FHA Streamline 203(K) Limited Repair Program

Introduction to the Energy Efficient Mortgage

Purchase or Refinance

“Change a FIXER into a DREAM PROPERTY”

Don’t Pass Up that Special Home:

The “Streamline 203 (K)” Limited Repair Program allows homebuyers and those refinancing to borrow up to an additional $35,000 to make discretionary improvements and renovations to the home

Make the Improvements that you Wish, Want or Need

A house with problems can be a great opportunity. FHA’s Streamline 203(k) program allows almost any improvement(s) to the home that homebuyers wish, want or need. You can immediately enjoy the benefits without having to wait years for the opportunity to make your home more comfortable, economical and livable

The Streamline 203(K) Solves the Appraisal and/or Pest Report Compliance Dilemma:

The purchase of a home 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. The Streamline 203(K) solves compliance problems

Questions & Answers

Q. What is the FHA Streamline 203(K) Limited Repair Program?
Homebuyers and those refinancing their existing home have a one-time opportunity during the escrow period to qualify for and finance up to an additional $35,000 to cover the cost of repairs, renovations and improvements including compliance issues and repairs called by the Appraisal or Pest Report.

Q. Can the Energy Efficient Mortgage and Streamline 203(K) combined?
Yes $ 8,000 Energy Efficient Mortgage Program may be combined with
$35,000 Streamline 203(K) Program
$43,000 Total available funds

Q. What improvements qualify for the Streamline 203(K) Program?
Minor Renovation & Repairs: The Streamline 203(K) Program is for “Uncomplicated & Discretionary”, Non-Structural Repairs & Renovations and can usually cover most compliance issues:

  • Improve Living Areas, Baths & Kitchen
  • Replace/Repair Roof, Gutters
  • Repair Decks & Patios (no landscaping)
  • Replace Floor Coverings
  • Appliances (with limits)
  • Dual Windows, Heat & Air, Insulation
  • Well & Septic
  • Improvements for persons with Disabilities

The Streamline 203(K) is not for major remodeling, adding luxury items, or new construction such as adding a room or moving walls

Q. Should the Streamline be included in the Purchase Offer?
Yes! because income qualifying and additional down payment may be required and to let the Seller know that the Homebuyer is going to take care of compliance issues or improvements to the home with the Streamline 203(K) Program

Q. Can any FHA Mortgage Lender do the Streamline 203(K) Program?
Not all FHA mortgage lenders offer the Streamline 203(K) Program
Ask your mortgage lender if they participate in the Streamline 203(K) and Energy Efficient Mortgage Programs

Q. How about Solar and Renewables?
The installed cost of Solar and Renewables may (at the lenders discretion) be financed within the Streamline 203(K) Program

Q. How much Streamline 203(K) money is available?
Buyer must qualify for the additional Streamline 203(K) funds up to $35,000 Basically the Streamline 203 (K) can cover most repair costs including building permit fees, inspections, clean-up, etc

Q. How complicated is the Streamline 203(K)?
Unless the homebuyer is fully prepared take the extra time and effort, the Streamline 203(K) may not be a suitable undertaking.

Synergy will assist the lender to guide the homebuyer though the sometimes confusing process, starting with the contractor bids to completing the numerous pages of required documentation:

  • It is the buyer’s responsibility to pick licensed and insured contractor(s) that have the expertise and financial stability to perform the scope-of-work within a reasonable time limit.
  • The Bid Proposal must be” detailed, clear and accurate” and submitted in a specific and detailed format.
  • "Cost plus" or "time and material" contracts are prohibited
  • The required documentation must be submitted by both the homebuyer and contractor to lender before loan approval.

