203(k) Streamline - New Financing Tool in our Arsenal

The 203(k) Streamline. It as available for the FHA limit, in our area that limit is $271k, but it fluctuates in surrounding counties. The consumer finds a home that might need some updating and makes an offer on the home with the repairs in mind. They can borrow 5-35k of the FHA loan over the price of the home to cover the repairs/updating.

For example the home is bought for 150k, it needs 30k in repairs/updating, they borrow 180k less the 3.5% down payment, the bank holds the balance for the repairs and they make the payments to the contractor. This way they get the home updated without having the cash up front, they make payments based on the total loan immediately, and have six months to have the work completed.

How it all works

• • After closing the difference in the sales price and the actual loan amount will be
• put into an escrow account with the bank
• • Repairs to the home need to start within 30 days of closing and finish within 6
• months of closing.
• • 50% of the funds put into the escrow account for repairs will be disbursed by
• check (overnighted) payable to the contractor and the homeowner once the
• work has started and the check has been requested
• • The remainder 50% of funds in the account will be disbursed when the work is
• completed.
• • If the work ends up costing MORE than the funds in the escrow account the
• borrower is responsible for the difference
• • If the work ends up costing LESS after the repairs have been completed, the
• remainder of the funds in the account will be applied to the principal balance
• • If the Rehabilitation costs are more than $15,000 the bank will order a final
• inspection once the work has been completed. Cost is $75-$100
• • Contractor will be required to complete a W-9 and will receive a 1099 from the
• bank