Funds for Handyman-Specials and Fixer-Uppers
Did You Know?
FHA's New Streamlined 203(k)
HUD has developed a new FHA insured mortgage, called the “Streamlined (K)” Limited Repair Program, that permits home buyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, home buyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.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.
HUD's 203(k) program can help you with this quagmire and allow you to purchase or refinance a property plus include in the loan the cost of making the repairs and improvements. The FHA insured 203(k) loan is provided through approved mortgage lenders nationwide. It is available to persons wanting to occupy the home.
The downpayment requirement for an owner-occupant (or a nonprofit organization or government agency) is approximately 3.5% of the acquisition and repair costs of the property.
The 203(k) loan includes the following steps:
- A potential homebuyer locates a fixer-upper and executes a sales contract after doing a feasibility analysis of the property with their real estate professional. 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.- The home buyer then selects an FHA-approved 203(k) lender and arranges for a detailed proposal showing the scope of work to be done, including a detailed cost estimate on each repair or improvement of the project.
- The appraisal is performed to determine the value of the property after renovation.
- If the borrower passes the lender's credit worthiness test, the loan closes for an amount that will cover the purchase or refinance cost of the property, the remodeling costs and the allowable closing costs. The amount of the loan will also 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.
- At closing, the seller of the property is paid off and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.
- The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments (PITI) put into the cost of rehabilitation if the property is not going to be occupied during construction, but it cannot exceed the length of time it is estimated to complete the rehab.
- Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of the job, 10% of each draw is held back; this money is paid after the lender determines their will be no liens on the property.
Now the consultant will meet you for $150, thats 25% off, get a feasibility study and see if you are right for a 203k Loan.
203k Loan Program Consultant
Now the consultant will meet you for $150, thats 25% off, get a feasibility study and see if you are right for a 203k Loan.
203k Loan Summary
203k Loans for Mpls/ 203k Loans for St Paul and all Minnesota.
Where can I get the funds to repair my home?
This is a summary. To read the full 203k Loan document click this link: Rehab a Home with HUD’s 203k
Leaky windows, roof shingles missing, kitchen or bath looking sad and tired? Maybe your house needs to be remodeled for an aging parent that is moving in, or you know that there is no way that it can make it though another winter or summer comfortably.
Unfortunately, you might not have enough in your savings or checking account to cover the cost of improvements or maybe you wish to hold onto that money and go with an option that might help lower your taxes. Look below and learn about a government backed loan program called a 203(k) along with some standard loan options.
There are ways to get the money you need to improve your living space.
203k Loan program from FHA
The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. The Section 203(k) program is the Department’s primary program for the rehabilitation and repair of single family properties. While this program fell out of favor during the housing boom with other loans not requiring inspections, it has gained traction again as one of the few types of loans that can still be gotten for repairs.
How the Program Can Be Used
This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways: To purchase a dwelling and the land on which the dwelling is located and rehabilitate it. To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it. To refinance existing liens secured against the subject property and rehabilitate such a dwelling.
Eligible Improvements (Normal Version)
There are plenty of eligible improvements allowed on 203K loans like: Bathroom remodels, Kitchen remodels with new appliances, Making a house handicap accessible, Whole house renovations & remodeling, Finishing the basement, New deck &/or patio, Flooring Replacement, New doors and windows, Upgrading the HVAC system, Additions, Roofing, Painting, Upgrading the plumbing & / or electrical, Energy efficient improvements, Wells and septic tank repair and upgrades.
Section 203(k) Streamlined Program
The maximum repair amount allowed is $35,000 with no minimum amount that can be taken for repairs. The funds will be escrowed at closing and released as the work is completed. However, the following items are not allowed under this program; complete house remodeling, new construction, structural issues or changes, & landscaping. All work must be able to be completed within three months and must start within 30 days of closing.
So what's the catch?
The program did fall out of favor during the housing boom due to the fact that inspections are required & minimum standards had to be met. The FHA requires that all doors and windows have adequate weather stripping; cracks, or joints in the building must be sealed to reduce air infiltration; all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation be insulated; ceiling areas must be insulated where necessary; attic and crawl space areas must be adequately ventilated; each sleeping area must be provided with at least one approved smoke detector; HVAC systems if replaced must be sized properly & insulated; work performed must conform with all state & local building codes.