3-in-1Mortgage approach

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Three-in-One Mortgage promotes mortgage financing in accordance with provisions of the 203k mortgage program. It is a very simple approach, but in order to better understand the benefits derived from utilizing it, there are certain aspects of current mortgage financing procedures that should be pointed out, including the requirements a loan applicant must meet when financing a home.

Currently a mortgage applicant shopping for mortgage financing may elect to use a traditional mortgage program (FHA 203(b), conventional or VA) and sign a purchase agreement/contract of sale subject to certain terms and conditions which, in most cases, include a clause to the effect that the property is being purchased in "as is" condition and will be delivered "vacant and broom swept", except for normal "wear and tear".

The lender will send a HUD-approved appraiser to do the property inspection primarily to determine that the value will support the mortgage being applied for, but also to assure that the property is in acceptable condition and will meet HUD's minimum property standards. Assuming that the area comparables, property square footage and construction type are satisfactory, the condition may - in many cases - need to be improved in order to meet HUD's MPS requirements and the appraiser would therefore be obligated to request that such repairs be completed as a condition of the appraised value.

The mortgage programs mentioned above are structured in such a way that, if repairs are required to be completed on the property as a condition of the appraisal report, a closing will not be permitted to take place until such repairs are completed, re-inspected (compliance inspection) and approved as having been completed in a manner acceptable to the lender and, by regulation, to HUD.

At this stage of the process, there would usually a need for renegotiation between the seller and his/her real estate agent regarding the cost of required repairs and how much of it will be deducted from the broker's commission; because the buyer is not required to pay for compliance repairs. In many cases the entire transaction hangs in the balance, and there have been instances where everyone involved in the transaction declares, as if in one voice "the deal is dead"; dreaded words when your earnings depend on the outcome of those transactions. The dreaded "dead deal stage" of the transaction has driven many a broker to drink.

I have always been of the opinion that the 203k program was created specifically to address that stage in the transaction when the seller refuses to complete repairs to a property being sold, the purchaser is restricted from paying for repairs on the property being purchased and there cannot be a compromise between the principals, even in cases when the real estate broker has agree to a considerable reduction in commissions/earnings.

Those who support the seller's position contend that there is a valid argument being made by the home seller, because people generally do not want to do a lot of work on a home they are leaving. That argument is certainly understandable. Of course, supporters of the buyer's position raise the question of why the buyer should have to incur the cost of a repairs on a home before even taking possession, especially with a mortgage payment soon coming due.

If a buyer was permitted to pay for repairs on the home being purchased, chances are that any contractor hired to do the work would probably demand payment upon completion and the buyer would therefore have to pay that (lump) sum which would most certainly take away from funds reserved for down payment, closing costs and reserves. However, if that same buyer was permitted to finance those repairs over a period of time after paying a small down payment towards them, a majority of buyers may elect to take on that responsibility, especially if they were given the option to choose the decor on a home they will occupy.

The 203 (k) difference

Choosing the decor of their new homes is precisely what buyers are able to do when they finance home purchases with HUD's Section 203k mortgage program. In addition, a purchaser can choose the General Contractor, type of materials used, the layout, number of units (cost for conversion is permitted), and under some circumstances, the type of heating and energy conservation improvements, plus a lot more.

The point is, buyers have full control of needed repairs to be completed on the properties they are purchasing. Once a price is agreed upon between buyer and seller and a contract is signed, the dreaded "dead deal" stage does not occur as a result of non-compromising of positions. It is non-existent, and will not be the cause of a real estate transaction being canceled; any cancellation will have to be the result of other conditions.

Three-in-One Mortgage Benefits

The Three-in-One Mortgage approach encompasses all that the 203k program offers, but goes further to include the maximum recommended energy improvements in accordance with a Home Energy Ratings System (HERS) report as well as increasing the buying power of purchasers as a result. It is reasonable to assume that, if prospective home buyers are aware of the benefits gained from purchasing a home with 203k financing, plus increase their buying power while reducing their long-term savings, many will opt to utilize this program. This is the objective that Three-in-One Mortgage has set out to achieve. Increase awareness of all the benefits offered in HUD's Section 203k mortgage.

FHA-insured mortgages are originated and processed by HUD-approved lenders. While it is true that any lender that is authorized by HUD can originate and process FHA-insured loans, only Direct Endorsed (DE) lenders are authorized to approve and close these loans (203(b) and 203(k)). The company with which Three-in-One Mortgage is associated is United Northern Mortgage Bankers a HUD Direct Endorsed Mortgage lender. For more details or to find out if you qualify, please visit the Credit Grade Calculator. Also, take a look at the United Northern 203k specialist page.

For additional 203k mortgage sources and relevant information, please visit the recently launched FHA-specific B.K.HECM Search Engine.