FHA 203k Loan Info

Many Lancaster County, PA home buyers find themselves torn when they are about to decide on which house to buy. We often here from potential clients “I LOVE the location, but we NEED to do something about that bathroom”; or “If it only had a finished basement…”; or “a home addition would make this our DREAM home”.

The Federal Housing Administration (FHA) offers a loan specifially for situations like the ones mentioned above – the 203k Rehab Loan. Here is some important answers and general info from the Housing and Urban Development’s website regarding eligibility, how to apply and all things 203k.

Program Overview

The purchase of a house that needs repair is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.

HUD’s 203(k) program can help you with this quagmire and allow you to purchase or refinance a property plus include in the loan the cost of making the repairs and improvements. The FHA insured 203(k) loan is provided through approved mortgage lenders nationwide. It is available to persons wanting to occupy the home.

The downpayment requirement for an owner-occupant (or a nonprofit organization or government agency) is approximately 3.5% of the acquisition and repair costs of the property.

For a list of lenders who are offering the 203(k) Rehabilitation Program, please see the 203(k) Lenders List. The interest rate and discount points on the loan are negotiable between the borrower and the lender.

Program Questions

What is the minimum amount of rehabilitation required for a non-streamlined Section 203(k) mortgage?

There is a minimum $5,000 requirement for the eligible improvements on the existing structure on the property. Minor or cosmetic repairs by themselves are unacceptable; however, they may be added to the minimum requirement. Under the Streamlined 203(k) program, a minimum repair/improvement cost requirement is not applicable.

What happens if the cost of the rehabilitation increases during the rehabilitation period?

Can the 203(k) mortgage amount be increased to cover the additional expenses? No. This emphasizes the importance of carefully selecting a contractor who will accurately estimate the cost of the improvements and satisfactorily complete the rehabilitation at or below the estimate.

Is there a time period on the rehabilitation construction period?

Yes, the Rehabilitation Loan Agreement contains three provisions concerning the timeliness of the work. The work must begin within 30 days of execution of the Agreement. The work must not cease prior to completion for more than 30 consecutive days. The work is to be completed within the time period shown in the Agreement (not to exceed six months); the lender should not allow a time period longer than that required to complete the work.

Does HUD always require a contingency reserve to cover unexpected cost increases?

Typically, yes. On properties older than 30 years and over $7,500 in rehabilitation costs, the cost estimate must include a contingency reserve. The reserve must be a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If utilities were not turned on for inspection, a minimum fifteen (15) percent is required.

Eligible Improvements

Can a detached garage or another dwelling be placed on the mortgaged property?

Yes, under the Standard (k) program, however, a new addition must be attached to the existing dwelling, and must comply with HUD’s Minimum Property Standards in 24 CFR 200.926d and all local codes and ordinances.

Can a dwelling be converted to provide access for a disabled person?

Yes. A dwelling can be remodeled to improve the kitchen and bath to accommodate a wheelchair access. Wider doors and handicap ramps can also be included in the cost of rehabilitation.

Application Process

This describes a typical step-by-step application/mortgage origination process for a transaction involving the purchase and rehabilitation of a property. It explains the role of HUD, the mortgage lender, the contractor, the borrower, consultant, the plan reviewer, appraiser and the inspector.

A. Homebuyer Locates the Property.

B. Preliminary Feasibility Analysis. After the property is located, the homebuyer and their real estate professional should make a marketability analysis prior to signing the sales contract. The following should be determined:

1) The extent of the rehabilitation work required;

2) Rough cost estimate of the work; and

3) The expected market value of the property after completion of the work. Note: The borrower does not want to spend money for appraisals and repair specifications (plans), then discover that the value of the property will be less than the purchase price (or existing indebtedness), plus the cost of improvements.

C. Sales Contract is Executed. A provision should be included in the sales contract that the buyer has applied for Section 203(k) financing, and that the contract is contingent upon loan approval and buyer’s acceptance of additional required improvements as determined by HUD or the lender.

D. Homebuyer Selects Mortgage Lender. Call HUD Field Office for a list of lenders.

E. Consultant Prepares Work Write-up and Cost Estimate.

F. Lender Requests HUD Case Number. Upon acceptance of the architectural exhibits, the lender requests the assignment of a HUD case number, the plan reviewer, appraiser, and the inspector.

