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.  This same loan can be done for ones existing home.

We believe first-time home buyers should get all the help they can. First-time buyers are often turned off by fixers or overwhelmed and ill-prepared to deal with the work required to bring some homes up to today's standards. Some buyers get their foot in the door and say "We have a lot of work to do here, and we're never going to get it done."

A Streamlined 203K loan might be the answer.

How Does a Streamlined 203K Loan Work?

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. 

  • A Streamlined 203K loan is figured into the original loan balance, resulting in one loan.
  • It can be an adjustable-rate or fixed-rate mortgage .
  • 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

  • Borrowers must occupy the property.
  • Property cannot be vacant for more than 30 days.
  • Work must be completed within six months.
  • 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
  • Luxury Items are excluded including pools and spas.

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.  

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.
  • Final payment is paid after submission of evidence of payment to sub-contractors / suppliers or other possible lien claimants.

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.

Do have questions?  We welcome your inquiry or to get started now call (214) 945.1066