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FHA 203(k) Streamline Limited Repair Program Loan Process

The 203(k) Streamline Limited Repair Program allows a customer to purchase or refinance a home and make limited upgrades/repairs to the property all under one single loan. The loan is not re-qualified as it is only underwritten one time, upfront.

There is no minimum amount for the repair costs; however the maximum is $35,000 (includes 10% contingency, supplemental origination fee, and final inspection fee).

There is a mandatory 10% contingency required on all 203(k) streamline loans.  This contingency is held until final disbursement. If the contingency is not used it will be applied to the principal mortgage balance.

The repair funds are held in escrow.

No more than two payments may be made payable to each specialized contractor or to the borrower, if the borrower is performing the work under a self-help arrangement.

The borrower is given 3 months from the closing date to complete all the repair/rehab work.

Eligible Properties

One-to-Four (single family) residences, including HUD REO properties Manufactured Homes are allowed (must meet FHA guidelines on our website)

Spot Approval for Condos is permitted on this program

Property must be 100% complete – no partially built homes

Eligible Improvements/Work

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

Repair/Replace/add exterior decks, patios, porches

Basement finishing and remodeling, which does not involve structural repairs

Basement waterproofing, including mold removal

Window and door replacements and exterior wall re-siding

Septic system and/or well repair or replacement

Connection to public water or sewage system

Ineligible Improvements/Work

Major rehabilitation or major remodeling, such as the relocation of a wall

New construction (including room additions)

Repair of structural damage

Repairs requiring detailed drawings, plans or architectural exhibits

Landscaping or similar site amenity improvements, including fence

Lead-based paint stabilization or abatement of lead-based paint hazards

Any repair or improvement requiring a work schedule longer than three (3) months; or Rehabilitation activities that require more than two (2) draws/payments.

Any work requiring a plan reviewer

Result in work not starting within 30 days after loan closing; or cause the borrower to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted (FHA anticipates that, in a typical case, the borrower would be able to occupy the property after the mortgage closing.

Contractors and Repair Criteria

All repairs/work must be completed within 3 months of the closing date.

Repairs must be completed by a contractor unless the borrower can demonstrate the required expertise/experience (ie: plumbing repairs would require a licensed plumber, electric work would require a licensed electrician).

The contractor making the repairs does not have to be a licensed general contractor; however, he must provide a resume along with two references (see client reference form).

The cost of repair(s) must be reasonable.

Use of Contractors:

Contractors provide estimates for the work to be done.

Contractors provide a resume and two references (see client reference form)

The lender will review the contractor’s credentials verifying jurisdictional requirements for licensing, bonding & insurance are met (we will need a copy of all these docs).

Each contractor must sign a homeowner/contractor agreement.

The cost estimate(s) provided must clearly state the nature and type of repair and cost for completion of the work item.

Additional cost estimates may be required from the borrower.

Self Help (borrowers completing work):

The borrower is required to have the necessary expertise and experience to complete the work in a satisfactory manner (ie: borrower is a licensed plumber and will complete that portion of the work).

The cost of labor is included in the repair/rehabilitation cost (in case the borrower is unable to complete the work and a contractor must be hired).

The borrower may not be compensated for his/her labor.

No sweat equity.

The borrower must provide written estimates of the repair/rehabilitation costs as well as written estimates from the suppliers of the materials that the borrower will purchase

The borrower must sign and complete the self help agreement.

“Cost Plus” or “Time and Material” contracts are prohibited.