FHA Streamlined 203(k) Renovation Loans
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If you want
to purchase a home that needs some minor repairs or updating, this may be the
loan for you. The FHA 203(k) loan
allows you to purchase a home and include the cost of the repairs, up to
$35,000, all in one loan.
This is the perfect loan for the home buyer who found the perfect home in the
perfect area. Only, the house is
missing kitchen appliances, or the carpet needs to be replaced, or you want to
upgrade to air conditioning, or you want to update the bathrooms.
Here is a list of some of the things you can do with the FHA
Streamlined 203(k) renovation loan:
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 as kitchen, which does not
involve structural repairs;
Exterior and interior painting;
Weatherization: including storm windows and doors,
insulation, weather stripping, etc.;
Purchase and installation of appliances, including
free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves;
Improvements for accessibility for persons with
disabilities;
Repair, replacement or the addition of exterior decks,
patios and porches;
Basement remodeling which does not involve structural
repairs;
Basement waterproofing;
Window and door replacement and exterior siding
replacement;
Well or septic system repair or replacement.
As you can see from the above list, improvements to the property cannot be
structural. Major repairs such as
relocation of load-bearing walls, adding a bathroom or bedroom, repair of
structural damage is not allowed with the Streamlined 203(k) renovation loan.
This loan
is for owner occupied homes only. It
is not for investors. (There are programs available for investors. Please
call us if you need information on these types of loans.)
All borrowers
must qualify based on credit, income and assets.
To find out if you qualify, call us at (520) 744-2292, or feel free to
complete the online loan application.
The
Process How Does It Really Work?
As a home
buyer, the first thing you want to do is work with a real estate agent and
lender knowledgeable with the FHA 203(k) renovation loan.
All repairs must be completed by licensed Arizona contractors.
If you are qualified, you can do some or all of the repairs yourself.
Before you
put in an offer on a home that needs repairs, I suggest that you have a licensed
contractor look at the house with you.
The contractor can give you a general ideal of the cost associated
with the repairs before you make the offer.
(I have a number of contractors I
work with who understand the FHA 203(k) process.
If you need a contractor, just let us know and we will be glad to
recommend one or more to you. )
Once you
have an accepted contract, and before your lender orders the appraisal, you need
to get bids/estimates for the work that will be included in the renovation loan.
Your Realtor should include a longer inspection period to allow you
enough time to work up accurate numbers, to ensure that your earnest money is
not at risk.
These bids,
once approved by you and the contractor, are submitted to the appraiser.
The appraiser will then value the home in its as is condition, as
well as provide us with a value once all repairs are completed.
Your loan is based on the purchase price plus the cost of repairs.
Most
lenders required a 10% to 15% contingency reserve to be added to the cost of the
repairs. This contingency reserve is
to offset any cost over runs associated with the repairs.
If you do not use the contingency reserve, the funds are applied to your
loan as a principal reduction.
You cannot
begin any work on the repairs until AFTER closing, when you are the owner of the
home. You must begin work within 30
days of closing, and you have 6 months to complete the repairs.
How
Does the Contractor Get Paid?
At closing,
50% of the repair estimates is paid to you AND the contractor.
The contractor begins the renovation work.
Approximately 30 after closing, you will receive a Letter of
Completion from the Investor. When
all repairs are completed, you need to sign the Letter of Completion and fax it
back to the Investor. The Investor
will then order a final inspection and a title policy update, to make sure the
repairs are completed and there are no liens filed against the property.
As soon as this verification is completed by the Investor, the Investor
will send a final check for the remaining 50% to you at your new home.
This check is also made out to you AND the contractor.
Ensuring the successful closing of a
203(k) Streamlined Renovation Loan
requires the cooperation of all interested parties. I highly recommend
that you consult with your Lender prior to writing any offer using this
program.
With our combined years of experience, knowledge and dedication, the Sue
Pullen Team is Arizona's ONLY choice for 203(k) financing!
Of course, if you have any questions, please feel free to contact
me at your convenience.
Sue
(520) 744-2292
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An Equal Housing Lender AZ MTG BK #0904162
CO ID 2289