Real Estate And Mortgage Section

Real Estate And Mortgage Section (REAMS) consists of information relating to real estate and mortgage financing… with emphasis on FHA 203k financing.


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One of the programs that I wrote extensively about on this blog and spent much of my time promoting, while still active as a mortgage lender representative, is the FHA-insured 203k rehabilitation loan. Having said that, I recently came across a video on the subject of 203k mortgages which does a great job of promoting the program and I want to share it with you. Click the REbuild USA link below to watch the video:

REbuildUSA With 203k on NBC Miami

Here are my remarks on this video:

This video hits the nail on the head about the FHA-insured 203k program!
It manages to convey (in 4 minutes, 45 seconds) the true essence and real benefits of the program, something I have been writing about for at least 3 years.
Thanks to Dennis & Teresa for putting 203k in the spotlight where,
hopefully, more first-time home buyers and qualified refinancing homeowners,
will take advantage of the program. I do intend to feature the video on my… (REAMS) website.



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How Does a Construction to Permanent Mortgage Work?

  • A Construction-to-Permanent “one time close” mortgage loan involves only one application and one closing that covers both the construction phase and the permanent mortgage and has one rate set for both.
  • The construction phase of the loan has interest-only payments. The bank will set up a disbursement schedule which are the payments made to your builder as the work gets completed.
  • An initial loan disbursement is made at closing if you are also purchasing the property (land or a knock-down) on which to build.
  • If you have a loan on the property that you’re building on, the first disbursement of the construction loan will pay-off that loan before construction starts.
  • When the construction phase is complete the construction loan converts over to a permanent fixed-rate mortgage.

Contact Arthur
201-741-1537 talk/text
Prospect Street Leonia, New Jersey 07605

Home Renovation Finance

REAMS takes great pleasure in bringing to you this article by Arthur Aranda. Mr. Aranda is a highly respected Home Construction & Renovation Mortgage Specialist who possesses a wealth of information about, and extensive knowledge in, residential New Construction mortgage loans, with special emphasis on Construction to Permanent loans. Please join us in welcoming Mr. Aranda by reading his first REAMS post. Thanks!

Homeowners can finance their renovation projects based on the appraised value of their homes, after the renovation is completed. In some cases, personal funds may not be needed for the construction costs. This unique feature of a “one-time-close” Construction to Permanent mortgage leverages the home’s future equity created by a major renovation or gut rehab construction project.

Here’s a brief overview of how it works. Let’s say the current appraised home value is $300,000 with a $200,000 mortgage balance. The homeowner plans a major home renovation with a $200,000 budget. A home equity loan would generally only provide $70,000 which is 90 per cent of the $300,000 appraised value minus the $200,000 mortgage.

If the appraised home value – after renovation – is $500,000, they may be able to qualify for a $400,000 Construction to Permanent mortgage which is 80 per cent of the home’s future appraised value. At loan closing the first draw would pay off their $200,000 mortgage balance, leaving $200,000 available for the construction. When construction work is completed the $400,000 loan converts to a permanent fixed rate mortgage at a rate that was set months earlier at time of application.

There’s a caveat however. The future appraised home value must cover construction costs, plus any existing mortgages; but this doesn’t always happen because a renovated home value may not appraise for the amount needed ($500,000) to cover the new mortgage, so the homeowner would need to use some of his/her personal funds.

Even when the entire construction budget can be financed based on the future appraised value, personal funds would still be needed to cover closing costs and typically, five per cent of the construction budget must be set aside as reserves to cover cost overruns. The lender will provide a Good Faith Estimate of closing costs and calculate reserve requirements so that the borrower will be prepared upfront for how much of their personal funds will be needed.

Each Construction to Permanent mortgage is structured to meet the needs of a homeowner’s specific renovation project. The lender will review a borrower’s income and overall financial condition to determine the qualifying loan amount. Generally a credit score of 680 or better is required; and for larger loan amounts a higher credit score may be needed.

