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. This loan is great for buyers who may pass on a home because it needs minor repairs. This loan is different from major rehab version of the loan by the same name and eliminates paperwork and simplifies the rehab fund process.
How it Works
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.
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.
Streamline 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
loan 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
not eligible 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?
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?
type of 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.
StreamlineK 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.
homeowners now have the option of buying a home in need of light rehab
repairs and it's a lot less paperwork than the major rehab version. 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 to check on this mortgage loans availability.
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