FHA 203(k) Streamline

Funds For REO’s - Foreclosures & Fixer-Uppers.

This may be one of the best ways to purchase and renovate a fixer-upper or foreclosure. Franklin Loan Center can handle the entire transaction for you from beginning to end.

The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased. Franklin Loan Center and HUD's 203(k) program can help you with this issue and allow you to purchase a property plus include the cost of making the repairs and improvements.

The down payment requirement for an owner-occupant is approximately 3.5% of the acquisition and repair costs of the property.

The 203(k) Streamline loan includes the following steps:

· A potential homebuyer obtains a Pre-Approval from a Direct Lender like Franklin Loan Center then locates a fixer-upper.

· A feasibility analysis of the property is completed.

o The feasibility analysis will consist of the potential homebuyer, Realtor, and Contractor determining the desired/required improvements and their costs.

· Once the feasibility analysis is complete a Purchase Agreement is drawn up and executed.

o The contract should state that the buyer is seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the Lender. Ideal escrow period is 45-60 days.

· Homebuyer finalizes list of improvements needed and schedules an inspection with a HUD cost consultant.

· Cost consultant completes the work write-up and prepares contractor bid packages to obtain cost estimates.

· Appraiser uses work write-up to determine “as-is” and “improved value”.

· Franklin Loan Center then submits the file for review by one of their FHA Direct Endorsement underwriters for final loan approval.

· The underwriter then approves the loan.

· Final loan documents are signed, loan funds and records.

o The loan closes for an amount that will cover the purchase of the property, the remodeling costs and the FHA Upfront Mortgage Insurance Premium. The amount of the loan will also sometimes include a contingency reserve of 10% to 20% of the total remodeling costs and is used to cover any extra work not included in the original proposal.

· A couple weeks after closing, half of the Escrowed funds are released so that the work can begin. Buyers should be prepared to advance additional money to cover costs above the initial draw if the contractor requires. Most contractors are able to complete the job with the initial draw. The remaining funds are released upon completion of all work.

Remember, the FHA 203(k) program still allows for the buyer to use gift funds for down payment and/or closing costs, as well as, seller credits for closing costs!

Streamlined 203K “ELIGIBLE” IMPROVEMENTS Below are the types of improvements that are allowed in the streamlined 203K program.

· Repair/replacement of 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, such a kitchens which does not involve structural repairs

· Weatherization: including storm windows and doors, insulation, weather stripping, etc.

· Purchase and installation of appliances, including freestanding ranges, refrigerators, washers/dryers, dishwashers and microwave ovens.

· Accessibility improvements for persons with disabilities

· Painting, both exterior and interior

· Repair/replace/add exterior decks, patios, porches

· Basement finishing and remodeling which does not involve structural repairs

· Basement waterproofing

· Window and door replacements and exterior wall re-siding

· Septic system and/or well repair or replacement

· Lead-based paint stabilization or abatement of lead-based paint hazards

Streamlined 203K “INELIGIBLE” IMPROVEMENTS Below are the types of improvements that are not allowed in the Streamlined 203K program.

· Major rehabilitation or major remodeling such as the relocation of a load-bearing wall.

· New construction (including room additions)

· Repair of structural damage

· Repairs requiring detailed drawings of architectural exhibits

· Landscaping or similar site amenity improvements

· Any repair or improvement requiring a work schedule longer than six (6) months

· Rehabilitation activities that require more than two (2) payments per specialized contactor

· Required repairs arising from the appraisal that do not appear on the list of eligible repairs

· Walkways or driveways

Need to complete one of the above repairs??? Call me today for more information on our Full 203k program. Where just about anything goes!

How does an FHA 203(k) loan compare to a standard FHA loan?

Remember, the FHA 203(k) program still allows for the buyer to use gift funds for down payment and/or closing costs, as well as, seller credits for closing costs!