G. Fee Consultant Visits Property. The homebuyer and contractor (where applicable) meet with the fee consultant to ensure that the architectural exhibits are acceptable and that all program requirements have been properly shown on the exhibits.

H. Appraiser Performs the Appraisal.

I. Lender Reviews the Application The appraisal is reviewed to determine the maximum insurable mortgage amount for the property

J. Issuance of Conditional Commitment/Statement of Appraised Value. This is issued by the lender and establishes the maximum insurable mortgage amount for the property.

K. Lender Prepares Firm Commitment Application. The borrower provides information for the lender to request a credit report, verifications of employment and deposits, and any other source documents needed to establish the ability of the borrower to repay the mortgage.

L. Lender Issues Firm Commitment. If the application is found acceptable, the firm commitment is issued to the borrower. It states the maximum mortgage amount that HUD will insure for the borrower and the property.

M. Mortgage Loan Closing. After issuance of the firm commitment, the lender prepares for the closing of the mortgage. This includes the preparation of the Rehabilitation Loan Agreement. The Agreement is executed by the borrower and the lender in order to establish the conditions under which the lender will release funds from the Rehabilitation Escrow Account. Following closing, the borrower is required to begin making mortgage payments on the entire principal amount for the mortgage, including the amount in the Rehabilitation Escrow Account that has not yet been disbursed.

N. Mortgage Insurance Endorsement. Following loan closing, the lender submits copies of the mortgage documents to the HUD office for mortgage insurance endorsement. HUD reviews the submission and, if found acceptable, issues a Mortgage Insurance Certificate to the lender.

O. Rehabilitation Construction Begins. At loan closing, the mortgage proceeds will be disbursed to pay off the seller of the existing property and the Rehabilitation Escrow Account will be established. Construction may begin. The homeowner has up to six (6) months to complete the work depending on the extent of work to be completed. (Lenders may require less than six months.)

P. Releases from Rehabilitation Escrow Account. As construction progresses, funds are released after the work is inspected by a HUD-approved inspector. A maximum of four draw inspections plus a final inspection are allowed. The inspector reviews the Draw Request (form HUD-9746-A) that is prepared by the borrower and contractor. If the cost of rehabilitation exceeds $10,000, additional draw inspections are authorized provided the lender and borrower agree in writing and the number of draw inspections is shown on form HUD-92700, 203(k) Maximum Mortgage Worksheet.

Q. Completion of Work/Final Inspection. When all work is complete according to the approved architectural exhibits and change orders, the borrower provides a letter indicating that all work is satisfactorily complete and ready for final inspection. If the HUD-approved inspector agrees, the final draw may be released, minus the required 10 percent holdback. If there is unused contingency funds or mortgage payment reserves in the Account, the lender must apply the funds to prepay the mortgage principal.

Visit the HUD 203k FAQ page for more questions and answers.

If you’re looking for your own Lancaster County, PA contractor, look no further than MBC Building & Remodeling, LLC! Please, please, please contact us with any questions you have regarding home renovations, rehabs or 203k loans.

What is Full-Service?

We are often asked what we mean when we say we are a Full-Service remodeling contractor here in Lancaster County, PA. Full-service means understanding that every project is unique. And it means working with each and every customer in whatever capacity they need us. Don’t like drywall (who does?) but love to paint? No problem. We can leave finished drywall in a home addition or basement remodel and you can paint to your heart’s delight. Find an AMAZING deal on flooring online? We can install products for you without ordering them. Or we can take care of everything if that’s what you want.

Kind of reminds me of this song…

Is your Lancaster, PA home remodeling contractor Full-Service? Any way you want it, MBC Building & Remodeling, LLC will take care of it!

Thank you for reading!

Matt & Mike Blank

MBC Building & Remodeling, LLC
PA Reg#: 1024
Lancaster County, PA Home Remodeling
[717] 371.5136

MBC Whole House Remodel Award Winner!

This year brought us another award! Pictured here is our Building Industry Association Whole House Remodel award-winner done here in Lancaster County, PA. On this project, we added a kitchen room addition and moved a chimney out of their bedroom, plus completely resided the whole home when we were done!

