What is the Difference Between 203k and 203k Streamline?
A commonly asked question by home buyers wanting to pay for home improvements is "What is the difference between 203k and 203k Streamline?" First of all, a quick look at what the FHA 203k is for anyone not familiar.
The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.
HUD's FHA 203k program can help you with the purchase or refinance of a property by allowing you to roll-in the costs of repairs and improvements up to 110% of the after improved value of the home with a minimum 3.5% down payment.
This means you can buy a home in need of remodeling and roll the cost of those repairs right into the same mortgage. Doing this amortizes the cost of the work over the life of the loan. It also makes the interest paid a tax deduction, because it's included in the mortgage.
Within the FHA 203k program you have two options: Full 203k and the 203k Streamline.
The 203k Streamline is an all-in-one loan used for homes that need minor repairs. It allows borrowers to finance the purchase of an existing home and make improvements or upgrades up to $35,000 before move-in. There are no minimum repair costs and the borrower must occupy the property.
The Full 203k (also called the Standard 203k) is an all-in-one loan used when homes need major rehabilitation, or when repairs are structural, involves landscaping, or when the renovation costs exceed $35,000. There must be a minimum of $5,000 worth of repairs, and again, the borrower must occupy the property. FHA loan limits are based on property type and location of the property being financed. A portion of the loan proceeds are used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. You may also roll in up to six months of mortgage payments if the HUD consultant determines you need to be displaced from the home during the repairs.
Below is a table with ideas of repairs covered by each option. This is a partial list - more repairs than those listed may be eligible for one home improvement loan or the other.
The Difference Between 203k and 203k Streamline
|| Basement waterproof/finishing (structural)
|Upgrade or repair an HVAC system
|| Major kitchen remodeling
|Repair or replace flooring (carpet, tile, linoleum, laminate)
|| Add a bathroom
|Minor kitchen remodeling
|| Add a bedroom
|Buy and install new kitchen appliances
|| Add a second story to a ranch style home
| Paint (interior, exterior)
|| Termite damage to a sill plate
| Septic system, well repair or replacement
|| Move a load bearing wall to expand a room
| Basement finishing (that doesn't include structural)
|| Finish an attic
| Build a deck or porch
|| Major landscaping like grading and drainage
| Disability access
|| Driveway repair (safety hazard)
As you can see, the main difference between 203k and 203k Streamline is structural repairs. If it involves the skeleton of the house, then you'll need a Full 203k home improvement loan. But if it's not structural and it's less than $35,000 then the 203k Streamline may work well for you.
You can also watch the video below for more information:
See the video here - FHA 203k Loan: Full 203k vs. 203k Streamline
Learn more about this home improvement financing option with "The FHA 203k Survival Guide" at the button below. The guide covers the nuts and bolts of the most versatile home improvement loan out there on today's market.