Govt Money for Borrowers -FHA Streamline 203(k)

DON'T BE AFRAID TO BUY A FIXER UPPER 

FHA Streamline 203(k)
FHA 203(k) Provides Cost-Effective, Single Close Loan that Enables Borrowers to Purchase a Home that May Need Repairs or Remodeling.

With the STREAMLINED 203(k) limited repair program, borrowers can finance a maximum of $35,000 into their mortgage to make improvements* The program includes the necessary funds for the renovation by financing the "as-completed" value of the home, rather than the present value. FHA 203(k) can help you expand your market reach by providing a value added niche product to qualified borrowers who need to renovate or repair their home, or have repair contingencies on a home they wish to purchase.

An attractive option for borrowers who:
• Are looking for a cost effective way to renovate, repair or improve an existing home.
• Would like to rehabilitate a foreclosure that has been neglected or damaged by an occupant.
• Would like to avoid having to us personal funds or obtain a 2nd mortgage for repairs, renovations and improvements.
• Want to improve their home and neighborhood.
• Want only one loan, with one closing.

PROGRAM HIGHLIGHTS At-A-Glance
PROPERTY TYPE 1-2 units

MAXIMUM LTV RATIOS Purchase maximum 96.5% LTV and refinance maximum 97.75% LTV

CREDIT SCORE Minimum 640 credit score required, regardless of automated underwriting decision

OCCUPANCY Owner-occupied primary residence only

LOAN PURPOSE Purchase, rate-term refinance (cost of repairs is not considered cash-out)

ELIGIBLE MORTGAGES 30 year fixed-rate mortgages (FRM)

REHABILITATION PERIOD Rehabilitation must begin within 30 days of closing and be fully completed within a maximum of six months

AMOUNT OF REHABILITATION
Minimum $5,000 rehabilitation costs and maximum $35,000 to be eligible, but the total value of the property must still fall within the FHA mortgage limit for the area; the value of the property determined by either: the value of the property "as is" before rehabilitation plus the cost of rehabilitation minus the sales concessions or 110% of "as completed" appraised value of the property, whichever is less.
Expenses eligible for inclusion in the cost of rehabilitation are: materials, labor, plus expenses related to the rehabilitation such as permits, inspection fees and lien protection fees for title updates. Additional restrictions apply.

SELF HELP
Self-help arrangements in which the borrower is performing some or all of the work items are strongly discouraged unless the borrower's ability to perform the work in a competent, timely and workmanlike manner is self-evident and easily documented. The self-help option is not allowed for any project for which permits will be required, unless the borrower is a licensed contractor working in the specific field necessary for the rehabilitation.

Additional restrictions apply.

ELIGIBLE IMPROVEMENTS
The Streamlined FHA 203(k) program is limited to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. Eligible improvements are limited and can not include any major rehabilitation
or remodeling like: new construction such as a room addition, repairs to
structural damage or site amenity improvements.

Examples of eligible improvements are:
• Repair/replacement of roofs, gutters and downspouts; plumbing and electrical systems; and flooring
• Repair/replacement/upgrade of existing heating, ventilation and air conditioning systems
• Minor remodeling that does not involve structural repairs, such as kitchens/baths
• Exterior and interior painting
• Weatherization, including storm windows and doors, insulation, weather stripping etc.
• Purchase and installation of appliances, including free-standing ranges, refrigerators, washers, dryers, dishwashers and microwaves
• Improvements for accessibility for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/replacement/addition of exterior decks, patios, porches
• Basement finishing and remodeling that does not involve structural repairs
• Basement waterproofing
• Replacement of windows and doors and exterior wall re-siding


Additional restrictions apply.

SECONDARY FINANCING Not allowed

BORROWER CONTRIBUTION/DOWN PAYMENT
The minimum down payment requirement on purchase transactions is 3.5%; refnances may not require a down payment if the borrower has substantial equity in his or her home.

SOURCE OF FUNDS
Borrower's own funds; proceeds from 401(k); gifts from relatives, fiancé/fiancée or domestic partner.

INTERESTED PARTY CONTRIBUTIONS
Up to 6% allowed to cover closing costs, prepaids, expenses, discount points and other financing concessions.

UNDERWRITING METHOD
Direct Endorsement (DE) underwriters are qualified to underwrite 203(k) loans; Desktop Underwriter® and Loan Prospector® allowed with automated underwriting system approval.

QUALIFYING RATIOS
Maximum qualifying ratios are determined by the AUS; for manually underwritten loans a maximum qualifying ratio of 31/43%, which may be exceeded only when significant compensating factors are present and approved by a DE Underwriter.

RESERVES 1-2 units: None

MORTGAGE INSURANCE
Up-Front Mortgage Insurance Premium (UFMIP) and Mortgage Insurance Premium (MIP), paid monthly, required (MIP not required with LTV ≤ 90% with a mortgage term of 15

Article by Primary Residential Mortgage Insurance 
Linda Rogers | NMLS#: 163076
Licensed by the Arizona Department of Financial Institutions.
AZ BK 0902614 NMLS# 3094