You Can Buy AND Renovate a Home with One Loan!

Buy AND renovate a home with a 203k mortgage! Because there is much more involved with this loan product than simply “getting a mortgage”; be prepared to be patient.

There are a couple of different 203k products:

• 203k
• 203k Streamline (aka: Streamline 203k Limited Repair Program)

The Streamlined 203(k) loan is the easiest and less costly renovation loan of the two.

Eligible Borrowers

This loan program is available only to people who plan to use the properties for which they are getting the loans as their primary residences. If a current homeowner needs to rehab his existing home, he can use the 203k refi program. Nonprofit organizations can also qualify for this loan program. *It is not available to investors who will not be living in the property.*

Eligible Properties

The program is focused on single-family, owner-occupied properties, but it is not limited to those. Homeowners can also use this loan to purchase condominiums or town homes. It can be used to purchase multi-family properties of up to 4 units.  Property owners can also use the loan to increase or decrease the number of units in a property. For example, this will allow the conversion of a single-family home to a triplex or converting a duplex to a single-family home.  The loan cannot be used to purchase new construction properties. The property must be at least 1 year old.

If you are not sure the property you are interested in meets the specifications mentioned above, feel free to ask us a question by clicking here.

Program Requirements

The FHA 203(K) Streamline loan was designed to purchase properties that required light or cosmetic repairs. For this reason, the program has a cap of $35,000 for repairs and other costs. There is no minimum repair cost for this loan. Other costs include the loan’sclosing costs, up to two inspections fees, a certified inspection report and a supplemental origination fee.

Rehab Requirements

Rehab work must commence within 30 days after closing and must be completed within 6 months. The homeowner cannot be displaced from the house for more than 30 days during this 6-month period.

Homeowners who are qualified can perform the rehab work themselves. “Qualified” is usually satisfied if the homeowner works in the construction trade or is a licensed contractor. Any contractors working on the home must be licensed and bonded. In addition, they must complete a W-9 prior to closing.

The FHA 203(K) Streamline loan cannot be used for repairs that HUD considers to be ‘major.’ This includes any new construction to the property, such as adding on a new room. It cannot be used to finance any structural repairs needed on the property. All rehab work must be completed within 6 months. It does not provide for landscaping.

Loan Requirements

The FHA 203(K) Streamline loan can be either a fixed-rate loan or an adjustable-rate mortgage (ARM). The homeowner cannot get any cash out on this program since it is designed for purchase and rate and term refinances only.

The outstanding mortgage balance cannot exceed the purchase price of the house. Monies designated for the rehab are held inescrow. The money is paid out after the work is complete during specified milestones. Any excess funds in escrow after the work is complete will be applied to the principal balance.

As with any loan product, rules and regulations can change. Be sure to check with a qualified mortgage professional for the current guidelines.