Don’t pass up buying a home because it needs minor repairs!
Learn the FHA home repair financing options available to you.
For new homebuyers, the decision to purchase or pass on a potential home can be affected by the amount of money needed to complete repairs. Many buyers pass up homes needing minor repairs because they either do not have the finances to complete the repair or their lender cannot provide an equity loan to cover the costs of those repairs. The Federal Housing Administration’s (FHA) Streamline 203k mortgage program is an option for buyers who are looking to purchase a home that needs minor repairs that may not have the cash-in-hand to complete those repairs.
It is important to note that this program can only be used for homes that come from the Department of Housing and Urban Developments (HUD) inventory of homes. A HUD-insured home is a home previously insured by the Federal Housing Administration (FHA) that was foreclosed upon and acquired by HUD. These properties are typically referred to as REO properties, otherwise known as Real-Estate Owner Properties. Borrowers who obtain an FHA loan can utilize the Streamline 203k mortgage program if the repairs on the property they wish to acquire cost less than $35,000
There is no minimum repair cost needed to apply for this program. However, repairs that exceed $15,000 must have an inspection completed to verify that all the repairs slated to be completed under this loan have been performed. This loan option cannot be used for major rehabilitation projects or projects that will take longer than six months to complete.
Unlike the Standard 203k program that allows the home to be uninhabitable during its reconstruction, the home utilizing a Streamlined 203k mortgage loan must be habitable. Within 30 days of closing on the loan, a borrower must commence the repairs on the home. Under this program, borrowers are allowed to complete the work themselves. They may only seek the costs involved with the materials in completing the work and cannot be reimbursed for labor.
Borrowers who wish to utilize this option can contact an FHA approved Lender for more details. Michigan State University Extension suggests that you also take a look at the list of all eligible repairs for the list of all eligible repairs and frequently asked questions concerning the Streamlined 203k mortgage program.
Whether you are looking to purchase a home in need of minor repairs or to complete a smaller improvement project, if you own a HUD-insured home, the Streamline 203k mortgage program may be an option for you.