Homeowner interested in this type of financing should talk to a construction lender early on in order to understand the process from application to funding, and to determine what documents will be needed for an expedient loan approval. They should also have some idea of what their home will be worth after the renovation. A good starting point for checking home values is a Zillow home price estimate (Zestimate). Currently, the national accuracy of a Zestimate is about 8 percent of the final sales price of a home.

Homeowners can also talk to real estate professionals, either agents or appraisers, who know the market in more details and can provide advise on how major home improvements will affect value. An independent real estate appraiser hired by the lender will review construction plans to determine the home value after renovation is completed.

A major home renovation project can be a complex process; but a one-time close Construction to Permanent mortgage can help make the financing simple and more affordable. Homeowners can focus on their home renovation with peace of mind; knowing that both the construction financing and the permanent mortgage are approved, the rate is set and the details of financing each stage from start to finish has been worked out ahead of time.

By Arthur Aranda

Contact Arthur
201-741-1537 talk/text
Prospect Street Leonia, New Jersey 07605

Real Estate and Mortgage Viewpoints In Retrospect

This first article titled, In Philadelphia, a Chance to Stave Off Foreclosure is published to the website.

My commentary: The article provides an insightful description of a necessary and timely housing program provided by the city of Philadelphia to that city’s homeowners. It is a program which should serve as a model to every municipality in the country. Housing and mortgage professionals should find the article very informative. Take a look!

This second article titled, Back to Business – Investment Funds Profit Again, This Time By Paring Mortgages is published to the website. it sheds light on the mortgage crises of 2007. View the entire article here!

My commentary: Way to go Wall Street! When you read this article you will probably be as surprise as I was. I have been pretty down on Wall Street for the last couple of years for a variety of reasons, not the least of which is the mortgage crises, but here is a Wall Street idea that is actually creating benefits for homeowners (Main Street). If you promote affordable financing for homeowners as I do, you will enjoy this article. Take a look for yourself at the above link!

Article number 3 is titled, An Upturn in the Housing Market May Be Reversing, is published on the website.

My commentary: At first I thought all the housing market news was going to be negative, but as I continued reading that turned out not to be the case. It’s kind of a mixed bag: One index shows housing prices rising just a fraction, another forecasting a decline of as much as 10 percent, while yet another has prices flat for September. Read more!

Article number 4 is titled, Treasury to Pressure Mortgage Companies to Cut Payments, is published to the website.

My commentary: Some workout programs have not been working out, and it may be necessary for the federal government to take a second look at the Home Affordable program. This is a fascinating article which gives the reader a brief insight into what is really taking place behind the scenes at mortgage servicers/holders across the country. Was it ever the intention of these banks and mortgage holders to implement the program as the government intended? You be the judge!

Article number 5 is titled, Bigwigs Debate ‘Too Big to Fail’ and is published to the Seeking Alpha website.

My commentary: As one who believes in, and writes about affordable housing at every opportunity, I certainly can’t fathom the TBTF concept. There are many who believe that our government is too big as it exists, and yet here we are debating whether certain institutions (not of the government) ought to be permitted – actually enabled – to continue operating on such a scale that their failure spells doom for the rest of us.

‘TBTF’ just doesn’t seem a reasonable or acceptable societal structure under which to live, so I’m anti-TBTF and I hope those we elect to address these matters share these sentiments. The above article, authored by Carolyn Austin, is very thought-provoking and, to her credit, she has opened what I believe to be one of the more profound discussions of our time. Take a look!

Article number 6 is titled, Official Google Blog: RT @google: Tweets and updates and search is published to the Google blog.

My commentary: What an appropriate statement. There is certainly a lot happening on the social networking scene, and when you add search to it, my sentiments are exactly those on the above article. Take a look!

Thank you for your support. We will continue working to provide the most relevant and useful information about current FHA-insured programs and related topics. God Bless!