You are here: Home / Archives for fha 203k streamline

FHA 203k Streamline: How Much Money Can You Get?

August 25, 2009 1 Comment

The FHA 203k streamline program was designed for people who are interested in buying a home that is in need of a few repairs that are not “structural” and would require major work. The FHA 203k program is designed for homes in need of major work, the FHA 203k Streamline is just designed for work like carpet, paint, kitchen, gutters, etc.

Here are the most common FHA 203k Streamline repairs.

So how much money can you get for repairs with the FHA 203k Streamline program? A total of $35,000.

Total.

FHA 203k Streamline: How Much Money Can You Get? %spacebasename

Now, at first glance, that might seem like you can spend $35,000 on contractor labor and supplies – but that isn’t so. That $35,000 includes bank fees.

FHA 203k Rehab Cost Must Include ALL Of The Following AND Can’t Exceed $35,000:

  • Cost of the construction supplies
  • Cost of the labor of the contractor
  • 10% contingency fee
  • $100 final inspection fee
  • Up to 1.5% supplemental origination fee

If you add all of these together, you will get a number that says that the total cost of materials and labor can’t exceed $31,257.

So make sure that when you budget for the FHA 203k Streamline program, you know that $35,000 isn’t really $35,000 – it is really $31,257 after you subtract all of the fees.

Which is kind of the way everything seems to be. A fee here, a fee there… yeah, we have a fee for that.

Share and Enjoy:
  • FHA 203k Streamline: How Much Money Can You Get? %spacebasename
  • FHA 203k Streamline: How Much Money Can You Get? %spacebasename
  • FHA 203k Streamline: How Much Money Can You Get? %spacebasename
  • FHA 203k Streamline: How Much Money Can You Get? %spacebasename
  • FHA 203k Streamline: How Much Money Can You Get? %spacebasename
Filed Under: FHA Loans Tagged With: , , ,

FHA 203k Streamline: How Do Payments Work?

August 19, 2009 1 Comment

When getting an Arizona FHA 203k streamline loan one of the more popular questions I am asked is “how does the payment process work?” and when outlined, it isn’t all that complicated (or at least it doesn’t seem like it…)

With the FHA 203k streamline program the repair funds are held in escrow by the lender – and the borrower has 3 months from their closing date to complete all of the work on the project. There can be no more than 2 payments (called the First payment and Final payment) and the must be paid directly to the contractor who performed the work. The first payment (sometimes called a draw) is limited to a maximum of 50% of the total repair cost.

FHA 203k Streamline: How Do Payments Work? %spacebasename

For the First Payment at Closing:

When requesting the first payment at closing to be disbursed, the following will be required:

  1. Initial disbursement forms
  2. 203k maximum mortgage worksheet
  3. All bids and estimates for the project
  4. The name of the contractor to be paid and the exact amount of each check to be disbursed at closing. The underwriter will review and approve this.
  5. All signed homeowner/contractor agreements (or a self help agreement if the borrower is doing the work)

Once you have all of this information provided, typically the closing/construction department will require at least 24 hours to review the request — which means leave a little leeway on your closing date, it can be somewhat fluid.

For the Final Payment

  1. All loans require a final inspection regardless of how much repair money was allocated.
  2. Before the final release, the borrower must sign a completion and affidavit for disbursement form.
  3. Final payment is disbursed upon completion of all work – can’t disburse if work is still “in progress”

So with the FHA 203k streamline loan, there are two payments — the first and the final.

Easy enough, right?

Share and Enjoy:
  • FHA 203k Streamline: How Do Payments Work? %spacebasename
  • FHA 203k Streamline: How Do Payments Work? %spacebasename
  • FHA 203k Streamline: How Do Payments Work? %spacebasename
  • FHA 203k Streamline: How Do Payments Work? %spacebasename
  • FHA 203k Streamline: How Do Payments Work? %spacebasename
Filed Under: Arizona Home Financing Options, FHA Loans Tagged With: , , ,

FHA 203k Streamline: Contractor Requirements

August 19, 2009 2 Comments

When using the Arizona FHA 203k streamline to finance your home, you will usually need to get a contractor to perform the work. The general process of finding a contractor and working with the lender and contractor looks like this:

  1. Lender reviews the contractors license, bonding, insurance and credentials
  2. Contractor estimates and provides the lender estimates that clearly state the nature and type of repair cost for labor and completion of the work.
  3. Lender reviews the estimates. The lender may call the borrower, loan officer and/or contractor to discuss the estimate and ask any additional questions they may have.
  4. Lender then can accept the estimate or ask for more estimates.

FHA 203k Streamline: Contractor Requirements %spacebasename

While it may seem like a long process – it really isn’t all that bad. Most lenders require that you use contractors to complete the rehab work unless the borrower can provide proof that they can perform the work (for example, if they are a general contractor, that is always a good sign they are capable…) but when the borrower is the one who completes the work the following apply:

  • Borrower must provide documented proof of expertise required to complete the work
  • Borrower ensures that the work will be completed within a “timely manner” (generally no longer than 3 months)
  • Borrower must execute a “self help” agreement
  • Borrower provides written estimates of supplies required to complete the work and must include labor in cost estimate in case a contractor is hired to complete the work.
  • Borrower may not be compensated for his/her labor. No “sweat equity” is allowed.

Is it possible for a borrower who is capable of doing the work be allowed to do the work?

Yes.

And now you know the rules of what will be required by the lender!

Share and Enjoy:
  • FHA 203k Streamline: Contractor Requirements %spacebasename
  • FHA 203k Streamline: Contractor Requirements %spacebasename
  • FHA 203k Streamline: Contractor Requirements %spacebasename
  • FHA 203k Streamline: Contractor Requirements %spacebasename
  • FHA 203k Streamline: Contractor Requirements %spacebasename
Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, FHA Loans Tagged With: , ,

FHA 203k Streamline: Why Choose The FHA 203k Streamline?

