Financing in South Miami>Question Details

Sujad Jarquin, Home Buyer in Miami, FL

What's the process like for an FHA Streamline 203K loan to purchase a single family home?

Asked by Sujad Jarquin, Miami, FL Wed Mar 17, 2010

About how much additional time does it take to process and close using an FHA Streamline 203K? I have heard that the standard FHA 203K can take up to 45 days, but the Streamline version is shorter? If I am low risk (credit over 700), what's the going rate for an FHA streamline 203K vs. a standard FHA? About how much more can I expect to pay in fees?

Am I able to live in the house after closing while the renovations are occurring? The house would need a minor kitchen remodeling (replace cabinets and buy appliances - nothing structural), a new A/C, and a new electrical panel (the house currently has fuses, updating to breakers). Information is greatly appreciated!

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What's the process like? It's not easy. I am currently doing 3 loans 203K. The timeframe depends on the underwriter and how much the underwriter knows about building a house. What you can do to speed things up is to use a contractor that the lender (loan officer) is familiar with. If they have a good relationship, the contractor will be more willing to write up the invoices the way the underwriter wants it to be done. Make sure you stay on top of the contractor to get things done in a timely manner. You need to sign everything that the contractor signs. You need to call the loan officer every week and asked him/her what else you can do to help the file move along. You'll also want to ask the loan officer to send the file to a Manager of the buying lender to review the file before submitting it to underwriting so that there won't be any hiccups. This one thing can save you a lot of time. I am licensed in FL, however, I would strongly recommend that you go local on this one (unless you bend my arm). I'd recommend Wells Fargo or a broker familiar with 203K. How would you know if they know. Ask the loan officer: What's the maximum amount of money I can borrower for a 203K loan? Answer: up to 35K or 110% of the after repair value, whichever is less PLUS up to 8K in Energy Efficient appliances and upgrades PLUS up to 2K in weather stripping. Rates are about 1/2% higher than normal rates, closing costs are normal. The cost of escrowing the repairs and paying contractors is subtracted from the money you request. Please do feel free to contact me if you have any questions.
4 votes Thank Flag Link Wed Mar 17, 2010
Hi Bill,
I am try to purchase an "as is" foreclosure home. We are close to closing. I am trying to get a 203k streamline loan. My Mortgage broker called in a "HUD Inspector", actually a consultant. He told my broker things that aren't true (such as if you have more than 3 contractors you no longer qualify and must go 203k). He said that $3,500 must be spent on a lead based paint issue on the exterior the area of which is much less than 20 square feet. Said the furnace must go without checking it out. Got the price well over the $35,000 limit and price me out of my home due to the increased down. My question: It is my understanding that I do not need an inspector on a Streamline loan, just an appraiser after the work is done. My broker insists that we must work with a consultant. What's the truth here? Everything I study tells me that the furnace if functioning well it's fine and the lead paint is not an issue. There is no peeling paint. The inside is fine. Thanks for your help.
Flag Sat Jul 5, 2014
Hi, Sujad

Here's some additional info concerning the Streamline 203K:

APPROVAL GUIDELINES:
- Buyer must qualify as they would for a typical FHA 203b loan
- Like Up Front Mortgage Insurance (UFMIP) the cost to do the repair/renovations are rolled on top of the loan and the buyer must qualify for the new total loan amount.
- Interest rates for 203k are higher than the standard FHA 203b.

PROCEDURAL GUIDELINES:
- Loan limit is up to 35K.
- PA has to state that the buyer is seeking a 203k, and that the contract is contingent on lender approval.
- Estimation of repairs/updates has to be submitted by a licensed contractor approved by the lender.
- Contractor has to begin repairs within 30 days of the close and must finish within 30 days of the estimated time to complete the work.
- Upon completion of work, the appraiser that previously inspected the home comes back out to reinspect the completed work for FHA compliance.
- If not already occupying property, buyer then takes full possession of home and moves in.

