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The Mortgage Process When Remodeling Your Home

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Consider an FHA 203(k) Loan to Renovate Your Existing or “New” Home


Unless you’ve built a home to your exact specifications, chances are that either the house you live in now or the one you would like to buy could use a little or maybe a lot of work to become your dream home. You can picture a “perfect” version of the home, but can you afford to make the changes? An FHA 203(k) Loan could be the solution! It’s a specialty product offered by Citywide Home Loans, an FHA-approved lender.


Ready to get started on the loan process? Call Quinn Richins, Citywide’s product specialist for FHA 203(k) loans at (801) 747-2470. He can let you know over the phone if a 203(k) Home Improvement Loan is right for you.


Never heard of it? Want to know more before you talk to anyone? Read on!


An FHA 203(k) is a loan insured by the government. It allows you to finance not only the cost of your home but also the cost of its improvements. You can buy (or refinance) a home and fix it up with very little money out-of-pocket. Your major up-front cost is the standard low down payment on an FHA loan. All improvement costs are part of the final loan amount being financed, and they become part of your monthly mortgage payment. It is designed to create opportunities to repair or improve existing homes, and increase the value of your home with a single mortgage that has low, fully amortized rates.


FHA-insured loans offer more flexibility in calculating household income and payment ratios.

They help low-income borrowers get a loan without making large down payments. In order to obtain a loan that is backed by the FHA (Federal Housing Administration), one must go through an FHA-approved lender, such as Citywide Home Loans.


There are two types of 203(k) loans available to you: Limited and Standard. The right one for you depends on the extent of the repairs and improvements you want to make, as well as their cost.


The Limited 203(k) loan allows for improvements that are non-structural in nature, with a total cost of up to $35,000, including fees. It excludes items such as moving load-bearing walls, room additions, repairing structural damage, and landscaping. The improvements cannot keep you from occupying the property for more than 30 days during the rennovation, cannot take longer than six months, cannot require detailed architectural drawings, and cannot require more than two disbursements of funds (draws) per contractor to complete the work, one at closing and one after the final inspection.


The Standard 203(k) loan does allow for structural improvements, like moving load-bearing walls and major landscaping. The cost of all improvements may exceed $35,000. The home can remain unoccupied for up to one year, and the repairs can take up to 12 months. There are a maximum of 5 draws. Because the first draw can’t take place until 10 percent of the work has been completed, there are fees you will have to pay up-front. The next three draws occur at pre-defined times, and the last draw occurs after the final inspection. HUD requires you to use a HUD-Approved 203(k) Consultant, typically a certified contractor or inspector who manages the entire process. You will pay the consultant fee up-front, based on the final cost of the repairs. You can locate a HUD-Approved 203(k) Consultant in your area by visiting https://entp.hud.gov/idapp/ html/f17cnsltdata.cfm.


There is actually a long list of things you can do with both types of 203(k) loans. All of these can be included in your “dream home” list:

  • Repair/replace roof, gutters, and downspouts
  • Repair/replace/upgrade existing HVAC systems
  • Repair/replace/plumbing and electrical systems
  • Minor renovations in kitchen and bathroom
  • Interior or exterior painting
  • Weatherization including storm doors and insulation
  • Buy and install appliances
  • Repair/replace septic systems
  • Disability access
  • Abatement/stabilization of lead-based paint hazards
  • Repair/replace/build decks, porches and patios
  • Basement finishing and waterproofing (excluding structural)
  • Replace windows, doors and siding


What you choose to do is really up to you. Only “luxury” items, like above-ground pools, hot tubs and top-of-the-line appliances, are excluded from both loan types.


Only these four items are limited to a Standard 203(k) loan:

  • Load bearing walls
  • Room additions
  • Repair/replace sill plate
  • Major landscaping


Standard FHA guidelines also apply to an FHA 203(k) loan. They include:

  • Down Payment of at least 3.5 percent of your own funds
  • Credit Score minimum of 620
  • Debt-to-Income Ratio (DTI) cannot exceed 45 percent of your gross income
  • Loan amount cannot exceed 110 percent of the after-improved value of the home minus your down payment
  • On a refinance, the total amount being financed cannot exceed 110 of the after-improved value of the home minus 2.25 percent, or the current loan balance plus the cost of repairs. FHA limits the total loan amount by county. Find your limit at HUD.gov.
  • Only primary residences are eligible, not investment properties.
  • Size is limited to one-to-four-unit dwellings
  • HUD requires a Contingency reserve between 10-20 percent of the total repair costs to be held in escrow to cover overages and ensure that the work is completed on time. Any money left over can go to the balance of your loan or to fund additional improvements.


A 203(k) loan requires a considerable amount of paperwork. You and your loan expert will work together to get the paperwork finished and submitted in a timely manner. It’s important that you have an understanding of what’s required, so ask all the questions you need to ask to get the job done correctly.


In addition to your loan expert, the following people will be part of your team.

