Credit on 203k closing cost and collateralized loan explained please (interest rate, escrow)

[sanctifiedlady27]

Hello to all,
I am about 1100.00 short on closing costs with a loan commitment date of the 10th of May. I have some of the lighting and flooring that I am going to use in the home which values over the 1100.00 needed. I read online under the hud guideline that this can be used for sweat equity. Is this true on both types of 203k loans? I have a full. If this is not the case, can some explain collateralized loans and what is acceptable? I was going to borrow money on my pickup or from a piece of jewelry. I would greatly appreciate your responses. Here is the info from HUD:

[SIZE=3][SIZE=3][LEFT]Labor performed, or materials furnished by the borrower before closing on
the property being purchased (known as “sweat equity”), may be considered
the equivalent of a cash investment, to the amount of the estimated cost of the
work or materials.[/LEFT]
[/SIZE][/SIZE][SIZE=3][SIZE=3][LEFT]Note[/SIZE][/SIZE][SIZE=3][SIZE=3]: Sweat equity may also be “gifted,” subject to the[/LEFT]
[/SIZE][/SIZE][SIZE=3][SIZE=3][LEFT] [/SIZE][/SIZE][SIZE=3][SIZE=3]additional requirements in HUD 4155.1 5.B.6.h, and[/LEFT]
[/SIZE][/SIZE][SIZE=3][SIZE=3] [/SIZE][/SIZE][SIZE=3][SIZE=3]gift fund requirements described in HUD 4155.1 5.B.4.[/SIZE][/SIZE]
[SIZE=3][SIZE=3][SIZE=3][SIZE=3][LEFT]If the borrower furnishes funds and materials,
he/she must provide evidence of the[/LEFT]
[/SIZE][/SIZE][SIZE=3][SIZE=3][LEFT] [/SIZE][/SIZE][SIZE=3][SIZE=3]source of the funds, and[/LEFT]
[/SIZE][/SIZE][SIZE=3][SIZE=3] [/SIZE][/SIZE][SIZE=3][SIZE=3]market value of the materials.[/SIZE][/SIZE]
[SIZE=3][SIZE=3]
[/SIZE][/SIZE][/SIZE][/SIZE]Thanks

[Pfhtex]

[redacted]

[sanctifiedlady27]

????

[Jamesww]

You cannot just simply use some part of the repair escrow cost to cover the funds you are short to close. You also cannot borrower funds to pay your down payment. You might be able to sell the jewelry, however, I would first check with your lender.

You must sell the jewelry though and not just borrow against it. If you sell this jewelry at minimum you will need to make sure you have a bill of sale to prove you got the funds from the sale of the jewelry. Then you will need to have the check showing that it is from the person who bought the jewelry. Make sure it is a check and do not just do a cash sale. You need the paper trail to prove to the underwriter where the money came from. Once you have sold the jewelry and you have a bill of sale along with the check from the purchaser, you need to go to your bank have them photo copy the check the bill of sale and the deposit slip together and sign the photo copy explaining that it was your deposit. Then get a transaction summary showing the deposit once it stops showing pending. Turn this into the lender to show you now have the funds to close.

If the funds you are short are not for the down payment, but rather for closing costs and/or prepaids then what you can talk to your lender about is increasing the interest rate to get the lender to pay the portion of the closing costs you are short. This can be known to the lender as Yield Spread Premium or Credit For Interest Rate Chosen

I wish you luck. I love the FHA 203k product and I happen to only originate renovation loans. The 203k is one of the loans that I originate.