203K Mortgage Renovation Program
There are a lot of great opportunities in the real estate market to purchase and fix up homes that have been sitting empty for years and the Federal Housing Authority (FHA) has a program that can assist you in doing just that.
In 2005 HUD came up with a new FHA insured mortgage program called the "Streamline (K) Limited Repair Program. The Streamline 203K loan permits homebuyers and those refinancing to borrow up to an additional $35,000 into their mortgage to improve or upgrade their home. Not to be confused with FHS's much more complicated 203K loan eliminates much of the paperwork and simplifies the process to obtain and repair and rehab funds.
The FHA Streamlined 203K program is intended to facilitate uncomplicated repairs or improvements to a home for which plans, consultants, engineers or architects are not required. The Streamlined 203K program includes the improvements and/or repairs shown below:
- Repair/Replacement of roofs, gutters and downspouts
- Repair/Replacement upgrade of existing HVAC systems
- Repair/Replacement upgrade of plumbing and electrical systems
- Repair/Replacement of flooring
- Minor remodeling such as kitchens, which does not involve structural repairs
- Painting, both interior and exterior
- Weatherization , including storm windows and doors, insulation, weather stripping, etc.
- Purchase and installation of appliances, including free-standing ranges, refrigerators, washer/dryers and dishwashers
- Accessibility improvements for person with disabilities
- Lead-based paint stabilization or abatement of lead-based paint hazards
- Repair/Replacement of decks, patios, porches
- Basement waterproofing
- Basement finishing and remodeling, which does not involve structural repairs
- Window and door replacements and exterior wall re-siding
- Septic system and/or well repair or replacement
What a Streamlined 203K won't permit:
- Landscaping or yard work
- Major remodeling
- Moving a load-bearing wall
- Room additions or add-ons to your home
- Fixing of structural damage
Given the need for homeowners to make minor repairs without exhausting personal savings, and in consideration of the increasing cost of materials the ceiling is now raised to $35,000. This revised maximum repair/rehabilitation amount recognizes the cost of making older homes more energy efficient. Please note that when repairs exceed $15,000 the mortgagee must perform or obtain an inspection to determine that all listed repairs were completed.
Reasons to apply for a loan below $15,000
The lender is not required to inspect the completed work
The lender is not required to authorize a third party to inspect the completed work
A letter from the borrower or copies of contractor receipts will suffice as notice of completion, providing the lender has no reason to determine a third-party inspection is necessary
How you can apply
It used to be that you bought a home and then applied for a home equity loan to fix it up, resulting in two loans. But many lenders won't make rehab loans. Some won't fund equity loans at closing, especially if there is no equity. A Streamlined 203K is figured into the original loan balance, resulting in one loan.
Visit your local bank or mortgage lender and ask for advice on obtaining a Streamlined 203K loan. Most lenders are aware of this FHA finance product and can guide you through the process. Provide a detailed estimate of the repairs or enhancement to the property that you would like financed and the price of the home that you would the mortgage on and they will proceed with their credit analysis.