Q. Can the buyers and those refinancing do the work themselves?
Homeowner (Self-Help) doing the work may not be allowed or May be “strongly discouraged” by the lender,

Q. When and how does the Contractor(s) get paid?
There are 2 draws:
The Initial (first) Draw for materials will be disbursed after the home records in the homebuyer’s name.
The Final Draw to be disbursed after completion: 1) “all” items on the Streamline 203(K) Bid Proposal(s) must be completed; 2) re-inspected 3) a title search for liens
NOTE: There can usually be up to 2 or 3 separate Contractor Bid Proposals and each contractor will be paid when his individual scope-of-work as stated in the Bid Proposal is completed. Sub-contractors will be paid when the General Contractor receives funds

Q. How much time is allowed to complete all the repairs?
FHA Guideline allows up to 6 months
Lender may require all work to be completed within 45 to 60 days

Q. Do all mortgage lenders have the same guidelines?
Mortgage lenders at their discretion may have guidelines and criteria that differ. Be sure to ask your lender specific questions about your loan, as each home has its special set of needs

Q. What happens if there is not enough money to complete the work or there is money left over?
All improvements as listed in the Streamline 203(K) Bid Proposal scope-of-work “must be completed” before the Final Release of Funds.

Not Enough Money:
At close of escrow, the lender will hold approximately 10% of the requested Streamline 203(K) funds in a “Contingency Account”. If the scope-of-work exceeds the original requested amount, with written approval from the Lender the Contingency Account funds may be used to cover a shortage. If there is not enough money in the Contingency Account, it will be the homeowners responsibly to pay the additional costs.

Money Left Over:
If the entire balance of the Streamline 203(K) is not used, the remaining balance will be applied to the principle balance of the mortgage.

Summary 203(K) Limited Repair Program

MORTGAGEE LETTER 2005-50- December 29, 2005
Enhancements to “Streamlined (k)” Limited Repair Program
Link: http://portal.hud.gov/fha/reference/ml2005/05-50ml.doc

WHO CAN GET A STREAMLINGE 203 (K) LOAN?
Purchase or Re-finance-Owner Occupants - No Investors
1 – 4 Units-Existing Home (over 1 year old, from date of first occupancy)
Condos ((not co-ops) - Manufactured homes - Mixed-Use Properties

PROGRAM LOAN LIMITS:
Up to $35,000 with Contractor Firm & Fixed Bid Proposal
Streamline 203(k) “may not” exceed loan limits

QUALIFING:
Income qualifying and additional down payment required

ENERGY IMPROVEMENTS Energy Efficient Mortgage may be combined with the Streamline (K)
Energy Efficient Mortgage: 5% of Purchase Price/Appraised Value, up to $8,000
Buyer automatically qualifies with no additional cash down.
Energy Improvements are above and over the $35,000 Streamline (K) maximum.
Energy Improvements “can” exceed Loan Limit

CONTRACTOR(S):
The Borrower selects the Contractor(s) Contractors must be licensed, bonded and insured. Written Firm & Fixed Bid Proposals are required: include itemized labor total, itemized materials total and services and required permits "Cost plus" or "time and material" contracts are prohibited Must agree in writing to complete the work for the amount of the cost estimate and within the allowed time

SELF-HELP:
“Self-Help" arrangements may not be allowed or may be “strongly discouraged” depending on the Lenders administrate guideline. Each lender may have different guidelines

Repairs are Installed After the Close of Escrow:
The Streamline (K) funds are held in an Escrow Holding Account

DRAWS:
2 draws per contractor
Initial Draw: No more than 50% for materials only
Final Draw: A Notice of Completion is issued balance is paid to Contractors with proof of Release of Lien(s)

*LENDER & UNDERWRITING
Any FHA-approved Lender may process a Streamline (K) and Energy Efficient Mortgage Program
Lender must receive Contractors and Borrower required documentation before underwriting & loan approval. *Not all FHA-approved Lenders participate in the Streamline 203(K) Program

INELIGIBLE IMPROVEMENTS:
Any structural repairs-New construction (adding a room)-Repairs requiring detailed plans or specs
Any repair taking longer than 6 months- -No landscaping

ELIGIBLE REPAIRS:
Almost any “Simple” Discretionary-Non-Structural Repairs, Renovations and Weatherization
Minor repairs and Improvements to Living Areas, Baths and kitchen
Replace or Repair Roof, Gutters Improvements for persons with Disabilities
Replace Floor Coverings Wells & Septic
Repair Decks & Patios Appliances:
Repair Pest/Dry Rot Energy Efficiency Dual Windows, Heat & Air, Insulation
Solar & Renewables (at Lender discretion)

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Disclaimer: Information on the Synergy web site is compiled from what we regard as publicly available information. The information is solely for review. Synergy accepts no responsibility for the validity of the information although it is compiled from sources we believe to be accurate and reliable.

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