  • The Home Power Team is responsible for finding, negotiating and performing the due diligence on the home. It includes the realtor and any inspectors you use during your purchase process.
  • The Loan Power Team is responsible for qualifying you, “originating” the loan on the home, and handling the loan paperwork and money. It includes a mortgage professional, an appraiser and an escrow officer.
  • The Improvement Power Team is responsible for the actual improvement work on the home. It includes your 203(k) consultant, who puts together the Specification of Repairs with the contractor(s) and sub-contractors who specialize in certain tasks.


The timeline of events for a 203(k) home improvement loan will include a few more steps than a loan that doesn’t include financing of improvements. Ask your loan expert for additional details:

  1. Pre-Qualification
  2. Finding a house (home search, offer & negotiation)
  3. Deciding on repairs/improvements
  4. Home inspections
  5. Loan paperwork
  6. Appraisals
  7. Loan approval
  8. Meeting at the title company to sign the paperwork
  9. Home improvements overseen by the Consultant or General Contractor
  10. Final inspections and closing


The main benefit of a 203(k) loan is that it gives you the ability to buy a home in need of repairs or to make changes to your existing home that you might not otherwise be able to afford.


If you are interested in more information on a 203(k) home loan, contact Quinn Richins, Marketing Director/Senior Loan Officer (NMLS# 103926), our Citywide Mortgage loan specialist for FHA 203(k) ) loans, at (801) 747-2470. He can let you know over the phone if a 203(k) Home Improvement Loan is right for you and answer any additional questions you might have.


Additional Resources:




10 Tips to Reduce Allergens and Have Cleaner Air in Your Home

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10 Tips to Reduce Allergens and Have Cleaner Air in Your Home.


According to the EPA, indoor air is generally more polluted than outdoor air. Allergens are just one form of air pollution that may be in your home. For allergy sufferers, the time of year, a pet, mold or even dust can be a problem, but having cleaner air in your home is healthier for everyone all year long. Here are 10 tips to reduce allergens and improve your indoor air quality:


  1. Have house plants. Plants are a natural and beautiful way to clean the air in your home. Some plants that are good for cleaning the air are spider plants, ferns, English Ivy, Golden Pothos, Snake Plant, and several dracaena.


  1. Keep HVAC systems clean. Run the fan in the ‘auto’ mode when using the AC. Having the fan on all the time will raise the humidity and may lead to mold growth. Clean ducts as needed and change filters often.


  1. Minimize dust. Dust frequently with a damp or treated cloth that attracts the dust rather than sending it into the air. Minimize dust-gathering clutter. Have your carpet deep-cleaned. Keep your windows closed when it is windy.


  1. Ventilate cooking areas. A top air polluter in the home is cooking with natural gas or at high temperatures with electric appliances. Use an exhaust fan that vents to the outside, or open a window and use a small fan to move air outdoors.


  1. Burn candles and wood fires sparingly. Candles emit smoke and fragrances. Wood fires pollute the air both inside and outside of your home with invisible particles inhaled into the lungs that may have several adverse health effects.


  1. Vacuum often. Vacuum floors and carpets at least one or two times a week, using a HEPA filter that traps smaller particles. Eliminate the dust, pet dander, hair and pollen trapped in carpet, by replacing old carpet with tile, wood or vinyl.


  1. Clean green. Use organic, non-toxic, odor-free cleaning products or make your own. Google products and recipes. Use steam vapor cleaners that clean and disinfect using only water. Don’t store chemicals, solvents, glues or pesticides in your home.


  1. Have pet-free areas. As much as possible, keep pets off of beds, out of bedrooms and off of living-area furniture. Wash your pet at least once a week. Weather and safety permitting, keep your pet outside. It’s good for them, too.


  1. Prevent mold and mildew. If humidity is high where you live, use a dehumidifier. Turn on the bathroom ceiling vent or open a window when showering. Use paint or tile, not wallpaper in a bathroom. Keep all walls as dry as possible. Make sure all appliances vent outside the house.


  1. Don’t idle your car in the garage. Your car’s emissions will end up inside your house. Install a carbon monoxide detector to be sure your air is free of that silent killer. Be sure to open the flue before lighting a gas fireplace.


Allergy sufferers who aren’t helped by these measures can try using an air purifier, changing clothes after being outside, showering before bed, washing sheets and blankets in very hot water at least once a week and not drying them outside, eliminating anything with a fuzzy covering like pillows or stuffed animals, and any other procedures recommended by a doctor.

Your Dream Home Wish List: Consider What You Can and Can’t Do Without

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Your Dream Home Wish List: Consider what you can and can’t do without


Hoping to Buy Your Dream Home? Your Real Estate Agent and Loan Officer want to make your dream come true, but be prepared to make at least a few compromises.


You’ve “done the math” and have a pretty good idea of what you can afford to offer for your new home. But is your Wish List just in your head, or have you actually put on paper all the things that will make This Home your Dream Home? When your answer is “Yes,” the next step is to come up with a ranking system, just in case all of the things on your Wish List aren’t wrapped up into one house that falls within your budget.


