FHA Sweat Equity – Alternative to FHA Down Payment Assistance 411

FHA Sweat Equity

Labor performed or materials furnished by borrower before closing may be considered as the equivalent of a cash investment.

Believe it or not FHA Sweat Equity Program has been around forever.  The idea behind Sweat Equity is a way to have the Seller Credit for Purchaser’s Down Payment through Labor or Materials being put forth into the house.

Sweat equity may be gifted subject to both gift requirements and additional requirements. 

• Existing construction – only the repairs or improvements listed on the appraisal are eligible for sweat equity. Any work completed or materials provided prior to the appraisal are not eligible.
• Proposed construction – the sales contract must indicate the tasks to be performed by the borrower during construction.
• Borrower’s labor may be considered as the equivalent of cash if the borrower can demonstrate his/her ability to complete the work in a satisfactory manner.
• Lender must document the value of the labor through either the appraiser’s estimate or through a cost estimating service. 
• Delayed work (on-site escrow), clean up, debris removal, and other general maintenance cannot be included as sweat equity.
• There can be no cash back to the borrower in sweat equity transactions.
• Sweat equity on a property other than the subject property being purchase is not acceptable. Compensation for work performed on other properties must be in cash and properly documented.
• Sweat equity credit cannot exceed the estimated cost of the work or the materials.
• Verification of source of funds used to purchase materials and market value of materials must be provided on any materials furnished by borrower.
• Paid receipts for the materials should be obtained. 

1. Buyers to get with the Contractors after an appraisal is done to lend “LABOR” to compensate for “Credit” towards down-payment.
2. Buyers to paint the house or do some side jobs to help earn “Credit” for the “Labor”
3. The Sellers will pay for the credit and can raise the sales price in order to compensate for the credit.

 

New Construction Down Payment Assistance Program – Builder Grant 100% LTV

The Down Payment Assistance Program that has been here forever and is not going anywhere

Worried about the economy? Worried about Down Payment Assistance Programs are gone or on the rocks?

I still can provide Down Payment Assistance Programs STILL and FREE through our FREE Builder Grant Loans.

The way it works is just like any Down Payment Assistance Program you have used in the past (Nehemiah, Ameridream or Genesis)

Quick Recap for those who haven’t:

• A Way for the Seller to contribute towards the down payment which is normally not allowed on Government or Conventional Concessions. Normal concessions only contribute towards Closing Costa dn Pre-paids.

Builder Grant Program Perks:

1. Can contribute up to 6% of the Sales Price
2. NO TRANSFER FEE (unlike most DAPS which charge between $300-$400 dollars)
3. Transferred on the HUD at closing
4. Less Paperwork and Less Stressful

So if you are a Builder or a Home Buyer looking for a new alternative to Financing New Construction Homes without giving away the bank and still want to take advantage of 100% LTV loans then contact me today for further information.

Home Improvement Loans: 203k Loans

Home Improvement Loans

The Home Improvement Loan is designed to help Home Owners and potential future Home Owners get a loan based on future improvements of the house.

If the house needs some work done then typically a normal loan like a Conventional loan will not finance the loan due to home improvements over $2,500.  This type of financing will call for a Home Improvement, Rennovation, Rehab, Full 203k and 203k Streamline loans.

Instead of paying out of pocket or financing the costs with a credit card, we can do a 1 stop shop for your financing needs with home improvements rolled into the loan.

Don’t worry about the appraised value if the house is in bad shape, the loan is based on the after improved value of your improvements.

Typically these loans can close in 30-45 days, with contract work started within 30 days of closing.

Below are some guidelines explaining 203ks

• Less fees vs a Full Renovation – cheaper
  

• No Reserves – Full 203k requires reserves

• Restricted to $35,000 in repairs – *no major structural repairs* Over 35k is Full 203k.

• NO HUD CONSULTANT - this is the biggest distinction here compared to full renovation.  Saves time and delays.
• Owner Occupied / 1-4 family

• No Inspections – over 15k in repairs just needs to verify work is done.

• No Contingency Added

• Repairs must be completed in 6 months – no extensions, after 6 months must be kicked to full renovation.

Rennovation Specialist

Renovation programs are great for 1st time home buyers providing solutions for needs and wishes into reality.

With Foreclosures and short-sales on the rise, many homes on the market need a lot of T.L.C and most of the time the previous owner had not taken complete care with the home, this is repair the 203k loan can shine for you.

Remember, not all Mortgage Professionals offer 203k Loans.  Consult with a Renovation Specialist who can guide you through the decision in Streamline vs Full Renovation.  By the way…I offer both