Mortgages

FHA 203K Mortgages-Light Rehab of Up to 35K in Repairs

The Federal Housing Authority or FHA also offers the 203k loan that is for light rehabilitation to a dwelling that requires $35,000 in repairs or less.  This is called the Streamline 203k loan. The Streamline 203k loan is great for buyers who may pass on a home because it needs minor repairs.  This loan is different from major rehab 203k loan and eliminates paperwork and simplifies the rehab fund process.

How it Works

The 203k Mortgage for light rehabilitation works for homes for sales as well as improvements to existing homes.  Its features include 30 year fixed or adjustable loans, 110% loan to value ratio, appraised value is given after the improvements are made to enhance the homes worth, and is great for minor rehabilitation repairs or revitalization.

You must occupy the home within 60 days after the repairs are completed and funds are disbursed to the contractor you pick in two stages.  First, a 50% materials draw is funded and when the completion of repairs is 100%, the remainder of the funds is released.

Quick Facts

The Streamline 203k minor rehab loan may be calculated into the original loan balance creating one loan.  It can be an adjustable or fixed rate and the mortgage balance can exceed the purchase price of the property.  Borrowers do not have to hire professional engineers or architects.  A home inspector or an appraiser will create a list of needed or recommended repairs or improvements and you can do the repairs yourself, or hire a contractor.

Eligible Rehab Repairs

The Streamline 203k loans is used mostly for light cosmetic repairs not exceeding $35,000 and includes roofs, gutters, and downspouts.  It may also be used for HVAC systems, electrical, plumbing, minor improvements to kitchens or bathrooms, flooring, interior and exterior painting as well as new windows and door and weather stripping and insulation.  The 203k light rehab loan encourages funds for handicap accessible improvements, energy efficient additions, removing lead paint, and the addition of decks, patios, porches, septic and well system.  A buyer may also purchase new kitchen appliances and a washer or dryer.

Ineligible Rehab Repairs

Items not eligible for the 203k Streamline light rehab loan are landscaping and yard work and major remodeling or rehabilitation to any dwelling.  It is also not for moving walls, adding rooms or fixing extensive structural damage.

What Are the Terms?

With the 203k light rehab loan, no minimum loan balance is required; however, buyers must intend to occupy the property once the light rehab repairs are complete.  The property may not be vacant for more than 30 days and all work must be completed within six months.  You do not have to hire a HUD approved contractor; however, a professional must complete your light rehab repairs.  All repairs must commence within 30 days after the closing.

Who Does the Work?

The 203k light rehab mortgage allows the buyer to select their licensed contractor and the lender will review the contractor’s experience.  The lender will get a firm estimate from the chosen contractor and buyers may even arrange to complete some of the work themselves.  If you go the do-it-yourself route, the lender will require documentation showing that you are qualified to complete the light rehab repairs.

Summary

The FHA 203k light rehab mortgage is great to make improvements to your owner-occupied home if the repairs are under $35,000.  If the repairs fall below $15,000, the lender is not usually required to perform an inspection and a letter from the borrower is sufficient along with contractor receipts as notice of completion of work.

Perspective homeowners now have the option of buying a home in need of light rehab repairs through the 203k loan, and it’s a lot less paperwork than the major rehab 203k mortgage.   The 203k Streamline line loan may also be used as a home improvement loan. If the home you are looking at needs minor rehab repairs, ask your lender about the 203k Streamline loan.

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FHA 203 K Mortgages-Full Rehab-Major Renovations

The Federal Housing Administration or FHA a division of HUD offers the 203k loan program.  This loans primary focus is the rehabilitation and repair of single-family properties or a home improvement loan.  The 203k full rehab, major renovation loan offers affordable ways to improve an existing residential home.

Quick Facts on the 203K Loan

The 203k mortgage full rehab, major renovation loan can be used for rehabilitation and/or improvement of any one-to-four unit dwelling.  It is designed to be utilized in one of three ways:
•    To purchase a dwelling and the land it sits on and revitalize or rehabilitate it.   For condos, only the interior repairs may be financed, no outside construction to the dwelling can be financed.

•    To purchase a dwelling on another site and move it onto a new foundation on the mortgage property and rehabilitate it.

•    For refinancing of existing dwelling and rehabilitating it.

To purchase a dwelling and land and to refinance indebtedness, the mortgage must be a first lien on the property and the loan proceeds must be available before the rehabilitation begins.  If moving a dwelling to another site and foundation and rehabilitating it, the mortgage must also be a first lien on the property but the loan proceeds for moving of the dwelling can’t be made available until the dwelling is attached to its new foundation.

How it all Works

With home foreclosures on the rise and lenders unwilling to finance repairs, the 203k loan allows repairs and improvements to be financed and the home may be appraised after the repairs enhancing value.

The borrow can finance all repairs, improvements and additions with the 203k rehabilitation loan and it acts as a regular loan, not a construction loan where you must find a conventional mortgage when the construction is complete.

Realtors also find the 203k rehabilitation loan effective as property listings become more attractive if the buyers are aware of the 203k loan and that it is an available option for them.

Dwellings not eligible are properties built less than a year from the time of the request for the 203k loan.  Income producing properties, non-residential, and cooperative homes are also not eligible with the exception of interior repairs or rehabilitation to a cooperative home.

The 203k rehabilitation loan is good for bathroom and kitchen remodels, removing lead paints or asbestos to meet building standards, eliminate the old or obsolescent look of the dwelling, plumbing and heating repairs, and connections to public utilities like water and sewer.  Additional eligible improvements are tile and carpeting, energy improvements, landscape, handicap accessible improvements, and roofing, gutters, downspouts, and new appliances.

Ineligible improvements for the 203k rehabilitation loan include barbeque pits, dumbwaiters, and exterior hot tubs as well as saunas, outdoor fireplaces, and swimming pools.  Satellite dishes and tennis courts are also considered to be ineligible repairs.

Where to Start

While HUD makes no loans it will work with your lender when you apply for a 203k full rehab, major renovation loan.  These loans are effective ways to revitalize a property to enhance its value or for owner-occupied homes.

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