You can make up your own system, but a scale like this could get you started:

5 = Deal Breaker; 4 = Heart Breaker; 3 = Really Want It; 2 = Could Go Either Way; 1 = First to Cut


Now, simplify your list by organizing your wishes into categories. Ranking each item in the category can help you decide the importance of the category, too. You’ve heard it before—there are only 3 things to consider: Location, Location, Location—so let’s start there.


Location: You may have fallen in love with the look of a certain neighborhood, perhaps near work, family or friends. Think deeper! Consider how important it will be to you if this location:

  • Is near to public transportation, the airport, a major highway, shopping areas
  • Has schools that rank high in the areas where you want your kids to excel
  • Includes families with or without children, depending on your situation
  • Has a great view or is near to scenic recreation areas


Home Type: Do you have your heart set on a certain type of home; for example, single-family, condominium, townhome? If the style of home you want is within your chosen location, how important is:

  • The minimum or maximum age of the home
  • The architectural style: Ranch, 2-story, Cape Cod, Colonial, Victorian, Mid-century, Stone & Stucco, etc.
  • The current condition and an immediate move-in vs. the need to renovate


Square footage and number of rooms:  The make-up of this category could contain the most “deal breakers,” but how you plan to use the rooms may change over time, so consider your family’s needs now and in the future:

  • Number of bedrooms and bathrooms
  • Open floor plan with kitchen and living area combined
  • Eat-in Kitchen &/or formal living and dining rooms
  • Family room &/or entertainment center
  • Laundry room size and location
  • Garage and outdoor living areas


Décor: You’ve found the style of house you want with a location you love and the number of rooms you need, but when you walk in the door, do you have to love what you see, or are you able to afford and open to some upgrading of:

  • Flooring: wood, carpet, tile
  • Kitchen cabinets & countertops
  • Windows
  • Fireplace: gas or wood-burning
  • Heating & cooling systems


Okay, you have a list with any additional preferences you are hoping for and a column for where each one falls on your ranking scale. Talk to a Citywide Loan Officer about prequalifying for a loan on a home that fits your budget and includes most of the highest ranking wishes on your list. Then let us help you find a realtor who specializes in homes like the one you’re looking for. With these two experts on your team, you’ll be set to find the home of your dreams.

Costs to Consider Before Purchasing a Home

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Buying a home? In addition to the new 2018 tax laws, these other financial considerations could affect your total cost. 

Buying a home in early 2018 could be the best financial decision you make all year. Low interest rates and slowly climbing home prices could make it the perfect time for you to jump into the real estate market. However, in addition to considering the base price, the down payment and the interest rate you will need to make your loan affordable, there are several other things you will be wise to consider before you take the plunge.

The DTI: The Debt-to-Income ratio—your monthly expenses compared to your income—will assist in determining the approval of your loan. You and your family also should consider your ability to keep your current lifestyle when you become home owners. The DTI gives you better idea of what you can spend on a house payment without having to cut lots of corners for the next 10 years. You can find several online calculators and forms that will calculate your DTI based on the figures you input.

Buy property you can afford now, not later. Even if you’re almost certain you’ll be earning more in a year or two, there also might be circumstances that increase the other expenses in your life. Children, schools, a new car, medical bills and home upkeep can be substantial costs. Be sure there will be room in your budget to live life the way you’ve planned.

Don’t underestimate the costs of purchase. In addition to the price of the home, there are many other costs involved,. Ask friends who have gone through the home-buying process. It’s unlikely they will say that it cost less than they planned for. It’s safer to understand and over-estimate those additional costs.

Some of the fees and services you can expect to pay for include the following:

  • Mortgage application fee: Lenders charge a fee for a mortgage application. The price varies, but can be several hundred dollars.
  • Home inspection: An inspection finds any undisclosed problems with the house before purchase. This protects you, the buyer, and gives the owner time to correct problems tied to making a sale. You can expect to pay several hundred dollars for the inspection.
  • Closing costs (title, appraisal and origination fees; interest due and escrow deposits): The paperwork for a home sale involves agencies at the private and government level. Your real estate agent should inform you each step of the way what you’ll be signing and paying for. You can ask for at a list of how much total closing costs will be before the big event. Closing usually runs about 2 to 3 percent of the cost of the house.
  • Homeowner’s Insurance: Coverage provided by a 3rd party agency to protect your home will be part of your total monthly payment, required and disbursed by your lender from your escrow deposits.
  • Mortgage Insurance: Coverage for the lender to protect against loan default may be a portion of your total monthly payment, also disbursed by your lender from your escrow deposits.
  • Property Taxes: As a homeowner, you will make an annual tax payment to the county until your principle is below a certain percentage of the value of your home. This is a part of your total monthly payment and is disbursed through your escrow. Some tax may be owed upon closing.

Contact your real estate agent and loan officer to learn more details about the initial and ongoing costs of homeownership.