You can purchase or refinance a home in need of repair or modernization without obtaining separate financing (which often comes at higher interest rates) to have the necessary work completed. The 203(k) program has a streamline or standard option and allows the borrower to include the cost of eligible rehabilitation work into a single mortgage at a long-term fixed or adjustable rate.


Streamline 203(k)

One of the most recent options added to the lineup of FHA programs is the Streamline 203(k). It can be used to purchase or refinance a home that needs relatively minor rehabilitation and/or improvements with fewer restrictions and less paperwork. If the work can be completed without needing plans, consultants, engineers, and/or architects, you may be eligible for this program. These improvements can be financed by the loan on top of the acquisition cost (if a purchase). There is no minimum and the maximum is up to $35,000 for eligible repairs and expenses. Some improvements eligible under the streamline program are:

This program is also available to those who own the property free and clear. Additionally, if the repair cost does not exceed $15,000 an inspection and associated costs may be avoided (at the discretion of the lender/mortgagee).


Standard 203(k)

The Standard 203(k) has a little more room for improvements over the Streamline. It will require a little more planning and paperwork, but there are more options and fewer restrictions on available funds (based on post-improvement value as determined by an appraiser). Even homebuyers who have purchased a property with cash can refinance using a 203(k) loan within 6 months of the purchase date. It will fall under the same guidelines as if you had purchased the home with a 203(k). Some examples of eligible improvements are:

Expenses eligible for inclusion in the cost of rehabilitation are materials, labor, contingency reserve, overhead and construction profit, and up to 6 months of mortgage payments. It can also cover some expenses related to the rehabilitation such as permits, fees, inspections by a qualified home inspector, licenses, and consultant and/or architectural/engineering fees. The maximum amount of funds available to use is based on the Maximum Mortgage Calculation.

For more information about the 203(k) Rehab Loan call to speak with a licensed loan officer or just fill out the online form and we will call you shortly.

Leave a Reply

Your email address will not be published. Required fields are marked *