MORE OPPORTUNITIES FOR FIRST-TIME HOMEBUYERS

You’ve checked your eligibility for a mortgage and you’re ready to get looking for a new property.   You definitely don’t want to miss the first time buyer tax credit either so you’ve been searching for your new home.

But have you considered looking at distressed property?   When you add distressed properties to you home search you create an opportunity for additional government assistance with the Streamlined 203k Program.

The program is supported by the FHA and helps simplify the process to get the rehab funds, up to $35,000, you need to do the renovations at the time of closing.   At closing the 203k loan amount is figured into your original loan balance and gives you one loan to repay.

The mortgage can either be a fixed-rate or adjustable-rate mortgage.    With this mortgage program the balance of the mortgage can exceed the purchase price of the property.   As a borrower you are not required to hire architects, professional consultants or licensed engineers.   During the approval process, the home inspector or appraiser can create a list of recommended improvements or repairs.

There are eligible repairs and improvements where this loan can be applied.   There are also some repairs that will require hiring a licensed professional if the borrower does not possess the expertise to do the work.   Below is the list of approved improvements/repairs from HUD:

  • Roofs, gutters and downspouts
  • HVAC systems (heating, venting and air conditioning)
  • Plumbing and electrical
  • Minor kitchen and bath remodels
  • Floor:   carpet, tile, wood, etc.
  • Interior and exterior painting
  • New windows and doors
  • Weather striping and insulation
  • Improvements for persons with disabilities
  • Energy efficient improvements
  • Stabilizing or removing lead-based paint
  • Decks, patios, porches
  • Basement completion and waterproofing
  • Septic or well systems
  • Purchase of new kitchen appliances or washer/dryer

Additional requirements to perform the work:

  • Borrowers can select among licensed contractors.
  • The lender will review the contractor’s experience, background and referrals.
  • The lender will want a copy of the contractor’s estimate and the agreement between the contractor and the borrower.
  • Borrowers can also arrange to do some or all of the work under a “self help” arrangement.
  • Do-it-yourself projects require providing the lender with documentation supporting the borrower’s knowledge, experience and ability to perform the necessary work.

Special Conditions & Terms:

  • No minimum loan balance required
  • Borrowers must occupy the property
  • Property cannot be vacant for more than 30 days
  • Work must be completed within six months
  • Work must be professional
  • If job requires a permit, borrowers must get a permit and a sign-off
  • Work must commence within 30 days from closing

Repairs not Permitted:

  • Landscaping or yard work
  • Major remodeling
  • Moving a load-bearing wall
  • Room additions or add-ons to the home
  • Fixing structural damage

Disbursement of Payments:

  • Maximum of two payments to each contractor, including borrower
  • No more than a 50% advance is allowed
  • Do-it-yourself allowances do not include labor; only materials costs are allowed
  • Final payment is paid after submission of evidence of payment to sub-contractors / suppliers or other possible lien claimants.

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