This homeowner had quite a dilemma. They LOVED their location… but their house was getting cramped for their growing family. We opened up the back of the house by removing the existing mudroom and wall that was there separating it from the kitchen. Then, we expanded the kitchen space by putting on an addition, which also allowed room for a dining area. Along with that, we moved a chimney out of a bedroom to add square footage to that space as well.

Also, energy efficiency on this 1920’s house was becoming an issue. Over the years the roof, siding and insulation had worn down. We solved this by putting new high-quality siding around the whole house and by repairing and replacing the roof.

Check out these pictures to see exactly why it won. Now they have the home of their dreams!

Front Porch before.

Front Porch after.

Kitchen addition and siding before.

Kitchen addition and siding after.

Kitchen Addition inside before.

Kitchen Addition inside after.

Keys to Securing Your Home: 5 Easy Ways to Help Protect Your Home

Many high-tech, high-priced home security products are available today. Fortunately, there are less expensive – but no less effective – ways to protect your Lancaster County, PA home, too.

Check out these smart home security tips!

Eliminate Hiding Places.

Keep all entry points to your house well lit.

Trim shrubs and trees that could provide cover for an intruder. Trim tree limbs that could enable intruders to gain entry via an upper-floor window or balcony and keep items such as ladders locked inside the house.

Don’t be an easy target.

Burglars want to hit the easiest target on the block so give them reasons to skip your house.

Home-security decals or “Beware of Dog” signs are good deterrents. Home security alarms are also good.

A subscription to a monitoring service is a good idea, but even the sound of an alarm is often enough to scare off a thief.

Lock windows and doors.

Department of Justice statistics report more than half of all burglaries occur with no sign of forced entry — meaning a robber was able to enter the house through an unlocked door or window.

Use a heavy-duty deadbolt that is bolted to the door frame with three-inch screws.

Appear to be home.

When you’re away, have someone pick up your mail and newspaper or have them stopped for the duration of your trip. In addition, have someone mow your lawn. Also, use timers to turn specific lights on and off in the house to make it seem as if someone is home.

Know your neighbors.

Make sure neighbors know when you’re planning to be away and how they can reach you in an emergency. Leaving an extra key with a trusted neighbor is a good idea. It’s better than hiding one under a mat or in some other outdoor hiding place.

Kitchen Trends for 2012

The new year is quickly approaching! In the spirit of change, we decided to put together a list of some of the kitchen remodeling trends that are in store for 2012. The general contracting we do here in Lancaster County, PA brings us into a variety of kitchens every year. We get to experience first hand these growing trends, and have decided to discuss the following topics – Design Styles, Appliances, Colors, Cabinetry, Countertops and Lighting.

Design Styles – A recent survey done by the National Kitchen & Bath Association (NKBA) has shown that remodeling clients really are looking for “a multi-functional space, which reflects their individual style. One component of this trend is the integration and concealment of appliances, which opens the kitchen floor plan, embracing adjoining areas of the home, rather than becoming an intrusion into them. The economy continues to encourage homeowners to consider products and designs that are affordable and deliver long-term value.”

Traditional style remains the most popular kitchen design, although it has dropped slightly in popularity compared to last year. Shaker style, which is characterized by its simplicity, un-ornamented yet functional, finely crafted style, overtook ‘contemporary’ style in 2011 as the No. 2 most popular kitchen design style, and that trend should continue into 2012.

Appliances – Concealed appliances, such as warming drawers and steam ovens are more popular than ever. By hiding appliances away during your kitchen remodel, you allow more space to incorporate multiple guest functionality. Kitchens are fast becoming a warm gathering place for the clients family and friends.

Colors – Stainless steel will continue to be a favored choice for your kitchen appliance finish. It has been used in kitchens for over 100 years. This is due to its universal appeal, its ability to provide a sterile surface and its shiny appearance. All of this has helped forge its association with luxury.

The next most used color is currently black. It usually gives the space a more formal appearance in relation to the rest of the common areas of your home. The top 5 colors list is rounded out by grays, beiges, and bones.

Cabinetry – Maple cabinetry looks to be the front-runner in 2012. As for finishes, various shades of white/off-white hues, some finish distressing or glazes remain popular. Dark natural finishes also have been trending. Light natural and colored painted finishes also remained fairly common.

