The Standard 203(k) and the Streamlined 203(k) products allow borrowers to finance the purchase price of the property, closing costs, and repair costs. Another attractive feature of these 203(k) products is that they require only a 3.5 percent down payment on the gross loan amounts. In the private market, conventional rehabilitation mortgages typically require 10 to 20 percent down payment.
Standard 203(k)
The Standard 203(k) loan is used when borrowers desire extensive structural work, such as additional room or removal of interior or external walls or when repair costs exceed $35,000. A minimum of $5,000 must be used toward repairs for Standard 203(k) loans and there is no maximum repair amount. The maximum mortgage, depending on house location, can range from $271,050 to $729,750 (for a more detailed explanation of the mortgage limits, see Appendix C). Further, the loan must not exceed 110 percent of the "as-improved" value. On Standard 203(k) loans, up to six months of mortgage payments can be financed while the home is renovated and uninhabitable. The six months of mortgage payments help a borrower pay for housing elsewhere during the rehabilitation phase. For Standard 203(k) loans, the FHA requires that an FHA-designated consultant write up a rehabilitation work plan before approving FHA insurance. The consultant ensures that properties meet FHA building and local code requirements. See table below for a list of subprograms.
Streamlined 203(k)
The Streamlined 203(k) product places fewer demands on the borrower and is designed to assist potential homeowners with less complicated and lower-cost rehabilitation projects. Streamlined 203(k) loans are recommended for small projects that are mainly cosmetic in nature and do not require structural changes to the house. The maximum repair portion of the loan amount is $35,000, and there is no minimum. Cosmetic improvements may include replacing appliances, flooring, windows, and doors. Borrowers can use this type of loan to replace the heating, ventilation, and air conditioning system, paint the home, or make minor roof repairs. Borrowers using this product are not required to employ an FHA-designated consultant.
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