For those of you unfamiliar with 203 K, a brief explanation is in order. The Federal Housing Administration (FHA) is a sub-department of the Department of Housing and Urban Development (HUD). One of the duties of the FHA is to oversee the 203K program. This is a loan program to help homeowners and potential homeowners rehab their houses. 203K offers loans for that specific purpose at attractive rates.
203K loans accomplish several positives. It improves the living conditions of families with initiative to rehab their houses. It brings employment to the community for carpenters, electricians, plumbers and building materials suppliers. It provides incentives for entrepreneurs to fix up old houses and for potential homeowners to buy a house that requires repairs and become homeowners. It also improves the face of a community or neighborhood and boosts real estate values.
However, one of the problems with the program has always been the amount of red tape those applying for 203K money had to cut through and the time required to actually get the loan. The 203K Streamline Loan Program has attempted to address these concerns.
Just as 203K loans offer homeowners an opportunity to rehab the house they are living in or one they want to purchase or a multi-family building of not more than four units, so too the 203K Streamline Loan Program targets the same borrowers. The difference lies in the fact that the 203K Streamline Loan offers homeowners, potential homeowners and entrepreneurs the change to buy a home that needs fixing up or repair their existing house without having to go through the time and effort of fulfilling all the clauses of the regular 203K loans program.
203K Streamlines are available to homeowners to refinance or improve the interior of a house they are living in, plan to live in or plan to resell or use as a rental property. These properties could be single homes, condominiums or townhouses. Homeowners can apply for a fifteen or thirty-year, fixed rate loan.
Under the rules of 203K Streamline Loans owners are allowed to upgrade or replace heating/air-conditioning systems, plumbing systems and/or electrical wiring. Unlike 203K loans the streamline loan allows for some exterior improvements such as roofs, gutters, eaves troughing and/or downspouts.
Where the regular 203K loan does not cover exterior improvements of any kind, the 203K Streamline loan covers painting of both interior and exterior surfaces or replacement of exterior siding. It also covers making homes more energy efficient through adding insulation and weather stripping and installing windows, doors and storm doors that are more energy efficient. Unlike the 203K program the Streamline Loan Program allows for repair or replacement of porches, verandahs, decks and patios on the exterior of the house.
Homeowners are also allowed to replace or upgrade septic and well systems under the 203K Streamline Loan Program.
The streamline loan also makes it possible for owners to replace roofs and/or flooring that is in disrepair. Structural repairs are not covered in 203K Streamline loans but homeowners are allowed to make minor remodeling of kitchens or bathrooms.
The regular 203K program allowed replacement of kitchen appliances whether they are built in or portable. This includes: stove, fridge, microwave, dishwasher and laundry appliances such as washers and dryers.
Basements can be waterproofed and/or repaired or finished but no structural changes are covered in the new Streamline loan program.
As with the 203K regular loan program certain things remain ineligible for 203K Streamline loan funding. This includes things like additions to the existing home; landscaping; repairs that require substantial blueprints or sketches.
Repairs requiring longer than six months are also not included in the 203L Streamline Loan nor are renovations which extend over two years. As well, the work must be commenced within a month of 203K loan funds approval for both programs.
If the item arose later, arose as a result of renovations or was not included in the original application, repair or replacement cannot be funded with 203K funds from either program.
Similarly if a repair requires hiring a consultant service, someone to review the project or an architect’s services or requires a specifications sheet completion, it is not covered by 203K funds from either the regular or streamline loan program.
203K Streamline Loan Program eliminates much of the paperwork of the 203K program. There are some differences in what is eligible in either program. Homeowners should be aware of the terms before they decide which program best suits their needs.