I recently settled a property in South Jersey with a Streamline FHA 203K loan. For those of you who are not familiar, the Streamline 203K refers to minimal processing on any property which requires less than $35,000 in total repairs.
There are old horror stories about 203K's. Back in the day, the process was much more tedious and involved endless paperwork. This is no longer the case. Even the full-blown program, in which repairs exceed the $35,000 max for the streamline, can be closed within 60 days (the streamline can close in 30-45). Keep in mind, if there are serious issues, ie.... foundation, septic problems, it may be determined that a full-blown 203K is needed rather than the streamline program.
I truly believe that the 203K program (both streamline & full-blown) can help jump-start the housing market. With the prevalence of short sales and foreclosures in today's market, many homes are in need of repair. This particular closed loan is a prime example. The property was well over 100 years old, and looked it. Most people would run screaming from the home as soon as they stepped through the front door. But these buyers, both in their early 20's, saw the potential of the place.
They bought the home for $82,500, with a $3,000 seller assist. The repairs came to $32,000. So the total mortgage amount (before MIP) was $114,500. Now here's the great part. The home appraised, based upon completion, for $160,000!!
Effectively these buyers payed $111,500 for a home with a finished value of $160,000. I might add, worth $160,000 in this market! Their 3.5% down payment, most of which was gift, was based, of course, on the $114,500, so their down payment really is only 2.5% of the home's worth. Think about that a minute.
The seller, meantime, who's off the hook for repairs, goes to settlement, gets his check, and is happily out of the picture. Half of the $$$$ for the repairs goes to the table, the rest to be released upon completion.
Note that the program is not for investors, its geared toward owner occupants only. The contractor must be fully licensed and insured.
One caveat. Make sure the LO and the lender are well-versed in the program, such as yours truly and Lincoln Mortgage, or it COULD turn into a nightmare like we experienced in the old days!
Oh, I almost forgot to mention, the kids are first time buyers, so they'll also receive the $8,000.00 TAX CREDIT!!
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