Found the perfect home but it is cosmetically challenged or need to make some minor improvements in your home but don’t have the cash the credit or down payment needed for a conventional renovation loan then the FHA Streamline 203k renovation loan may be the answer.
Benefits and Features of the FHA Streamline 203k Mortgage
- For Primary Residences (1-4 unit family properties) only
- 3.5% minimum down payment
- Perfect for properties that are cosmetically challenged and may have been given low marks on quality and condition ratings and unable to obtain financing with Conventional, VA, USDA or normal FHA loans.
- The contractor costs can be built into the loan.
- No need for a second mortgage to repair the property. All costs are built into the first mortgage, which means lower closing costs.
- Loan amount can go up to 110% of the After Repaired Value (ARV) from the appraisal
|Minor repairs up to $35,000 total are allowed such as…|
|As long as it is minor, permanently affixed to the property and adds value. This list is not all inclusive|
|Basement finishing and remodeling, which does not involve structural repairs||Electrical & Plumbing modernization|
|Basement waterproofing||Well or Septic Installation/repair|
|Upgrading central air/heat||Roofing, gutters and downspouts|
|Minor Kitchen and Bath Remodeling||Flooring, tiling and carpeting|
|Handicap Accessibility||Replace or Install Siding on a wall|
|Painting inside and out||Weatherization, including storm windows and doors, insulation, weather stripping|
|Repair/replace/add exterior decks, patios, porches||New Built-in Appliances|
Contractor Requirements for the FHA 203k Streamline Mortgage
- Must have a construction contract with a contractor, no self-builds
- Use of a HUD Approved 203k Consultant is required
- The Bank reviews and approves your contractor to determine they are adequately qualified to perform the work and complete the job
- Plans & Specs must have been prepared by a registered, licensed, or certified general contractor, renovation consultant, or architect
- Plans & Specs must fully describe all work to be done & state when stages of completion will be scheduled, including both the job start & completion dates
Insurance Requirements for the FHA 203k streamline renovation loan
- You will be required to obtain Hazard and Flood (where applicable) at the after repaired value amount at time of loan closing
Changes to the plans allowed when using an FHA 203k streamline loan
- On an FHA Streamline 203k mortgage, any changes to original Plans and Specs must be accompanied by a necessary Change Order paperwork and not exceed original loan amount and be approved by HUD before any work is done.
Limitations when using an FHA 203k streamline loan for buying or fixing your current home:
- Minimum of $5,000 in repairs are required
- Maximum of $35,000 in repairs allowed. If more repairs are required then an FHA 203k full renovation loan may be needed
- Ineligible Properties (not all inclusive please call with the specifics of your property)
- manufactured housing & Condos
- New construction/never occupied
- Homes Purchased with Government assistance of any kind such as HUD $100 down, down payment assistance or income such as section 8.
- Homes constructed less than 12 months from Certificate of Occupancy (CO)
- Homes being relocated from one property to another
- Property Flipping NOT Allowed
- Investment/secondary homes are not allowed. The Property must be owner occupied. For These, you would use the HomeStyle Renovation Loan
- Items NOT Allowed
- Recreational or luxury improvements, such as pools, hot tubs, whirlpool baths. For these improvements, you would use the HomeStyle Renovation Loan
- Barbecue pits, bath houses, tennis courts, satellite dishes or tree surgery
- Additions or alterations to support commercial use or to equip or refurbish
- Washers and dryers
- If a refinance, you are not eligible to receive any cash back at closing
- Renovation Costs may include:
- Labor and materials
- Soft costs (architect fees, permits, licenses, inspection fees, independent consultant fees, engineering fees, fees charged for processing draws, review of renovation plans)
- Contingency reserve of 10% of the cost of labor, materials and soft costs) – this is optional unless property is a 2-4 unit property
- Contractor bid must be given to appraiser to determine ARV
- If funds remain after all work is performed, they will be applied to the loan
Availability of the FHA 203k streamline renovation loan in America
Home improvement, renovation, and rehab Mortgage Loan State AvailabilityUS State availability for Home improvement, renovation, and rehab Mortgage Loans
So if you’ve been looking for that perfect home or need to fix up your home FHA 203k streamline renovation loan may be the perfect way you can buy or fix up your dream home that needs some cosmetic love that you would otherwise not be able to purchase or repair. If you need Major Repairs then there is a full FHA 203k loan that may work better.
Contact us anytime and we would be delighted to consult with you and your project.
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