The Skinny on Re-Hab Loans: FHA 203K Streamline and Full Rehab Loans ~ Hampton Roads Real Estate Ramblings

The Skinny on Re-Hab Loans: FHA 203K Streamline and Full Rehab Loans

Tuesday, March 23, 2010

Hello Hampton Roads,

Do you need to renovate your home or investment property? 

Let’s face it, with all the homes for sale in our market, there are more than a few properties out there that need work to make them really shine! If you find a home to buy that fits this bill and are wondering how you can afford to purchase it and make the needed renovations, then look no further than the 203K Streamline or Full Renovation Re-hab loans. Both the purchase and renovations can be financed into one loan.


Re-Hab loans such as the 203K Streamline and the full renovation loan are perfect for any home in need of repairs as well as for bank owned homes and foreclosures, and for Housing and Urban Development Foreclosures (HUD homes). In a nutshell, these loans can be used to purchase and renovate a home or refinance and renovate; however, they are designed strictly for owner occupants and each loan has their own specific guidelines for qualification.

To start with, the FHA 203k Streamline is only allowing repairs costing a minimum of $5,000 up to a maximum of $35,000, while full Rehab loans are for repairs costing more than $35,000.

The 203K streamline facilitates purchase transactions in which the home needs basic repairs identified in a pre-purchase home inspection or an FHA appraisal. Such improvements may include the following:

  • Repair / replacement roofs, gutters and downspouts
  • Repair / replacement / upgrade of existing HVAC systems
  • Repair / replacement / upgrade of plumbing and electrical systems
  • Repair / replacement of existing flooring
  • Minor remodeling that does not involve structural repairs, such as kitchens
  • Exterior and interior painting
  • Weatherization, including storm windows and doors, insulation, weather stripping, etc.
  • Appliances, when at least $3,000 of basic home repairs is involved. Appliances may include free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves and may not exceed $2,000 in total cost.
  • Improvements for accessibility for persons with disabilities.
In addition, the 203K streamline does not require a consultant for repair specifications, nor any plan reviewer or architectural exhibits. The work immediately starts after 30 days of loan closing and this helps save the buyer a lot of time!

Full Rehab Loans on the other hand, are intended for properties that require major structural rehabilitation. But unlike the 203K Streamline, it is necessary to involve both an appraiser and a consultant. The consultant will prepare the work write-up and cost estimate. Also, an architect, engineer or home inspector will  then need to inspect the property to ensure the following:

  • There are no rodents, dry-rot, termites and other infestation
  • There are no defects that will affect the health and safety of the occupants
  • The existing structural, heating, plumbing, electrical and roofing systems are adequate and
  • The completion of thermal protection upgrades (where necessary).
As such, on a standard FHA 203(k) loan, the process is often as follows:
  1. Contact lender for pre-approval
  2. Locate property & make offer
  3. Get Your Offer Accepted
  4. Peform the Home Inspection
  5. FHA 203K HUD Consultant
  6. Contractor bids and contractor selection
  7. Submit the loan to underwriting
  8. Clear any loan conditions
  9. Property closing
  10. Repairs Begin/ Final Inspection when finished
In addition to the qualifications or guidelines above, the full rehab loan can be applied in three ways:

1. To purchase a dwelling and the land it sits on and revitalize or rehabilitate it. In this case, the mortgage must be a first lien on the property and the loan proceeds must be available before the rehabilitation begins. Therefore, for condos, only the interior repairs may be financed, no outside construction to the dwelling can be financed.

2. To purchase a dwelling on another site and move it onto a new foundation on the mortgage property and rehabilitate it. In order to do this, the mortgage must also be a first lien on the property but the loan proceeds for moving of the dwelling can't be made available until the dwelling is attached to its new foundation.

3. For refinancing of existing dwelling and rehabilitating it.

Although both the 203K Streamline and Full Rehab Loans seem to entail a lot of official procedures and higher closing costs than a regular purchase mortgage, they are still considered to be a good source of house renovation financing. They can help save both time and money and in addition to turning that diamond in the rough into the perfect dream home!

Not every lender is knowledgeable about these types of loans and if you think that this may be a good product for you, feel free to send me an email and I can put in touch with a qualified lender!


Thanks for Reading,


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Serving your Hampton Roads and Virginia Beach Real Estate needs.