The FHA 203(k) Streamline obtained its name because it simplifies the loan process by not requiring the extra cost and details found in its counterpart, the FHA 203(K) loan (aka full 203k, consultant 203k, standard 203k).
This loan program is available for customers looking to fix up there primary residences or purchase a primary residence. It is not available to investors who will not be living in the property.
The program is for single-family, owner-occupied properties. As well as condominiums or town homes and multi-family properties of up to 4 units plus mixed use properties (great niche’s).
Property owners can also use the loan to increase or decrease the number of units in a property. For example, this will allow the conversion of a single-family home to a triplex or converting a duplex to a single-family home.
The loan cannot be used to purchase new construction properties. However you can basically do new construction by tearing down a home and building a new structure on the old foundation. The property must be at least 1 year old and have had a Certificate of Occupancy at one point in time. Properties can be located in a planned unit development (PUD).
The FHA 203(K) Streamline loan was designed to purchase or refinance properties that required light or cosmetic repairs. For this reason, the program has a cap of $35,000 for repairs and other costs (Cost should actually be closer to $30K). There is no minimum repair cost for this loan. Other costs include the loan’s closing costs, up to two inspections fees, a certified inspection report and a supplemental origination fee. We do require an FHA 203k consultant on streamline transactions.
Rehab work must commence within 30 days after closing and must be completed within 6 months. The homeowner cannot be displaced from the house for more than 30 days during this 6-month period.
We do not allow for “Self-Help” projects. We require a general contractor or up to 3 specialized contractors. Any contractors working on the home must be licensed and insured. In addition, they must complete a W-9 prior to closing. We will do a verification and check references to insure that we only use top quality contractors who can complete the work as specified.
The FHA 203(K) Streamline loan cannot be used for repairs that HUD considers to be ‘major.’ This includes any new construction to the property, such as adding on a new room. It cannot be used to finance any structural repairs needed on the property. All rehab work must be completed within 6 months. It does not provide for landscaping.
The FHA 203(K) Streamline loan can be either a fixed-rate loan or an adjustable-rate mortgage (ARM). The homeowner cannot get any cash out on this program since it is designed for purchase and rate and term refinances only.
The outstanding mortgage balance cannot exceed the purchase price of the house. Monies designated for the rehab are held in escrow. The money is paid out after the work is complete during specified milestones. Any excess funds in escrow after the work is complete will be applied to the principal balance or used for changes.