A “lite” version of the more complicated FHA 203k Rehab Loan program, this Streamlined 203K loan option does away with a lot of the paperwork associated with its bigger brother and makes it easier to get hold of the money you’ll need to make those much needed cosmetic repairs.
Often, Florida first-time home buyers avoid bank owned or foreclosed properties because they just don’t have the money required to bring these neglected homes up to snuff. It can all be very overwhelming. Think about it. You’re just starting out, maybe you’ve just started a family, and you just can’t see where the money required to replace carpet, paint, fix the AC, and re-shingle the roof is going to come from. The FHA Streamlined 203K loan program may very well be the answer for you!
Here’s How the FHA Streamline 203K Loan Program Works
In years past, it was common for a family to buy a home and then take out a home equity loan to fund the fix up and repairs that it needed to make it nice and cozy – leaving them with two loans. However, few lenders today are keen to make rehab loans, and families are lucky to get into homes with even 20 percent equity, much less the breathing room often required to do any sort of decent repair or fix up work. The FHA Streamlined 203K loan solves this problem by factoring the cost of repairs and resulting after repair value into one single loan.
Basic FHA Streamline 203K Facts:
- Repairs are factored into the loan amount, which means you only take out one loan
- Loan amount may exceed the purchase price of the property
- It is not necessary to hire professional consultants, licensed engineers or architects
- Home appraisers can put together a list of recommended repairs / improvements
Eligible Repairs & Improvements
The Streamlined 203K loan provides only for cosmetic or light structural repairs. Florida home buyers looking for major rehab funds to be wrapped into a single mortgage should instead look at the FHA 203K Rehab loan.
Using the Streamlined 203K mortgage, borrowers can take care of simple repairs that can be easily estimated and completed. Some repairs may require the use of a licensed contractor if they lie outside your personal area of expertise. The Department of Housing and Urban Development lists the following repairs as eligible under the FHA Streamlined 203K loan program:
- Roofs, gutters and downspouts
- HVAC systems (heating, venting and air conditioning)
- Plumbing and electrical
- Minor kitchen and bath remodels
- Flooring: carpet, tile, wood, etc.
- Interior and exterior painting
- New windows and doors
- Weather stripping & insulation
- Improvements for persons with disabilities
- Energy efficient improvements
- Stabilizing or removing lead-based paint
- Decks, patios, porches
- Basement completion and waterproofing
- Septic or well systems
- Purchase of new kitchen appliances or washer / dryer
Special Conditions & Terms
- The following terms and conditions apply to those taking out an FHA Streamline 203K mortgage:
- Property must be owner-occupied and cannot be vacant for more than 30 days
- Repair work must be completed within a six month period
- All work must meet professional specifications
- Borrowers must obtain permits for all work requiring them
- Work must commence within 30 days from closing
Repairs Not Covered
- Landscaping or yard work
- Major remodeling
- Moving a load-bearing wall
- Room additions or add-ons to the home
- Fixing structural damage
Requirements to Perform the Work
- Borrowers may choose any licensed contractor
- Lenders review each contractor’s experience, background and references
- All contractor estimates must be submitted to the lender along with copies of all agreements between the contractor and borrower
- If they can prove competency, borrowers may perform repairs – note: borrowers must provide the lender with documentation supporting the borrower’s knowledge, experience and ability to perform the necessary work
Payment Disbursement Process
- Each contractor used can receive a maximum of two payments – this includes the borrower if performing work under the “self-help” model
- No one advance may total more than 50% of a given repair job
- Do-it-yourself allowances do not include labor; only materials costs are allowed
- Final payment is paid after submission of evidence of payment to sub-contractors / suppliers or other possible lien claimants.
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage loan originator, I’m your guy. Call me at 888-859-7418 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
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I had a closing recently on an REO and my buyer took advantage of this great program. The money was used to tear out an in-ground pool.
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Awesome, Kevin! I do think it’s a great deal, and I’m definitely seeing some increase in the interest levels here in Central Florida for the Streamlined 203K loan!
The 203K Loan is a great alternative to the standard FHA loan. So many foreclosure properties need repairs that banks are unwilling to make, but the standard FHA guidelines require habitability, and are very strict with regard to property condition. The 203K lets people with small down payments still take advantage of the chance to achieve home ownership with heavily discounted distress sales that need work. Thanks for getting the word out!
.-= Geoff@San Diego Foreclosures´s last blog ..MIA San Diego Foreclosure Properties =-.
Hey Geoff – First, thank you so much for stopping by! I can think of no better financing vehicle that this FHA 203K Streamline loan for getting a foreclosed property – or any property needing up to $35,000 of repair work – up to speed. Seriously, it’s an underused mortgage loan vehicle.
Here in the Orlando and Tampa, Florida mortgage markets, there are tons of homes that could be absorbed using such a program.
Hi , I am a licensed genereal contractor in Minnesota , I am moveing into the are between Orlando and Clear Water could I get this Loan and pay myslf on my labor or do I have to pay someone else
Hey Gene – It’s my understanding that you can use the Streamline 203K loan and do the work yourself, as long as you are licensed to do that work. Not sure being a contractor will cover everything. The lender may require you to be an actual licensed electrician – say, to do electrical work.
Wow, very interesting. This is a great program for newly married couples with low or even no disposable income. I know I will take advantage of a program like this to avoid having to fill out tons of paperwork to add on yet another loan when that household emergency pops up.
Wow, great for sharing. This is a great idea for families just starting out.
A great way to save money on those repairs that won’t be rolled into the loan is to get your materials wholesale. Ordering from an online dealer can save you tons on everything from carpet to electronics.
Do you know if there is a way for contractors to get registered and set-up ahead of time with the HUD so they can market themselves to potential buyers who are looking to utilize the 203K loan and will need a contractor? Thank you
There’s now a central database of 203k Contractors. http://www.203kContractors.com TM.
I feel first time home buyers will shy away from bank repos and foreclosures as they are more careful with their purchase. They don’t want to gamble by buying something with which they will have problems or something that requires too many renos.
This is an amazing program especially for those newly married couple having low income. This is very promising and it is really a good help because you only have to take advantage of one loan.
I agree. We’ve done quite a few of these and find they’re excellent for folks who are willing to put a little work into a less than perfect-condition REO or foreclosure property.