1. Increasing Your Sales WithFHA 203(k) Streamline Loans Brought to you by:

2. Why FHA?

Recent surge in FHA loans. Some reasons are:

• • Tightening of Conventional Underwriting Guidelines

• • Increased Mortgage Insurance Costs

• • First Time Home Buyer Programs Scaled Back

3. Typical FHA Borrower

• • Family member allowed to sign as non-occupying co-borrower!

• • May be a 1 sttime homebuyer

• • May have bruised/lack of credit

• • May have minimal down payment

4. Comparison of FHA andConventional Loans Stringent stand-alone ratios apply for primary borrower when non-occupant co-borrower is applicable No stand-alone ratios apply for primary borrower Stand-Alone Ratios: Ratio calculations more rigid. Ratio calculations more flexible Ratio Calculations: Household income calculations more rigid Household incomecalculations more flexible Income Calculations: Conventional: FHA: 5. FHA/Conventional Comparison continued Often 2-month PITI reserve requirement. Typically NO 2-month PITI reserve requirement. Reserve Requirements: May allow non-occupant co-borrowers but there may be additional qualifying restrictions (e.g. additional ratios for occupant co-borrowers). Allows non-occupant co-borrowers without additional qualifying restrictions. Non-occupantco-borrowers: Typically 5% must be from borrower's own funds unless 20% down. Down payment can be derived from gift.* Gifts: Required down paymenttypically higher than 3.5%. 3.5% down payment requirement Down Payment: Conventional: FHA: 6. FHA Overview Conventional: FHA: Less likely to qualify for Conventional loan than FHA More likely to qualify for FHA loan than conventional loan Bankruptcies & Less-Than-Perfect Credit: Typically more stringent guidelines. Typically more flexible guidelines Guideline flexibility: 7.

More FHA Advantages:

• Seller can pay up to 6% of closing costs and prepaids

• Co-signers allowed, but may add an NOO individual for approval

• No prepayment penalty

FHA Overview 8.

More FHA Advantages (cont.):

• More lenient underwriting

• Compensating factors

• Non-traditional credit

• 7 rental property maximum versus 4 maximum on conventional

FHA Overview 9.

• Fairfield Mortgage has Direct Endorsement Approval.

• That means:

We have the highest level of underwriting approval.

• Quicker Approvals

• Quicker Closings

10. Standard FHA Terms

• 30 year fixed

• 15 year fixed

• 1 year and 3 year ARMs

• Owner occupied, primary residences only

• *Note:203(k)

• Streamline

• Program:

• 30 year fixed only

11. What is anFHA 203(k) Streamline Loan?

the purchase of a property

AND the cost of repairs or modernization of the property.

203(k) Streamline is a type of FHA mortgage that includes: 12. 203(k)Streamline: What are the benefits?

Amount of repair escrow can range from $5,000

to $35,000

Can finance repairs to update the home.

13. 203(k) Streamline: What are the benefits?

Property may have deferred maintenance

Property may be an REO, foreclosure or short sale

14. 203(k) Streamline: What are the benefits?

Property may have incomplete renovations

Property may have an outdated kitchen

or bath

15. 203(k) Streamline: What are the benefits?

Provides borrowers an affordable, stable financing solution that combines the purchase of a home along with the cost of improvements

& -all in a single loan. = 16. 203(k) Streamline: What are the benefits?

Any left over funds are applied directly to the loan principal.

Help borrowers find affordable financing and realize the dream of home ownership

17. What types of improvements are eligible for 203(k) Streamline?

Kitchenorbathremodel (does not include structural repair)

18. What types ofimprovements are eligible for 203(k) Streamline?

Flooringrepair/replacement

Basementwaterproofing

Repair/replacement ofroof ,guttersordownspouts

19. Eligible improvements (continued)

Repair/replacement ofpatio ,deck ,porchorterrace

Repair/replacement/upgrade of existingheating ,ventilationandair conditioningsystem

Repair/replacement ofplumbingandelectricalsystems

20.

Handicappedaccessibility improvements

Eligible improvements (continued)

Purchase and installation ofappliancesincluding free standing ranges, refrigerators, washers and dryers, dishwashers and microwaves

21. Eligible improvements (continued)

Exterior and interiorpainting

Lead based paintstabilization or abatement of lead based paint hazards

22. What improvements areNOT eligible for 203(k) Streamline?

Luxury items:

swimming pools

tennis courts

Gazebos

barbeque pits

saunas

hot tubs, or

alterations to support commercial use

23. What improvements areNOT eligible for 203(k) Streamline?

Landscaping

Major remodeling or room additions

24. Ineligible improvements (continued)

Improvements to detached structures

(such as garages) 25. Ineligible improvements (continued)

Any repair or improvement requiring a work schedule longer than 6 months or more than 2 payments per specialized contractor

26. FHA 203(k) StreamlineApplication Process Realtor helpsborrower locate property. Borrower* and realtor determineimprovements basedon need orpreference. Borrower* obtainscontractor bidsand costestimates assoon as possible. *or Cost Consultant hired by borrower 27. FHA 203(k) Streamline Application Process Appraiser determines as-isand improvedvalues. Loan closes.Initial drawmaybe disbursed,@ 50% ofcontract amount. Loan isunderwrittenand approved. 28. FHA 203(k) StreamlineApplication Process Construction MUSTbegin AS SOONAS POSSIBLEAFTER closing, butno later than30 days from closing Work is completed; final inspection by appraiser; final draw disbursed. MUST BE COMPLETEDWITHIN 6 MONTHSOF CLOSING 29. Contractor & Sub-ContractorRequirements

Must be licensed by state or industry board for each specialized repair or improvement

Must sign Homeowner/Contractor Agreement and W-9 prior to closing. They will receive a 1099 reflecting amount paid.

Must provide estimates for supplies and labor. Must agree in writing to complete work for the amount of the cost estimate and within the allotted time frame.

Must be approved by our DE underwriter.

30. What is the contingency reserve?

10% of the cost of the rehab that is held in the repair escrow account. In certain circumstances, this can be 15% or even 20%.

Can only be used on changes that affect health or safety, or an increase in cost due to a necessary item.

31. Contingency Reserve

If reserve amount is insufficient, the borrower must place additional monies into the reserve fund.

If the additional improvements do not meet the guidelines, borrower must pay for them, but not out of the contingency reserve fund.

32. Contingency Reserve

Upon completion of the project, any remaining contingency reserve funds MUST be applied to the principal balance of the loan.

33. FHA 203(k) StreamlineProgram Summary

Finance cost of home PLUS repairs/modernization

Benefits buyer, realtor and lender

34. FHA 203(k) Streamline Program Summary

Kitchen/bath remodel

Painting

Purchase/install appliances

Repair/replace:

• gutters

• porch

• roof

• patio

• heating/ac

• plumbing

• electrical

Includes:

Luxury items

Landscaping

Detached structure improvements

Major remodeling / additions

Excludes: 35. FHA 203(k) Streamline: Questions?