ACCEPTABLE REPAIRS/UPDATES:
* Roofs, gutters and downspouts
* HVAC systems (heating, venting and air conditioning)
* Plumbing and electrical
* Minor kitchen and bath remodels
* Flooring: carpet, tile, wood, etc.
* Interior and exterior painting
* New windows and doors
* Weather stripping & insulation
* Improvements for persons with disabilities
* Energy efficient improvements
* Stabilizing or removing lead-based paint
* Decks, patios, porches
* Basement completion and waterproofing
* Septic or well systems
* Purchase of new kitchen appliances
* Purchase of washer and/or dryer

UNACCEPTABLE REPAIRS/UPDATES:
* Landscaping or yard work
* Major remodeling
* Moving a load-bearing wall
* Room additions or add-ons to the home
4 votes Thank Flag Link Wed Mar 17, 2010
There are two types of FHA 203(k) loans – the regular FHA 203(k) Rehabilitation loan, the FHA 203(k) Streamline Rehabilitation loan.

The FHA 203(k) Rehabilitation loan involves structural repairs and/or costs that exceed $35,000. Because this loan is more involved, the time from application until settlement can take as long as 45 – 60 days.

For an FHA 203(k) Streamline Rehabilitation loan, the costs can not exceed $35,000, and there can be no structural repairs. Because this loan is less involved, the time from application until settlement can take as long as 30 – 45 days.

Mortgage rates for FHA 203(k) loans tend to be a little higher than regular FHA loans. How much higher will depend on the lender you are working with.

Before the house is appraised, a work list of items to be completed along with estimated costs of repairs must be given to the appraiser. This is so the appraiser can prepare an “as is” appraisal as well as an appraisal for after the work is completed. Your final mortgage can not exceed 100% of the final appraised value, and must stay within the limits for the county in which the home is located.

As for fees, there’s an added inspection fee for the Streamline Rehab loan, where as the regular Rehab loan involves a consultant that must be used to facilitate the process. There’s also several inspections that must be done over the course of work to be done. The inspections must be done before the contractor can make draws for work performed.

If the house in habitable, you can live in the house while repairs are being done. If not, you must live elsewhere until the work is completed. If you do have to live elsewhere, you can roll up to 6 months of mortgage payments into the loan.
4 votes Thank Flag Link Wed Mar 17, 2010
Do you know if you are allowed to do most of the repairs yourself as long as it isn't structural? Like remodel the bathroom and the kitchen myself, but hire someone to do windows?
Flag Mon Nov 18, 2013
I am in process of doing a 203k and at the moment I am being offered 4%. But add in the FHA P.M.I. at 1.5 % for the life of the loan (thank you bank bailout for changing this as of 4-1-13.) it will end up actually being 5.5%
Flag Sun Nov 17, 2013
Hey Sujad....We are running about 35-45 days to process either program at Wells Fargo. We do service our loans and have a dedicated draw dept.....The key to the processig timeframe is getting the contractor and FHA consultant (if you are going to do the consultant K) together quickly to meet at the property as soon as possible after you get an accepted contract on the house. The consultant K rate is about 1/8 higher than the Streamline K..... The extra fees for the Consultant K (also known as Standard) are the extra fee you have to pay the FHA Consultant which probably averages $750.

Sometimes you can live in the house during renovations but it depends on if the items being completed are are safety or health concerns. For example, you cannot live in the house if the water is not hooked up as that would be a safety hazard.

I do have a Wells contact in Miami if you are interested, shoot me an email and I will put you in touch with him...
3 votes Thank Flag Link Wed Mar 17, 2010
Sujad a 203k loan either Streamline or regular doensn't really take any longer to process than a regular mortgage loan (about 5 work days) as long as YOU are diligent on getting things done with the realtors/sellers help.. Using an experienced consultant will expedite the proess and worth the money spent. Though a consultant is not necessary for a Streamline they do know what you should pay for the work that will be performed.
In order to have an appraisa done the appraiser will need either detailed write upd the the work to be done from the contractors or the consultants summary report so they can figure the value of the upgrades/repairs into their report.
You will be able to live in the property as long as there are no safetly issues associated with doing so. good luck with your new home.
2 votes Thank Flag Link Wed Mar 17, 2010
we are also doing a 203k streamline, my question if anyone can answer is.... if the house can not be occupied due to conditions of replacing plumbing and electricity what will happen, Do we need to be in the home on a 203 streamline within the 30 days.
Flag Thu Feb 20, 2014
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