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 
  REPORT DATE: DEC 31, 2011 

203K ENDORSEMENT SUMMARY REPORT 
  DEC 01,2011 TO DEC 31,2011 

 ANCHORAGE                                       2                3   
   BOISE                                           8               26   
   FRESNO                                         22               80   
   HONOLULU                                        7               15   
   LAS VEGAS                                       9               38   
   LOS ANGELES                                    45              146   
   PHOENIX                                        42              125   
   PORTLAND                                       29               85   
   RENO                                            2               15   
   SACRAMENTO                                     27              113   
   SAN DIEGO                                      13               38   
   SAN FRANCISCO                                  42              115   
   SANTA ANA                                      32               83   
   SEATTLE                                        62              182   
   SPOKANE                                        11               24   
   TUCSON                                          4               18   
            HOC: SANTA ANA                       357            1,106 

Las Vegas did 9 of these loans in December - Seattle did 62.  We are missing the boat and a great opportunity. 

Call me to learn more about marketing strategies and how to really help your clients:  Jed Wunderli - 702-812-1214.  

What drives you to be better?

I was on my morning bike ride and I was riding great.  Over the last couple of months I've noticed a fairly significant improvement in my average miles-per-hour while I've also noticed that my average heart rate has decreased somewhat significantly as well.  All of a sudden I'm riding about 1.0 miles per hour faster (about 2.2 mph faster than last year at this time) - and plan to improve that as well - and my Average HBM (heartbeats per minute) is about 7-10% lower than what it was just a couple of months ago.  The change?  I started cross training by running on the treadmill and doing the eliptical 2-3 nights a week in addition to my normal riding schedule (when it's not windy - I hate riding in the wind).

Why am I doing this other than the fact that I love cycling and want to see how good I can be at 46+ along with trying to manage my weight?  I have a riding buddy who calls me "Lance" because of how much I ride and how fast I ride (at least relative to my friend).  I always chuckle and defer humbly that I am far from him or any other pro cyclist, not to mention lots of great hobby cyclists.  However, I am competitive and if someone is going to call me Lance, I better try to live up to the name.  With this in mind in addition to my normal competitive nature, I started training harder both on the bike and off, and I am trying to watch what I eat - my sweet tooth is challenging some times - o.k. most times.
I then try to apply this same attitude and mentality to my business by analyzing what I can do to build more relationships - both referral and client.  I don't worry too much about my bottom line because if I take care of my relationships, they will help me create more relationships until I have enough to achieve my bottom line goals.  I look for niches (FHA 203(k) Streamline, Energy Efficient Mortgage, etc. - www.YouTube.com/thewunderliteam) and try to develop strategies that will help my Realtor partners build their business which positively impacts mine.  I also offer value-added services such as bond market analysis and the Energy Efficient Mortgage to provide benefits to my clients.
So what drives (rides) you?  What makes you want to improve your business?  What ideas do you have to help your fellow business partners achieve their goals as well?  It's the new year and a great time to assess what you can do to improve on last year.  Let's pick it up and sustain it throughout the year - not just for the first month.  Please share your ideas / comments.

D. Jed Wunderli
Certified Mortgage Planner
Alterra Home Loans
702-812-1214

FHA 203(k) Streamline Quick Reference Guide

This is part four in the "Quick Reference Guide Series" that I started writing on Monday.  I have already covered FHA, VA, and Conventional loans with regard to general guidelines and the benefits to the home buyer.  In today's post, I will be covering my favorite loan, the FHA 203(k) Streamline.  The FHA 203(k) Streamline is a very under-utilized loan program and yet it helps the buyer get a home that ends up being much closer to the home they really want than any turn-key home they could buy.  It also makes it possible to write offers on homes that don't qualify for standard FHA financing as well as homes that aren't getting a lot of offers because the home needs work.  Done right, this loan can close just as quickly (give or take a few days) as a standard FHA loan and it has the potential to generate far more referrals.  We have a system that we use from start to finish that I won't go into here - feel free to call or email and I can let you know exactly what we do.  Here is the FHA 203(k) Streamline Quick Reference Guide:

The FHA 203(k) Streamline (also known as the government rehab loan) is a little used (underused) loan program that provides tremendous opportunity for Realtors and clients – this is one to focus on!!

The program guidelines are exactly the same as for the standard FHA loan:

Program guidelines:

            Loan-to-Value:  96.5%

            Debt-to-Income Ratio:  as high as 55%

            Minimum Credit Score:  none, but prefer 640+

            Mortgage Insurance: 

1)    Up-front = 1% of base loan amount (financed)

2)    Annual (paid monthly) = 1.15% of base loan amount

Reserves:  None required

            Bankruptcy:  Need re-established credit

1)    Chapter 7 – eligible 2 years from the discharge date

2)    Chapter 13 – eligible 1 year from the filing with Trustee’s approval

Foreclosure / short sale:  eligible three years from the foreclosure date or sale date.

The difference between this program and the standard FHA is that the home buyer can get up to $35,000 for rehab / repairs.  Here’s how it works:

1)    buyer gets accepted offer

2)    buyer gets bid from contractor (we have one we work with very closely

3)    Appraisal is done using the purchase contract and the bid and the value is “as repaired.”

4)    The loan amount is based on the lower of purchase price plus the bid price or the appraised value plus 10%.

Benefits to the buyer:

1)    The buyer can use FHA financing for homes that wouldn’t otherwise qualify for FHA financing

2)    The buyer can bid on homes that have less competition

3)    The buyer can get a house just they way they want it

4)    The Realtor will get more referrals from the raving fans who are their buyers.

D. Jed Wunderli
Certified Mortgage Planner
Alterra Home Loans
702-812-1214