FHA 203k Streamline Mortgage
The FHA 203k loan is a government insured “rehab” loan. Borrowers have to qualify for the loan just like any other FHA process, but the property does not have to be in FHA ready shape necessarily.
The FHA 203k “streamline” loan allows for up to $30,000.00 additional cash to be applied to fixing up the property. This cash can pay for new flooring, new windows, a new roof, or even new appliances. As a rule, you can expect the overall mortgage interest rate to be about .5%-1% above the standard available FHA 203b mortgage (203b is the normal FHA purchase loan).
This loan is not one that is readily available. Even though HUD will insure this loan, there are not a lot of funding sources for it. Truth be told, my experience with this program has been fairly poor. The approval process is VERY demanding, as it is effectively a government insured “construction” mortgage, there is not a lot of logic surrounding the guidelines for this loan.
Not only must the borrower qualify to make the payments, but the construction / repairs must also be approved. This means that you must get a quote from a licensed contractor. The contractor must be assessed and approved by the bank (all current on their accounts, and updated licenses and corporate bond etc.), the contractor must also draw up plans for the repairs along with a detailed list of materials needed and the costs associated. There will also be a schedule of events created at this time.
You can expect a LOT of back and forth with the bank, as well as back and forth with the contractor during the loan approval process on an FHA 203K mortgage. Because the qualifying process is so cumbersome, I would plan for a closing time frame of around 70-90 days.
To learn more about the FHA 203k loan program, the Oregon Mortgage Blog recommends contacting James Adair with Pdxhomeloan.com at Mortgage Trust, Inc.
