On December 10, 2008,
in Tips And Advice,
by Jonas Kruckeberg
Written by: Jonas Kruckeberg |
California - 619-436-8267
If you’ve been passing up buying homes that require cosmetic repairs for lack of funds to fix them up, FHA has a program for you. Not to be confused with FHA’s much more complicated 203K program, a Streamlined 203K loan eliminates much of the paperwork and simplifies the process to obtain rehab funds. Buying a home in Temecula, Murrieta and the surrounding cities can be a competition. Homes that are ready to move in typically have up to a dozen offers the day after it hits the market.
A Streamlined 203K loan might be the answer on a fixer.
How Does a Streamlined 203K Loan Work?
Watch this video to find out.
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 loan is figured into the original loan balance, resulting in one loan.
The mortgage balance can exceed the purchase price of the property.
Borrowers are not required to hire professional consultants, licensed engineers or architects.
The appraiser or home inspector can put together a list of recommended repairs / improvements.
Eligible Repairs & Improvements
The Streamlined 203K loan allows for simple repairs that can be easily estimated and completed. Many are considered light cosmetic repairs, but some will require hiring a licensed contractor if it falls out of the borrower’s area of expertise. Here is an approved list of repairs / improvements from HUD:
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
No minimum loan balance required.
Borrowers must occupy the property.
Property cannot be vacant for more than 30 days.
Work must be completed within 90 days.
Work must be professional.
If job requires a permit, borrowers must get a permit and a sign-off.
Work must commence within 30 days from closing.
Repairs Not Permitted
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 can select among licensed contractors.
The lender will review the contractor’s experience, background and referrals.
The lender will want a copy of the contractor’s estimate and the agreement between the contractor and borrower.
Borrowers can also arrange to do some or all of the work under a “self help” arrangement.
Do-it-yourself projects require providing the lender with documentation supporting the borrower’s knowledge, experience and ability to perform the necessary work.
Disbursement of Payments
Maximum of two payments to each contractor, including the borrower, providing the borrower works under a “self help” plan.
No more than a 50% advance is allowed.
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.
This is a Mortgage Video and Blogging community of national lending professionals who are dedicated to educating buyers and real estate agents about the home loan process.
*This is not an offer to lend. 
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