Buy A Fixer Upper

Buying a fixer upper can be exciting because you get to make design decisions and will quite possibly end up with a great deal on a home that lenders will not put a standard loan against. 

There are two great programs that allow you finance the renovation.  In both cases, you can do most any type of remodel you want including a room addition.  Keep in mind, this is not a separate construction loan from the mortgage.  In a nutshell, the price of the home and the cost of the remodel (along with certain costs & A contingency reserve) is all wrapped together into 1 loan and 1 payment. 

FHA 203k Rehabilitation Loan
There are 2 versions of this program 
The Streamline FHA 203k and the Standard FHA 203k  
The maximum loan cannot exceed 110% of the value of the home (after completion value). 
Both programs are subject to the Maximum FHA County Loan Limits
Both progams are subject to standard FHA mortgage insurances (upfront & monthly)
Both programs require a contractor to be assigned to the project.  The contractor will have to pass a basic background check to m

Streamline FHA 203k
Total allowed amount added to loan is $35,000.  This means that all rehab costs, contingency reserve (10-20%), and 203k specific costs must not exceed $35,000.  The estimated rehab costs for this program should stay under $31,500 to be safe.  

The Streamline program is intended for uncomplicated rehabilitation and/or improvements to a home for which architectural exhibits and HUD consultant oversight is not required. The work allowed under the Streamline 203k is limited to the following:
  1. repair/replacement of roofs, gutters, and downspouts;
  2. repair/replacement/upgrade of HVAC systems, plumbing, or electrical systems;
  3. minor remodeling, which does not involve structural repairs;
  4. painting of interior or exterior;
  5. weatherization;
  6. purchase and installation of appliances;
  7. accessibility improvements for persons with handicaps;
  8. lead-based paint stabilization or abatement of lead-based paint hazards;
  9. repair/replacement/addition of decks, patios, and porches;
  10. basement finishing and remodeling, which does not involve structural repairs;
  11. basement waterproofing
  12. window and door replacements and exterior wall re-siding; and
  13. septic system and/or well repair or replacement. 

Standard FHA 203k  

There is no limit to the amount of rehab costs added to this loan other than the normal County Loan Limits set by FHA.  The Standard FHA 203k is designed for bigger remodel jobs.   One major distinguishing factor from the Streamline FHA 203k is that with the Standard FHA 203k Loan you can defer up to 6 months of mortgage payments if the construction makes the home uninhabitable.  Keep in mind that the amount of the deferred payments is included in the construction budget. 

HUD Consultant [to be continued...]

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