How to use a FHA 203k loan and what requirements for items you might overlook when searching for your new home

A 203k loan is simply a FHA loan with a twist. An ordinary FHA loan referred to as a 203(b) in the mortgage industry. Adding renovation or improvement costs to the loan you get a 203k.  Through this loan program, renovations are completed after closing of Escrow by using a portion of the loan proceeds to cover improvement costs.  Funds are held in a managed account with the mortgage company, earning you interest during the renovation period. "Draw requests" throughout stages of renovation release funds to your contractor's as the work progresses.

Here is a list of items an appraiser will be looking for to make sure your selected property meets the HUD minimum property standards.

Streamline 203(K) checklist

•               Peeling or chipping paint
•               Any signs of mold or mildew
•               All windows freely open and close
•            Missing electrical fixtures, switches/outlets and switch/ outlet plate
•              Missing flooring, including missing tiles
•              Flooring that is in disrepair
•              Handrails if there are more than three steps
•            Approximate remaining life of the roof (there should be at least 2 years)
•              Water stains on walls and ceilings
•            Missing bathroom fixtures and/or cabinet doors
•            Signs of termite damage
•             Missing screens on windows
•              Missing door knobs
•              Missing kitchen fixtures and/or cabinets
•              Exposed wiring
•              Missing gutters
•              Damage to the exterior of home including, soffit, fascia and siding
•            Utilities must be turned on and checked for operation
•            Adequate caulking and weather stripping on doors and windows
•              Missing built in appliances
•               Dampness or water in basement
•               Hot water heater - make sure it has a relief valve
•               Well/septic - does the inspection report state needed repair
•              Cracks in foundation- note, if present you will need to use a different renovation program instead of the  Streamline 203(X).

Many of the foreclosures and shorts sales we see in New Hampshire and parts of  Maine look to be overwhelming based on the repairs that might be needed.  If you take a step back and think about the great programs, such as a 203k loan, many of these properties could be your “diamond in the rough”!