Any of these finishes can help contribute to a comfortable and relaxing kitchen many homeowners and buyers are looking for.

Countertops – Natural stone and quartz counters remain remodeling prospect favorites, but other renewable and recycled materials, such as laminate, concrete, paper, glass and stainless steel are seeing increased interest. Consider a low-maintenance surface to help cut down on cleaning and disinfecting time!

Lighting – LED energy-efficient lighting options continue to rise in popularity. Not only do they offer fresh, modern designs, they also help you save money and energy!

Thank you for reading our blog! I hope these trends will give you some fresh ideas to spice up the new year. If you have any questions or are thinking it is time to remodel your kitchen in Lancaster County, PA, please give us a call!

-Matt Blank
MBC Building & Remodeling, LLC
[717].[371].[5136]

To Move, or to Remodel, that is the question.

At least that is the question a lot of homeowners we meet with ponder: Should I move to a new home, or remodel the home my family is in now? Well, since we at MBC do remodeling in Lancaster County, PA, you should definitely remodel… JUST KIDDING!

With our housing market still down, you don’t want to rush into any decisions involving your largest asset. Does your family like the area and how long do you plan on staying in the home? You want to consider not only what your family will gain from your choice, but also the financial investment you stand to gain down the road. Your family’s well-being and overall happiness should always be at the heart of your decisions.

If your spouse, the kids and yourself love the neighbors and neighborhood, their school and your distance from work, changing the layout or adding space to your home by remodeling is probably a better choice. You will improve your enjoyment of your own home without losing your perfect location.

How long do you plan on staying? The investment in remodeling your home could take 5-10 years to fully appreciate in value, depending on what type of project you are planning. Spending $10,000 on remodeling will not add $10,000 to your homes value. There is no set percentage of gain from project to project or location to location. Kitchens and baths are always the best investments because people spend a lot of time there. Keep in mind you could always break down large projects into smaller sections, or lessen the scope, such as a kitchen re-facing versus a complete remodel.

Also, keep in mind that if your home is already the nicest in the neighborhood, putting on a room addition or renovating the kitchen will really not add much value to the home, only to your enjoyment of it. Now, if you are in a less valuable home, you can remodel to be average or above average with the other homes in the area. One example would be adding another bathroom if you currently have 2 but the others in the neighborhood have 3 to 4.

You must find a balance between Enjoyment & Investment Return to help steer your decision. Talk with an experienced contractor and real estate agent to get opinions and figures on the actual costs you are looking at. Take a look at this list Pro’s and Con’s to consider when you are thinking of remodeling or selling your home:

Remodel:
Pros:
• You will see at least some return on your remodeling investment when you go to sell your home.
• More functional home, plus you will increase everyone’s enjoyment of it.
• Makes your home fit your family’s lifestyle better.
• Stay in neighborhood/school district you like,

Cons:
• Certain projects pay off more than others.
• Don’t upgrade beyond what your neighborhood is worth – a $500,000 home in a $200,000 area won’t return the cost of remodeling. If your home is already the biggest and nicest around, it will not appreciate much more when remodeled.
• Remodeling is an invasive process.
• May take 5+ years to fully increase your home’s value.

Move:
Pros:
• The layout you are looking for is already there with no time or work to be done.
• Your budget is the only limit on the size, style and area you move to. Depending on lot size, etc, you may not be able to remodel your current home into the dream you envision.

Cons:
• Real estate fees– real estate commissions, taxes and closing costs; plus minor improvements in new home, furniture & window treatments, movers, etc
• Selling your current house.
• Cost of moving – time, money and energy spent moving

Free Resources:

Check out these free resources to help guide your decision whether to move, or to remodel.

Remodeling Magazine’s Cost vs Value 2011 report. This site compares the average cost for 35 popular remodeling projects with the value those projects retain at resale. Choose your state to display data for one of 9 regions; choose any one of 80 U.S. cities to download a PDF with local data.

RemodelorMove.com’s Cost Calculator. Here you’ll find home remodeling and moving cost comparison tools, articles with advice and tips on remodeling and moving and more.

