Georgia FHA Home Loans - (& Opinion)

So you or your client have found a home in a great area in the client's price range. Only one problem: it's in bad shape. The HVAC system is 50 years old, the roof is 40 years old and the windows may as well not even be closed. Plus the kitchen has vinyl floors in 3 different patterns and the counters are all laminate with burns and holes and scars.

Not to fear! Meet the FHA 203K Streamlined renovation loan.

Eligible Improvements Virtually any kind of improvement is eligible provided it becomes a permanent part of the real property and adds value. 

• Additions to the structure
• Kitchen or bath remodels
• Finished basement or attic
• Patios, decks or terraces
• Roofing and landscaping
• Safety, energy efficiency and electrical upgrades
• Handicapped accessibility improvements

Luxuryitems are not eligible

• Swimming pools, hot tubs, tennis courts, gazebos, barbecue pits, saunas or alterations to support commercial use

"They just keep on changing these rules, don't they?" It was an honest question from a frustrated agent.

Here is what I do know: FHA Concentration can shoot you in the foot. HUD Mortgagee Letter 2009-46B in Section 1 Subsection V Paragraph 10 parts a, b and c tells us about FHA Concentration and how to see it coming from miles away. Keep in mind you can still get financing in developments which have reached the maximum concentration levels specified by HUD for FHA insured loans but not with FHA.

The easies rule to remember is thirty percent (30%). If the project development (not phase) has 30% or more of the available units financed with an FHA insured mortgage there will be no further issuance of FHA case numbers in that project. In a nutshell this means there will be no more FHA loans issued for those condominiums until the concentration level again falls below 30%.

For condominiums consisting of three or fewer units only one unit may be financed with an FHA insured loan. With condo projects of four or more units the 30% rule comes in to play. If you are math challenged just remember for every 10 units in the project only 3 can be financed with an FHA insured loan.

So remember, in Georgia and especially the metro Atlanta area, even if I have not yet closed a condo loan in your new or existing condo project I know a few things about condos. This might be the first time you and I have ever met but one look at my gray hair and you'll know I didn't just step off the chicken farm yesterday.

I do condo loans. Give me a call and let's chat then let's get your loan closed. Right Mrs. Martin? (Mrs. Martin came to me with a very unusual and challenging condo loan and we are closing on Friday. No other lender she worked with including banks with two or three words in their name could get it done for her.)

"Oh I don't want to mess with all that trouble", the agent said to me during a phone conversation. She meant she did not want to mess with selling a home that needed a new roof, some plumbing repair, new carpet and new appliances which I could finance into the loan amount.

I asked, "why not? What trouble?"

It seems she had a few misunderstandings about how this powerful purchase loan works. The truth is it doesn't involve any extra work for her than a regular FHA loan. What it does it take an unsellable home and turn it into a sale. Conventional loans do not allow for some of these types of repairs on an "as is" home sale. Even there it increases the sale amount by the mere virtue of dealing with a homeowner financing the property instead of an investor paying cash for the property.

The FHA 203k Streamline purchase loan is perfect for the large majority of homes in the US. Any home that qualifies for a standard FHA home loan, the 203b, also qualifies for the FHA 203k if it needs less than $35,000 in non-structural upgrades or repairs. So what CAN you do with an FHA 203k loan?

• Repair or replacement of roofs, gutters and downspouts
• Upgrade of plumbing and electrical systems
• New flooring or floor covering
• Exterior decks, patios and porches
• Minor remodeling (no structural such as room additions)
• Paint and wall covering
• Weatherization including storm windows, storm doors, insulation and weather stripping
• Purchase and installation of new appliances
• Disability access improvements interior and exterior
• Basement finishing and remodeling
• Basement and crawl space moisture control and waterproofing
• Window and door replacement
• Exterior residing such as replacing old, defective siding
• Septic system or well repair or replacement

HIGHLIGHTS ONLY - I don't want to distribute incorrect information so if you have a viable correction please make it known in the comments.

HR 3458 "The Worker, Home Ownership and Business Assistance Act of 2009"

While it is called an "Extension and Modification of the First-Time Homebuyer's Tax Credit" it really is an extension and overhaul or re-construction. Modified doesn't seem to cover it. If you are interested the full text of the Resolution signed into law is found at this link on Thomas Library of Congress. (This is also based on S 1678 dated September 16, 2009 and passed unanimously in the Senate.)

All the good stuff related to the Tax Credit seems to be found in Sections 11 and 12. I am not interested in sharing my political opinion in this post (had to clarify this post) but working with you to develop a fuller and more accurate understanding of this new law. We know the second version of the First Time Homebuyer's Tax Credit was scheduled to end with homes purchased, and closed on, before December 1, 2009. The key word at that time was "closed". The newest version has a different twist which we will examine. So, here we go line by line where application matters to our common clients:

Section 11(a)(1)(A) extended to May 1, 2010

Section 11(a)(2)EXCEPTION IN CASE OF BINDING CONTRACT - if the binding contract is entered BEFORE May 1, 2010 then the closing must occur BEFORE July 1, 2010

Section 11(b)(6)EXCEPTION FOR LONG-TIME RESIDENCE OF SAME PRINCIPAL RESIDENCE - if the person buying the primary home lived in their primary residence for "any 5-consecutive-year period during the 8 year period ending on the date of [qualified] purchase" they also qualify for the credit under SEC.11(c)(1)(D)

Section 11(c)(1)(D) sets the maximum credit for long-time residents to $6,500

Section 11(c)(2) sets the maximium individual AGI to $125,000 and the maximum married couple AGI to $225,000

Section 11(d)(3) sets the maximum purchase price [not loan amount] to $800,000

There are other subsections specific to military personnel who are deployed found primarily in Section11(e)(E)

Section 12 is also pertinent but contains mostly clerical changes and restates the recipient of the credit must be at least 18 years of age at the time of purchase of the home.

IN SUMMARY

You must close before May 1, 2010 (so no later than April 30 2010), if you are not a "first time home buyer" (defined as someone who has not owned a primary residence during the last 36 months prior to the closing date) you must have lived in your primary residence at least 5 continuous years out of the 8 years preceding the closing date unless you enter into a binding contract before May 1, 2010 then you must close before July 1, 2010. Individuals may take advantage of the tax credit if you earn no more than $125,000 per year Adjusted Gross Income and married couples may not earn more than $225,000 AGI. Your sales price may not exceed $800,000 and you must be 18 years of age.

BIG DISCLAIMER: I AM NOT A TAX ATTORNEY OR ACCOUNTANT and everything you just read is my opinion on what the law says. Do not make any decisions based on the content of this blog post. Seriously, do not use this as a substitute for tax advice or legal advice.