Loan Process:
1. Borrower finds a property that is in need of repair.
2. Borrower schedules a meeting with a contractor at the house.
3. Contractor creates a list of improvements, completes a work write
up and prepares a contractor bid package to obtain cost estimates.
4. Appraiser uses work write up to determine improved value.
5. File goes to underwriter for approval.
Basics:
1. Only 1 bid is required
2. Home must be livable within 30 days of closing.
3. Borrower must occupy within 60 days of closing.
4. All work must be completed within 60 days of closing.
5. General Contractor is not required, but preferred.
Property Requirements:
1. Owner Occupied homes only.
2. Condos and newly constructed homes are not eligible.
3. 1-2 units allowed.
Borrower Qualifications:
1. 31/40 Ratios apply
2. Higher ratios may be allowed with credit score of 720 or higher.
3. Minimum FICO score of 620.
4. 3.5% Down Payment
Loan Qualifications:
1. 30 Year Fixed Rate Loan
2. Can borrow up to 110% of the appraised value.
3. Minimum of $5,000 in repairs - Maximum of $30,000 in repairs.
4. 10% contingency reserve is added for cost overruns.
Eligible Improvements (Not inclusive):
1. Repair/Replace roofs, gutters & downspouts.
2. Repair/Replace plumbing & electrical systems.
3. New furnace or A/C
4. Weatherization – storm windows & doors
5. Exterior siding
6. Appliances
7. Basement finishing and waterproofing.
8. Repair/Replace flooring
9. Minor remodeling – kitchens, baths, etc.
10. Lead base paint stabilization and abatement.
11. Repair/Replace/Add decks, patios & porches.
Ineligible Improvements:
1. Septic system and/or well repair or replacement.
2. Swimming pools or luxury items.
3. Structural Repairs.
4. Free standing garage or barn.
5. Landscaping, sidewalks, driveways.
6. Additions.
7. Major Rehabilitation/Remodeling
8. Relocation of load bearing walls.
Bids:
1. Must be on contractors letterhead signed by all parties.
2. Bids must be detailed and complete (Name Brand, model #’s, etc).
3. All bids must be reviewed by lender.
4. Once approved, cannot be changed.
Contractor Requirements:
1. Must use licensed contractors.
2. Need copy of contractor’s license & insurance policy.
3. Must fill out a W-9.
4. Must sign Homeowner/Contractor Agreement before closing.
5. Contractor must submit credentials, work experience & references.
Draw Process:
1. Draws at closing are not permitted.
2. The investor must purchase the loan before draws can begin. This
can take 7 to 30 days. This means the contractor must be okay starting the work knowing he may not get his first draw for about 30 days. Contractor should be okay with this knowing the money for the project has been escrowed at the closing.
3. Only 2 draws are permitted.
1. Borrower finds a property that is in need of repair.
2. Borrower schedules a meeting with a contractor at the house.
3. Contractor creates a list of improvements, completes a work write
up and prepares a contractor bid package to obtain cost estimates.
4. Appraiser uses work write up to determine improved value.
5. File goes to underwriter for approval.
Basics:
1. Only 1 bid is required
2. Home must be livable within 30 days of closing.
3. Borrower must occupy within 60 days of closing.
4. All work must be completed within 60 days of closing.
5. General Contractor is not required, but preferred.
Property Requirements:
1. Owner Occupied homes only.
2. Condos and newly constructed homes are not eligible.
3. 1-2 units allowed.
Borrower Qualifications:
1. 31/40 Ratios apply
2. Higher ratios may be allowed with credit score of 720 or higher.
3. Minimum FICO score of 620.
4. 3.5% Down Payment
Loan Qualifications:
1. 30 Year Fixed Rate Loan
2. Can borrow up to 110% of the appraised value.
3. Minimum of $5,000 in repairs - Maximum of $30,000 in repairs.
4. 10% contingency reserve is added for cost overruns.
Eligible Improvements (Not inclusive):
1. Repair/Replace roofs, gutters & downspouts.
2. Repair/Replace plumbing & electrical systems.
3. New furnace or A/C
4. Weatherization – storm windows & doors
5. Exterior siding
6. Appliances
7. Basement finishing and waterproofing.
8. Repair/Replace flooring
9. Minor remodeling – kitchens, baths, etc.
10. Lead base paint stabilization and abatement.
11. Repair/Replace/Add decks, patios & porches.
Ineligible Improvements:
1. Septic system and/or well repair or replacement.
2. Swimming pools or luxury items.
3. Structural Repairs.
4. Free standing garage or barn.
5. Landscaping, sidewalks, driveways.
6. Additions.
7. Major Rehabilitation/Remodeling
8. Relocation of load bearing walls.
Bids:
1. Must be on contractors letterhead signed by all parties.
2. Bids must be detailed and complete (Name Brand, model #’s, etc).
3. All bids must be reviewed by lender.
4. Once approved, cannot be changed.
Contractor Requirements:
1. Must use licensed contractors.
2. Need copy of contractor’s license & insurance policy.
3. Must fill out a W-9.
4. Must sign Homeowner/Contractor Agreement before closing.
5. Contractor must submit credentials, work experience & references.
Draw Process:
1. Draws at closing are not permitted.
2. The investor must purchase the loan before draws can begin. This
can take 7 to 30 days. This means the contractor must be okay starting the work knowing he may not get his first draw for about 30 days. Contractor should be okay with this knowing the money for the project has been escrowed at the closing.
3. Only 2 draws are permitted.
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