I saw an article about the FHA 203k loan product. I think it is a great product based on the type of market we are in currently. Here is why I beleive this way:
- There is a large number of homes on the market for sale that are either Bank owned or in some form of default
- These homes are typically vacant and have been for sometime, which mean they have not been properly maintained; even if the HVAC system has been winterized
These are good homes that simply need a little "Tender Loving Care" or minor repairs. The FHA 203k Streamline loan allows for the acquisition costs of the home plus additional monies to fix up the home from $5,000 - $35,000; and it is done at the same time with one settlement. The loan product will allow for the following types of repairs or rehabilitation examples:
- New appliances, new Kitchen cabinets and counter tops, new flooring (carpet, hardwood, etc.)
- New paint and drywall (including drywall repair), plumbing and electrical repairs
- New roof and windows
Basically a FHA 203k Streamline loan, gives a purchaser the opportunity to take an exisitng house that needs some repair and to get that repair done at a very decent interest rate. This loan also does not require a FHA 203k consultant to be involved in the process. The purchaser can use companies like Home Depot, Lowes, and other such reputable companies. The purchaser can pick their own genreal contractor to do the work as long as the contractor is licensed and bonded in the state that the work is to be performed.
It also comes with some inherent protections; the lender will allow for a deposit on the work to be performed but as each additional "Draw Payment" is requested by the Home Owner or the General Contractor; the Lender will send out an inspector to view the work that has been completed and insure that all State, City and County inspections have occured and been signed off on prior to the payment to the contractor. This process is for the benefit of the purchaser and the Lender to insure that the work is done in a timely and professional manner.
The end result is that a house that structurally is sound and just needs a little work to make it more appealing to the purchaser, can occur without the borrower having to come up with this money out of their own pocket. After the work is performed the Home Owner can very easily refinace the FHA 203k streamline loan into a regular FHA loan at a lower interest rate on a "Rate & Term" basis if the lower interest is of a "tangible benefit" to the Home Owner.