Monday, January 12, 2015 - Article by: Derick Condron - Right Start Mortgage -
One of the best products that not many people know about is a rehabilitation loan. The program code is 203k so that is what I will refer to it as in this post. The loan is a FHA loan. The process of qualifying for this loan is just like that of a regular FHA loan, you will need to have the income, credit and assets to qualify. You can use it as a refinance loan to do some updates on your current home or use it on a house you are purchasing to give it that personal touch when moving in. Like anything, there is a maximum dollar amount that can be rolled into the file; currently that is 35,000, which will include a 10% contingency for any unforeseen overages that arise during the construction process. As we go, there are many details that over time I will get more in depth on, but this post will give you a quick snap shot of how the 203k streamline loan program works.
Just like any FHA loan the first thing you will want to do is get your free pre-qualification with me. The process of closing this loan is virtually the same as any other loan. The only additions are the contractor bids and an "as completed" value on your appraisal. This "as completed" value will need to be in line with the renovation work we want to complete on the home. The key to the 203k Streamline is making sure that the work we are completing adds value to the home. After going under contract or deciding to move forward on a refinance we will want to identify the items that you want to repair or update on the home. In a purchase situation I recommend that you have a contractor with you while having the home inspection completed. Once you have secured the bid you want to move forward with (we recommend obtaining 2 or 3 different bids just as comparisons), the next step is to order the appraisal. This appraisal will be completed with an "as is" value and an "as completed" value. This difference between the two values is what the property would appraise for "as is" with no repairs (as it currently sits), what the value will be after the repairs named in the bid are completed. Your loan amount becomes based off of the "as completed" value, thus allowing you to finance in repairs or remodeling into your total loan payment. After this we get the approval on the file and you close the loan; your contractor will have 6 months to complete all the work that you have submitted to the lender with the original bid you chose at the beginning of the process.
Some of the things that you can use the 203k Streamline to update are kitchen counters, floors, bathroom fixtures, painting or updating wall coverings. You can get as deep as working on foundation issues as long as you are not adding square footage to the home. In the case of a purchase, you could take a home with great layout, but outdated features and amenities and make it up to your modern standards upon move-in with only one loan! For refinances, you can take your current home and make your ho-hum kitchen the entertainment and gathering area of your dreams!
This gives you a very broad stroke of the brush idea of how the 203k Streamline loan program works. Keep watching this blog for more details on each step of the process, from garnering the bids to the completion of the work. Call or email me to start the process of getting qualified today!!
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