Leavenworth Real Estate

FHA Mortgages – Loans for Limited Repairs

This is a Guest Post provided by Kevin Rimes, of Taylor Mortgage in Wenatchee

HUD has developed an FHA insured mortgage, called the “Streamline (K)” Limited Repair Program that permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser. All standard FHA underwriting guides apply as they do for regular FHA loans in regards to credit, income & asset documentation. As well as the use of automated underwriting systems and manual underwrites.

 

 

 

About the FHA Limited Repair Loans

•  May be used for purchase or refinance of one-to-four (single family residences, including HUD REO properties 
• May be either Fixed or Adjustable rate mortgages
• Combines the funds to purchase or refinance (pay off existing liens) along with the funds needed to repair/rehabilitate the property.
• Repairs are completed after closing. (NOTE: Cannot do a Cash-Out Refinance)
•  One closing, with rehabilitation funds escrowed and disbursed as the work is satisfactorily completed
• Can be used to update homes, correct health and safety issues, pay for higher cost items such as a roof, etc.
• Property value must be sufficient to purchase/refinance and complete the\rehabilitation
•  Property must be 100% complete or equivalent document and must be at least one (1) year old. (EXCEPTION: Presidentially declared disaster areas for\one (1) year after the disaster)
•  Borrower and credit eligibility same as for other programs (No Investors,including REO sales)

STREAMLINED (K)

•  No minimum threshold; maximum is $35,000, includes the 10% contingency
• Appraisal is completed as “Subject To”
• Minimum 10% Contingency
• Consultant (and plan) is not required; General contractor is not required
• Lender is responsible for ensuring that the cost of the repair is reasonable and customary for the area in which the property is located
• Preparation of architectural exhibits (as listed in Handbook 4240.4 REV-2, Paragraph 3 – 2) is not required
• Helps address the repair issues that could delay/prevent the sale or refinance

Eligible Improvements under the FHA Limited Repair Program

• 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, weatherstripping, etc.
• Refrigerators, washers/dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
•  Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/replace/add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement

Ineligible Improvements under FHA

• Major rehabilitation or major remodeling, such as the relocation of a load bearing wall
•  New construction (including room additions)
•  Repair of structural damage
• Repairs requiring detailed drawings or architectural exhibits
• Landscaping or similar site amenity improvements
• Any repair or improvement requiring a work schedule longer than three (3) months; or Rehabilitation activities that require more than two (2) payments per specialized contractor. That would necessitate a “consultant” to develop a
• “Specification of Repairs/Work Write-Up”
• Require plans or architectural exhibits
• Require a plan reviewer
• Result in work not starting within 30 days after loan closing; or cause the mortgagor 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 mortgagor would be able to occupy the property after mortgage loan closing)

This entry was posted on Friday, May 15th, 2009 at 11:29 am and is filed under Home Buyers, Home Sellers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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