FHA 203k streamlined Repair and Rehab Loans: A Primer

FHA has a purchase/rehab program designed to allow a buyer to buy and have cosmetic improvements made on a house they purchase. Often an MLS listing agent will not list “FHA” as one of the choices available on a property. This is especially true on bank owned properties.  Yet, when asked, an asset manager may accept an FHA 203k(s) as the type of financing for the offer allowing your buyers to buy the home they want. They know that the house as is, may not pass an FHA inspection but when repaired, will. By having access to this program you can provide your buyers with a powerful tool to expand their search for just the right, value priced home.

Here’s a short primer on using these loans.

What Kind Of Work Is Covered?

• 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 putting in new kitchen cabinets and counters, 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
• Repair/replace/add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs (no walls built, no walls removed!)
• Basement waterproofing                                                        
• Window and door replacements and new exterior siding
• Septic system and/or well repair or replacement
• No landscaping is allowed

 The Process:

• Get a bid for all work from a licensed, bonded and insured General Contractor with a minimum of 5 years experience.  (Just one!) We’ll put them through a short approval process. (We can recommend some pre-approved contractors)
• The appraisal will be done on an “as improved” basis and up to 110% loan to value
• Up to $31,000 in actual repair costs (10% held back in case something unforeseen comes up)
• 50% of the contract paid at the closing of the purchase transaction to the contractor
• Prompt payment at the end of construction from escrowed funds
• $1000 minimum work required (not $5000 like others!)

How can we help?

• We’ll walk you and your buyers through our streamlined process step by step
• With 20 years of experience, these loans are routine for our processing staff
• Since we originate, process and close these loans in house, we’ll get the job done on time.  Fairway is no stranger to FHA product and currently ranks as the 15^th largest FHA lender in the country.

Most buyers today struggle to come up with the cash for the downpayment leaving them very little after closing to handle repairs or paint the walls the color they really want them to be.  By incorporating the remodeling into the purchase, they can paint the walls, put in the new carpet, update the furnace, or the roof and have it all with one low payment. It’s a great way to make their new home more affordable!   I was talking to a manager at Home Depot who said to me, “I wish I’d have known about this program when I bought a house.  I ended up putting a lot of things on credit cards after closing and this would have saved me a lot of money!”

Need a short one on one on how this all works?  We’re a phone call away!   -Mike Wright

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