Mortgage Corner

The Basics On The FHA Streamline Repair Loan

In today’s real estate market, the amount of foreclosure and short sale properties in the marketplace for sale has grown to a level where it cannot be ignored for new home purchasers. Often times you will even find some of these properties in very good condition. However, other times, the properties will need some work in order to bring them up to an adequate and proper status for the new buyer. For these instances there is one loan that home buyers can turn to that will actually allow them to build the costs of these repairs into the financing of the home purchase. That loan is the FHA 203K or the FHA Streamline Repair loan. Here are the basics you need to know about the program.

Purchase or Refinance
The FHA 203K loan is available for the purchase or refinance of a property and takes into account the purchase price or payoff (in the case of a refinance) and then adds in the cost of repairs to create your new loan balance. The repairs are then completed after the loan closing.

Property Value
The property must be appraised based on what the property will be worth after repairs. This value will then be used for a property value and the loan to value will be based off of the new loan value.

Streamlined
The maximum repair amount allowable is $35,000 with no minimum amount that can be taken for repairs. The funds will be escrowed at closing and released as the work is completed. A general contractor is not needed, but the work must be completed by a licensed professional.

Eligible Improvements
Eligible improvements include: repair/replacements of roofs/gutters, hvac, plumbing, electrical, flooring, painting, appliances, patios, porches, driveways, windows, doors, septic systems and other common repairs.

Ineligible Improvements
Ineligible improvements include: complete remodeling, new construction, structural issues, landscaping. As well any repairs taking longer than three months or not starting within 30 days of closing are ineligible.

These are just some of the basics of the FHA 203K Loan. In today’s market this can be a very important loan program for both new buyers and existing home owners. If you have a property that needs minor repairs, this may be the loan for you.