If you’re looking into buying a fixer upper home.
An FHA 203k Streamline loan may just be a perfect fit for you.
With a 203k loan you can get the fund to purchase a rehab home, plus get up to $35,000 cash to make renovations and cosmetic repairs.
In this article we will explain the in’s and out’s of the FHA streamline 203k mortgage.
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What is an FHA 203k Streamline Loan?
Rehab loans used to be very complicated. Requiring a high credit score and resulting in having two loans to pay back. With a 203k streamline mortgage you can get the home financed as well as additional cash to make renovations.
Your can choose from a 15-year or 30-year fixed-rate mortgage, or adjustable rate mortgage loan.
The loan amount is typically for more than the purchase price of the home, so there are stricter requirements for a 203k loan vs an FHA loan.
One of these differences is the minimum credit score requirement. While FHA home loans require a 580 or higher FICO score. A 203k streamline requires good credit history, and at least a 640 credit rating.
Standard vs Streamline 203(k)
There are two types of 203k rehabilitation loans, the streamline and standard 203k, or construction 203k loan. The standard 203k loan is a more difficult process. While there is no cash limit, there is more paperwork required and you must hire a 203k consultant to oversea the project.
203k streamline mortgages allow for mostly cosmetic renovations and basic repairs. The maximum amount of cash you can receive with a streamline loan is $35,000. You can also do the work yourself and not hire a HUD contractor.
203k Streamlined Requirements
The property has to meet FHA 203(k) eligibility standards. The borrower also needs to meet the 203k eligible criteria set forth by the Federal Housing Administration.
- Only FHA-approved Lenders can offer 203k streamline loans
- No foreclosures, bankruptcies, or short sales in the past 3 years
- Must be able to prove income. (w2’s, tax returns, bank statement)
- Downpayment of 3.5%
- Minimum 640 credit score
- Stable employment history
- No more than 1 late payment in past 12 months
Type of Work Allowed
- Roofs, gutters and downspouts repairs and/or replacement
- Decks, patios, and porches can be repaired, replaced, or installation
- Repair HVAC systems
- Door, window, exterior siding repair and replacement
- Well repair/replacement
- Accessibility improvements
- Stabilization of lead-based paint
- Plumbing and Electrical repairs
- Basement water-proofing
Type of Work Not Allowed
- Major repairs needed to the structure or foundation
- No repairs can take longer than 3 months to complete
- Any construction that is not a part of the property
- The building of a new pool or hot tub
- Adding new rooms or bathrooms
- Renovations requiring detailed
FHA 203k for First-Time Homebuyers
The FHA 203k streamline program is great for first time homebuyers because of the low down payment requirements. However you don’t have to be a first-time buyer to get 203k financing It’s not eligible for investment properties, and you must be purchasing the home as your primary residence.
Eligible Property Types
- Single-Family Homes
- 1-4 unit mute-family homes at least one year old.
- 1-4 building condominiums
- Units off-site that can be moved to a property
- Single unit homes/condos that have been converted into a 2-4 unit dwelling
- Homes that have been demolished but have the original foundation in good condition
Streamline 203k Guidelines
- Minimum loan amount is $5,000
- Maximum cash for repairs is $35,000, or;
- Up to 110% of the purchase price of the home
- Must meet the FHA loan limit guidelines
- The home can’t be vacant for a period of more than 30 days
- Construction is required to be completed within 6 months.
- Occupying borrower only
- Not available to real estate investors
- All repairs and renovations must be finished 1 month before closing
If you Apply for a 203k loan for $5,000 to $15,000
- The mortgage company does not need to inspect the completed construction
- A third party is not required to inspect the project either
- Contractor receipts will qualify as completed construction
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Randall has over 15 years of experience in the mortgage and credit industries. He spends a chunk of time helping consumers understand their credit, advise them on how to increase their credit, and lending his mortgage expertise to help them find the right type of loan. Randall lives in Dallas, Texas with his two sons.