August 19, 2009 1 Comment

As more and more bank owned properties are bought here in Arizona, many people are starting to become aware of the various loan programs designed for homes that are in need of repair. The most popular ones are the FHA 203k Streamline, the FHA 203k loan and the Fannie Mae HomePath loan programs.

FHA 203k Streamline: Why Choose The FHA 203k Streamline? %spacebasename

When it comes to the two FHA loan options, many people ask me “why would someone want an FHA 203k Streamline loan vs. a FHA 203k “regular” loan? And the simple answer that I give is this: if the cost of repairs is anywhere close to the $35,000 allowed by FHA for the FHA 203k streamline program, go with the streamline.

If it is much, much more than that – you will need to pick the “regular” FHA 203k loan program.

But the answer is really slightly more in-depth than that — and here are just a few other reasons people choose the FHA 203k streamline loan program:

  • Architectural exhibits are not required with the FHA 203k streamline
  • The lender is responsible for making sure the cost to repair is reasonable
  • General contractors and/or consultants are not required
  • Some lenders don’t require that you get at least $5,000 in repairs (some do)

Now there are certain situations where it is clear that you are going to need far more than $35,000 to rehab a house – but I have found that in most cases, the $35,000 for repairs is more than enough – which makes choosing the FHA 203k streamline an easy choice.

Share and Enjoy:
  • FHA 203k Streamline: Why Choose The FHA 203k Streamline? %spacebasename
  • FHA 203k Streamline: Why Choose The FHA 203k Streamline? %spacebasename
  • FHA 203k Streamline: Why Choose The FHA 203k Streamline? %spacebasename
  • FHA 203k Streamline: Why Choose The FHA 203k Streamline? %spacebasename
  • FHA 203k Streamline: Why Choose The FHA 203k Streamline? %spacebasename
Filed Under: Buying a New Home in Arizona, FHA Loans Tagged With: , , ,

FHA 203k Streamline or HomePath Renovation Loan: Which Is Best?

April 5, 2009 10 Comments

We get plenty of people asking us questions here and from time to time, we get so many questions about a particular subject, we turn it into a full-blown post because it is popular enough that everyone wants to know about it.

Today’s question comes from a question someone submitted asking about buying a house that “needs a little work” and what kinds of loan options there are:

I am hoping to get an FHA Loan as a first time homebuyer. It is my understanding that if a house needs work, it will not qualify. I do have a house in mind and it does need work (light fixtures, appliances, etc.) Will the 203K loan be an option for me?

FHA 203k Streamline or HomePath Renovation Loan?

The answer to this question is “it depends” – and while the FHA 203k loan may be a great option, you may also be eligible for the new Fannie Mae HomePath renovation loan.  They are very similar programs – and while it is close, I personally think that the HomePath renovation loan probably has more advantages over the FHA203k streamline program because of less money down, no appraisal required and no mortgage insurance. Here are just a few of the highlights for the FHA 203k streamline and the Fannie Mae HomePath renovation loan programs:

FHA 203k Streamline Loan Highlights:

The FHA 203k streamline loan has been around for years – but with recent numbers of bank owned properties being bought that need a little work, this loan program has become hot again. Some of the highlights of the FHA 203k streamline loan include:

  • It works like a construction loan – you are able to buy a home that wouldn’t qualify for FHA financing and finance the repairs that will bring it up to FHA standards
  • The total amount of the loan is the purchase price plus the amount needed for repairs
  • FHA has limited the Streamline 203K program to a range between $5,000 and $35,000
  • The requirements to qualify are the same as a traditional FHA loan
  • The construction phase can’t begin until the loan closes. The funds to pay the contractor come from escrowed funds at the closing
  • Up Front Mortgage Insurance Premium and Monthly mortgage insurance are paid to FHA just like a regular FHA loan
  • Appraisal required

Fannie Mae HomePath Renovation Loan Highlights:

The newest loan program for homes that “need a little work” is the Fannie Mae HomePath Renovation loan. The HomePath renovation loan is only for homes that are currently owned by Fannie Mae and you will qualify to get the HomePath loan through Fannie Mae as well. Because Fannie Mae currently owns so many homes, this is one way that they are helping people get into homes (they are also offering investors the HomeStyle renovation loan program) when the home may be in need of a few minor repairs. Some of the HomePath renovation loan program highlights include:

  • Financing to fund both your purchase and light renovation
  • Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
  • Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
  • No mortgage insurance

With the inventory of homes so high at Fannie Mae, it is no wonder that they came out with this great program. I woudln’t expect it to be around forever – so don’t be surprised if the program goes away once Fannie Mae sells many of the homes it currently owns.

So which loan program is right for your situation? The easy way that I try to explain this is something like this:

  • Is the home owned by Fannie Mae? If yes, get a HomePath Renovation loan.
  • Is the home owned by someone other than Fannie Mae? Time to look into qualifying for a FHA 203k loan.
Share and Enjoy:
  • FHA 203k Streamline or HomePath Renovation Loan: Which Is Best? %spacebasename
  • FHA 203k Streamline or HomePath Renovation Loan: Which Is Best? %spacebasename
  • FHA 203k Streamline or HomePath Renovation Loan: Which Is Best? %spacebasename
  • FHA 203k Streamline or HomePath Renovation Loan: Which Is Best? %spacebasename
  • FHA 203k Streamline or HomePath Renovation Loan: Which Is Best? %spacebasename
Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, FHA Loans, HomePath Mortgage Loan Tagged With: , , ,