Thank you for reading our blog. When the time comes for your home remodeling project here in Lancaster County, PA, please call MBC Building & Remodeling, LLC at [717] 371.5136.

Kitchen Island Innovations

Dreaming of your own fantasy island here in Lancaster County, PA? No, I don’t mean the island with white sandy beaches, palm trees and sun… a kitchen island. They are increasing in popularity here; and with the interest both the attractiveness and innovations of kitchen islands continue to grow. Centrally located, islands are easily accessed and ideal for kitchen tasks such as food prep, cooking, clean up and entertaining. Here are the newest kitchen finds and options to consider when building or turning your fantasy island into a functional, stylish workspace.

Create Levels – Multi-level islands are becoming increasingly popular since most homeowners not only want a work area, but also an informal place for entertaining guests. With the kitchen as one of the main gathering areas in a home, your guests will be able to sit, chat or rest their beverage glasses on the high-top counter, while the lower tier of the island features an ample work area and storage area.

Be sure to incorporate enough drawers and shelves below the work area to keep key ingredients, utensils and your favorite cookbooks right at your fingertips.

If you love to entertain, consider adding a wine refrigerator to maintain proper temperatures for your reds and whites. You could also use the other side for seating like the picture above shows.

Turn Up the Heat – Installing cook tops as part of your kitchen island brings counter top burners within easy reach, while also creating room for amenities below, such as additional storage or warming drawers.

Easy Clean Up – Install a sink and faucet in your kitchen island to make food prep and clean up quick and easy.

Top It Off – Add character to your island countertop with a dramatic surface finish, such as granite, metal, solid-surface, marble and new custom, hand-applied finishes with unique designs, such as full circles and waves.

Finish off your counter with a thick butcher block, making it an easy spot for all your cutting needs.

With a few island innovations, you’ll make the most of your kitchen space and create your own, customized fantasy island! When it’s time to do your kitchen in Lancaster County, PA, please contact MBC Building & Remodeling, LLC.

MBC Project Spotlight #2: Mudroom Addition

What started as an idea to help keep the house clean turned into this beautiful mudroom.

This home addition was designed to allow family and guests a beautiful place to enter the home without having to go directly into the kitchen of this old Lancaster County, PA farmhouse. Not only could this bring dirt, mud and more into the house, the kitchen is for enjoying family and food, not for wiping your feet and hanging your jacket. The customer was understandably concerned with matching the style, look and feel of the home.

The room addition was much more than just a closet space though. Wood ceiling and slate flooring were chosen; don’t they accentuate the built-in breakfast nook perfectly? What would be more beautiful than starting your day with coffee and Lancaster County countryside?

MBC Building & Remodeling, LLC as a whole were thrilled to work on this project, and our passion poured through. Professional Remodeler’s from across the state of PA chose this mudroom addition for a Building Industry Association (BIA) Award of Excellence in 2009.

Your Decking Material Options: Pros and Cons

We have been building wood, composite and solid PVC decks and screened porches here in Lancaster County, PA since 1999. With over 12 years experience I can tell you the decision most families struggle with is what kind of decking material to we choose for their new deck.

If initial cost were the only concern, the answer would always be simple: wood. Unfortunately, we must consider many important factors. Along with initial cost, the appearance you are looking for and long-term maintenance time and costs come into play. The types of fasteners used to secure the decking are also important to many homeowners. Please use this guide to help you decided whether pressure-treated wood, composite or PVC/plastic decking is what your dream deck is made of.

Pressure-Treated Wood

Why is the wood pressure treated? According to About.com: “Less durable woods, like Southern pine and Western fir, are treated with preservatives. This makes them more resistant to the elements, rot and insects.”

Wood is used for the structural pieces of your deck no matter what you choose for the top. The other types of materials used for the surface are most likely either not strong enough or too expensive (or both) to serve as the frame for your deck.

Pros:

• Cheaper option
• Looks like real wood… ‘cause it is!
• Easy to work with
• Mold-resistant
• Hidden or visible fastener options
• Usually comes with lifetime warranty

Cons:

• Higher maintenance costs
• Will rot and lose appearance if not maintained
• Contains chemical preservatives
• Can splinter

Composite

Composite or synthetic decking is a lumber alternative that combines plastic and wood fiber. It is more environmentally friendly than wood, and the popularity of composite brands, such as Trex, has exploded over the past decade in residential deck building.

