June 15, 2011
A type of loan called the FHA Streamline 203(k) allows a borrower to finance up to an additional $35 thousand of repairs and upgrades to a FHA mortgage.
This loan is designed to “to purchase and improve or upgrade the home before move-in” but can also be used to refinance an existing mortgage and add repairs or improvements up to the same $35,000 amount.
According to the FHA official site, “Unlike the standard 203(k) program, any FHA approved lender may originate a Streamlined 203k mortgage.” The availability of additional funds to repair or improve a home can be a powerful incentive to close the deal on a home that still needs work to make it truly attractive to the buyer, but it’s important to know exactly what the Streamline 203(k) program allows the use of its funds for.
There is some cosmetic repair allowed, plus minor remodeling which does not include structural repairs or fixes. Roof, gutter and downspout improvements are covered under the FHA Streamline 203(k), as are improvements or repairs to plumbing, heating and electrical systems, flooring, and HVAC. Kitchen remodeling (described as “minor remodeling” by the FHA) is allowed, as is weatherization improvements such as storm windows, insulation, weather stripping, etc.
One attractive feature of the FHA Streamline 203(k) is that the program also allows the borrower to buy and install appliances including refrigerators, washers and dyers, microwaves, ranges, and related items. The program even allows for the addition or replacement of decks, patios and porches.
All of this is appealing for qualified borrowers purchasing a typical home with an FHA home loan, but the Streamline 203(k) may also be used when purchasing a HUD home.
In such cases repairs and upgrades may be sorely needed depending on the condition of the property when purchased. HUD homes are properties owned by the Department of Housing and Urban Development in the wake of foreclosure proceedings. They are put on sale at reduced prices to recover the government’s loss on the foreclosure claim.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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