Your HUD Home can be Your Dream Home

If you are thinking about buying a REO property that needs repair, FHA’s 203(K) rehabilitation loan or it’s simplified alternative, the Streamlined(k) may be a good option for you.  FHA’s simplified Streamlined(k) program for small-scale repairs is the perfect option for most HUD REO sales.  For the major repairs & more complicated renovation plans, the Standard 203(K) program is the option.   

HUD Homes, like the majority of property re-sales, require some level of repair.  FHA’s Streamlined (k) program allows the buyer to finance both the purchase and the cost of minor repairs and/or upgrades through a single mortgage.  While there is no cap on repairs for the Standard 203(K), the Streamlined (k) allows for repairs from $1 up to $35,000. 

For the Streamlined(k) option, homebuyers identify their repair needs, which may include: new carpet; interior and exterior paint; new appliances; kitchen or bathroom remodel; exterior landscaping and other minor improvements.

A realtor or FHA approved lender will be able to answer specific questions about the Standard and Streamlined 203(K) loan program.  To find out more, visit HUD’s website at www.hud.gov/offices/hsg/sfh/203k/203kslrp.cfm or call 1-800-CALLFHA.

Summary:

Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase or refinance of an existing (<1 year old) house and the cost of its rehabilitation through a single mortgage. The minimum rehabilitation amount must be at least $5,000, with the total value of the property falling within the FHA mortgage limit for the area. The after improved value determines the loan amount and you may borrow up to 110 percent of the after improved appraised value.

The types of improvements that borrowers may make using Section 203(k) financing include:

• Structural alterations and reconstruction.
• Modernization and improvements to the home's function.
• Elimination of health and safety hazards.
• Changes that improve appearance and eliminate obsolescence.
• Reconditioning or replacing plumbing; installing a well and/or septic system.
• Adding or replacing roofing, gutters, and downspouts.
• Adding or replacing floors and/or floor treatments.
• Major landscape work and site improvements.
• Enhancing accessibility for a disabled person.
• Making energy conservation improvements.
• Eligible Streamlined (k) improvement and/or repairs.
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For more information from HUD on this program, please click on the following link: 
Program Description: Rehabilitation Mortgage Insurance (Section 203(k)) - HUD

Summary:

FHA's Streamline (k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their existing home. With this new product, homebuyers 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. What makes this loan more attractive is that the changes to the property can be cosmetic as well as meet minimum property requirements. There is no minimum repair cost threshold of $5,000. The Streamlined (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required.

The Streamlined (k) program includes the discretionary improvements and/or repairs shown below:

• 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 flooring
• Minor remodeling, such as kitchens, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement

The FHA 203 (k) and Streamlined (k) loan programs can both be used in conjunction with the Energy Efficient Mortgage (EEM) program. The amounts permissible under the EEM program as well as the qualifying requirements-are in addition to those available under the Streamlined (k) program and, thus, combined may exceed the $35,000 Streamlined(k) repair cost limit. Both the cost of EEM improvements as well as weatherization items (not to exceed $2,000) may be added to the total FHA loan amount.

For more information from HUD on this program, please click on the following link: 
203K Rehab Loan Insurance - HUD