Pros:

• Weather resistant
• Lightweight
• Low maintenance costs
• Made from recycled materials

Cons:

• More expensive than wood
• Varying appearance issues between brands
• Not resistant to mold or mildew. Especially shows in places where the deck is under a lot of shade.
• Tend to sag and bend over time more than wood
• They don’t last forever. Varying warranty lengths (10 years – lifetime)
• Can be difficult to work with

PVC

Plastic lumber (PVC), including products made by Azek, is a 100% recyclable decking option made from recycled plastics. It is said to need the lowest amount of maintenance of the materials we are discussing.

Pros:

• Stain resistant
• No mold or mildew
• Scratch resistant
• Will not rot
• 100% recyclable

Cons:

• More expensive than wood
• Varying appearance issues between brands
• Tend to sag and bend over time more than wood
• They don’t last forever. Varying warranty lengths (10 years – lifetime)
• Can be difficult to work with

Please comment on your experiences with any of these decking materials. If you are looking for a deck builder in and around Lancaster County, PA, please contact MBC Building & Remodeling, LLC at [717] 371.5136.

More Family Time: The Important Benefits of Home Additions

There are several types of Home Additions we do here in Lancaster County, PA. Believe it or not, every room addition we’ve ever done was unique…seriously! Additions are custom designed to your exact dreams and needs, and the needs and dreams of every family are different! However, there is one unifying theme of all of the families we work with; when you create the home of your families dreams, your family dreams of spending more time at home.

More Family Room:
Sometimes a homeowner wants to add rooms, both bedrooms and bathrooms, for their growing family. Two or second story additions allow you to add exactly the rooms you want at exactly the right size and color you want them. Since you have the option of going up (2nd story addition) or out (room addition), there is no need to go through all of that hassle moving to an entirely new neighborhood!

By adding more family space, you will not only enjoy your home more, but it will up the square footage and home value as well!

Garage Addition: What makes a garage addition so great? No stepping outside in the cold winter, the rainy spring or the hot summer. No matter what the weather, you can start up your cars and trucks in the comfort of your own garage.

Do you need a space for all of your Christmas stuff, bikes or sporting equipment? More storage is the name of the garage addition game. And again, since you are customizing the space, you can have as little or as much storage room as you want.

Have you been considering finishing your basement? (Possibly even your very own Subterranean Sanctuary or Man Cave) Unfortunately, sometimes our basements just do not have the square footage or layout to really become the room we are envisioning. A garage could house all of those art supplies, tools, exercise equipment or toys downstairs or up. Many garages we build have a room above turned into a master bedroom, but this space could be used for anything you want.

Home Office: As I mentioned in a previous blog post “Your 4 Home Office Options”, home additions are always the most exciting home office projects. An addition allows you to completely customize your new workspace. You have the capability of your own bathroom plus an outside entrance for customers. What better way to be close to the family than working from home?!?

Another benefit? You just set up the desk and you’re ready to go, no painting, flooring or worse… drywall!

Mudroom: If you are getting tired of everyone tracking mud through the house, you can add a small mudroom. These are the perfect place to store the kid’s (big and small) coats, shoes, bags and more! You could also add a breakfast nook with a beautiful window looking out at your yard.

Screen(ed) Porch: No matter what you call them, a screen or screened porch is the perfect place to enjoy the spring, summer and fall with your family, from big kids to little grandkids, everyone enjoys spending time outside. Screened porches are perfect for entertaining events, such as birthdays and graduation parties.

Sunroom: Nothing brightens your mood more than sitting down in your very on sunroom to relax! Sunrooms offer complete natural light and heat, so they usually don’t use much energy, even during the coldest parts of winter. Reduce stress and reap the physical and emotional benefits of natural light in your very own home.

I hope these benefits of home additions helped you. There are of course many other benefits as well as drawbacks. When you are considering your own addition here in Lancaster County, PA, be it a second story, mudroom, home office, garage, screened porch or sunroom, please contact us for more information.

Thank you,

Matt Blank
MBC Building & Remodeling, LLC
[717] 371[.]5136