203(K) and streamline (K), what is the proccess like? How long to close?

Asked by Bailey's Mom, Atlanta, GA Sat May 3, 2008

We originally weren't looking to buy a fixer upper for our first house, but we found one that is in our price range and we absolutely love. It needs kitchen appliances, maybe a new furnace. We aren't sure about the electrical or the plumbing, the house is pretty old. Also we would probably want to put in an alarm system. It may need some other cosmetic things, and perhaps a kitchen remodel if there is any money left over. Can we use the the 203K or streamline K for this sort of thing? What is the proccess like? How long do these things take to close on average?

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Ute Ferdig, Agent, Auburn, CA
Sat May 3, 2008
Hello Bailey's Mom. The 203(k) streamline process is a great program. I would check to see if Energy Efficiency Mortages are available in your area as they allow you to add another $10,000 on top of the loan without income qualification, which means that you don't have to use the 203(k) streamline for items that can be covered under the energy efficiency loan and that frees up money under the 203(k) streamline program that can be used for other things that are not energy efficiency related. For instance, you mentioned that the house needs new kitchen appliances and maybe a new furnace. Most likely the kitchen appliances and furnace would be covered under the energy efficiency loan (the cost consultant can help you with making the determination of what should be covered under what loan). I would also recommend that you use the energy efficiency loan to have the house weatherized (a weatherization contractor will come in and seal the house to reduce the hourly air exchange which will help greatly to reduce energy cost). You may be reluctant to take out an extra $10,000 loan, but the monthly savings on energy cost will more than make up the additional interest that you pay on the $10,000 and making your house more energy efficient will also add value. There are certain things that are not eligible for financing under the Streamlined (k) program (e.g., major rehabilitation and remodeling, repairing structural damage, new construction (incl. room additions), repairs requiring detailed drawings, landscaping or similar site improvements).

Now to the process for 203(k) streamline. After you have signed the sales contract (which is made subject to the home inspection), you'll schedule an inspection with a 203(k) cost consultant, home inspector and appraiser to budget the home improvements. Once you approve the budget, the cost consultant completes the work write-up and prepares contractor bid packages to obtain cost estimates. The appraiser uses the work write-up to determine "as-is" and "improved value." The loan closes with an FHA-approved 203(k) lender and the construction begins within 30 days of loan closing and must be completed within a certain amount of time (I am not sure if it's 3 or 6 months - I have heard different timelines and you have to check with your loan agent to make sure you get current information). It's important to work with an experienced cost consultant who is familiar with the time requirements of the 203(k) streamline and who has an established network of contractors who can get the job done within the required time frame. This is not the time to involve contractor friends (that's just my personal opinion).
One more thing. Don't expect to move into the house right after closing because the contractors will first demolish what will be replaced and the house may not be habitable for the first month or so.
You can expect a 45-day closing as the 203(k) streamline and energy efficiency loans do not usually hold up the closing of the escrow. Your loan agent can give you a better time estimate.
Good luck to you.
2 votes
Jolie Abreu, Agent, Boca Raton, FL
Sat May 3, 2008
In general, the 203(K) monies are meant for things determined by the inspector to be related to construction or code requiremnts. I would thing the electrical, and plumbing would certainly qualify. You may even have an arguement for the alarm system. The cosmetic things, and especially the kitchen remodel would bel a bit of a stretch. And, the "repairs" may be subject to approval by an FHA appraiser.

The process can be similar to any corporate, or bank owned home, and you should allow at least 2-3 months for the response / negotiation time. Then it's just a matter of contract to close, which should take anywhere from 2 to 6 weeks, depending on your financing situation. I'm giving you the worst case senario on the time, it could take 6 weeks from beginning to end. Please feel free to call if you have any other questions.

Jolie Abreu
(678) 894-4409
Web Reference:  http://www.helpinghomes.net
1 vote
Chris Colvin, Other Pro, Marietta, GA
Wed Nov 28, 2012
This is an old question, but still very relevant to today - if not more so.
Closing is 45-60 days minimum. So keep your eye on any extensions/deadlines and make sure the realtor is as well. Otherwise you will be on the court house steps looking to buy it out of a complete circus. The Full K and Streamline K are only different in a couple ways - one allows load bearing work and anything that can be dreamed up (Full K) and requires the HUD Consultant, the other (Streamline) is generally for basic repairs/upgrades under $35k... but certain levels of copper theft and unique damage may flip it in to a Full K at U/W review. Your process? Qualification docs are basically the same... except on a Full K the Consultant builds the Work Write Up and HUD package (scope for the U/W & Appraiser to consider), and assists with bid. Honestly, this loan is saving the country one house at a time - so go forth and renovate.
0 votes
Chris Colvin, Other Pro, Marietta, GA
Wed Sep 29, 2010
There is some good advice in this thread below...
I have to say that walking the property with a HUD consultant/FHA Compliance Inspector would answer a lot of questions - and give you the documentation that is needed to be very well informed. On full k loans, I have never seen an alarm system get turned down, and if you are really going to get serious about a kitchen remodel - or even think you are- then the full k loan is the place to go, especially if you are a first timer to renovation.
Good luck,
chris colvin
0 votes
Laura, Both Buyer And Seller, Minnesota
Mon Mar 2, 2009
You can use this loan (203k streamline) for a kitchen remodel, and all of the other things you listed (except I am not sure about the alarm system) up to at least $35000. You can get your most questions answered on the FHA web site.
0 votes
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